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Black Sea Oil & Gas takes FID on Romania offshore gas project

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Black Sea Oil & Gas takes FID on Romania offshore gas project

Highlights

$400 million Midia gas project moves forward

FID taken on assumption of legislative changes

Romania could become significant gas exporter

London — Private equity-backed upstream player Black Sea Oil & Gas and its partners have taken the final investment decision on the planned $400-million Midia gas project offshore Romania, BSOG said Thursday.

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Gas from Midia -- which is estimated to hold some 10 Bcm of gas -- is expected to boost Romania's gas production along with other major projects in the Black Sea including the ExxonMobil-operated Neptun project in the next decade.

BSOG CEO Mark Beacom said Midia was a "pioneering project" and would be the first new offshore gas development project in the Romanian Black Sea since 1989.

"We look forward to building and operating this game-changing project for Romania's energy industry," Beacom said.

BSOG -- majority-owned by the Carlyle Group -- is among a number of Romanian offshore companies looking to develop gas projects.

There have been doubts about the investment climate in Romania after the government implemented a new offshore law that requires operators to sell 50% of their offshore gas output in a centralized marketplace.

The Romanian government has also proposed to cap the price at which producers sell gas in Romania at Lei 68/MWh (Eur14.60/MWh) for three years, well below current European gas prices.

FID 'IN GOOD FAITH'

BSOG said the FID was taken assuming the situation in Romania would improve.

"FID has been taken in good faith and on the assumption that BSOG and its joint venture partners will successfully be able to restore all of their rights with respect to the removal of any newly imposed supplemental taxes and fees as well as removing any restrictions, in accordance with EU Directives, on the free movement of gas on a fully liberalized market in order to not only make the project a viable investment but also to encourage further gas developments in the Black Sea," it said.

Beacom told S&P Global Platts Thursday that the project would move forward even without changes.

"We are committed to taking FID and moving ahead regardless of the eventual outcome of these disastrous provisions," he said.

"We will in parallel be working to obtain satisfactory resolution of these issues," Beacom added.

Midia -- which comprises the Doina and Ana offshore fields -- will consist of five offshore production wells, one subsea well at Doina and four platform wells at Ana.

A 126-km (78-mile) gas pipeline will link the Ana platform to the shore and to a new onshore gas treatment plant with a capacity of 1 Bcm a year, which represents around 10% of Romania's consumption, BSOG said.

BSOG has also secured a long-term gas sales agreement with a Romanian subsidiary of France's Engie for 500 million cu m/year.

The contracted volumes refer to all the gas production from the project, reduced by the volumes that the producers are obliged to sell on the centralized market.

BSOG has also secured a gas transmission contract with grid operator Transgaz the transport of the production into the national grid for a period of 15 years.

FIRST GAS

BSOG has said the delivery date for first gas is February 1, 2021.

"The entire project infrastructure, including all offshore and onshore facilities, has been contracted to be built, installed and commissioned...with a contracted delivery date of Q1 2021," BSOG said Thursday.

BSOG is operator of the project with a 65% share. Its partners are privately-owned investment company Petro Ventures Resources (20%) and Italian gas producer Gas Plus International (15%).

Romania is effectively self-sufficient in gas -- with production and demand both at around 10-11 Bcm/year -- so it would make sense to export new gas output, with a new pipeline network, BRUA, under development to take Romanian gas via Hungary to Slovakia.

However, the ruling Social Democratic Party has moved to introduce the new legislation unpopular with the gas industry in a bid to boost Romania's own economic performance.

-- Stuart Elliott, Stuart.Elliott@spglobal.com

-- Edited by Jonathan Dart, newsdesk@spglobal.com