A wealth of oil and gas riches lies below the waters of the Black Sea and, while the energy powers-that-be scramble for unproven assets in the Arctic and delve into the Caspian, this largely untouched resource is a story of the moment.
The Black Sea has had a touch of Cinderella treatment, with attention focused on first oil from the Caspian’s Kashagan and on news about which pipeline will ship Azerbaijani gas to Europe. Both events are expected this year.
However, a string of recent discoveries, with implications for Russian gas supply and the countries that want to wean themselves off it, is muddying the waters. Now, eyes are turning to the game-changing fields in the Black Sea.
“The Black Sea is getting discovered,” Gabor Tari, chief scientist for OMV, told the Black Sea and Caspian Energy Conference in London this week. Rather than a Cinderella, Tari dubbed it a “Sleeping Beauty”. It’s going to happen, but we need to get it right, he said.
This reference to “we” encompasses a broad church – not only do energy companies need to heavily invest in order to deal with the acidity in the deeper levels, but governments need to create the right regulatory environment, so that gas extracted from Black Sea fields can be sold profitably.
Romania’s 42-85 billion cubic metre Neptun field, announced by ExxonMobil and OMV in February last year, represents 7-14% of overall Romanian reserves, according to KBC Securities.
It offers a tantalising prospect for a country that depends on Russian imports at around $500 per thousand cubic metres (Mcm), to meet one-third of its domestic gas demand.
However, the current fiscal regime means the gas would have to be sold on the domestic market and, at roughly $160/Mcm, this makes the project a non-starter – for now.
In Bulgaria, the 39.6-79.3 bcm Khan Aspurah offshore field has put a spring in Sofia’s step. The Energy Ministry said last year the field could meet Bulgaria’s domestic demand for the next 15-20 years, potentially helping it diversify away from Russian supplies.
Finds such as these look set to tilt the Russia-weighted balance in the region and are contributing to the growth of two-way connecting pipelines between nearby countries.
While it looks to be a good 10 years until the discoveries come onstream, Bulgaria, for example, has already become more assertive with Russia in gas price negotiations – and the Black Sea finds look set to send ripples around the adjacent energy map.