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Romania formally approves Black Sea Oil & Gas' Midia offshore gas project

Highlights

FID on $400 mil Midia gas project taken in Feb

First new Romanian offshore gas development since 1989

Romania could become significant gas exporter

London β€” The Romanian government has given its formal approval for private equity-backed upstream player Black Sea Oil & Gas (BSOG) and its partners to develop the $400 million Midia gas project offshore Romania.

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Midia, 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.

The development plan approval from the government -- issued by the National Agency for Mineral Resources (NAMR) -- follows a final investment decision taken by BSOG in February.

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

"The development of the Ana and Doina gas fields offshore Romania is a top priority for NAMR, which supports the implementation of the Romanian offshore project that could lead to the diversification of the supply sources in Romania," NAMR's president, Gigi Dragomir, said late Monday.

BSOG has said the delivery date for first gas from Midia -- the first new offshore gas development project in the Romanian Black Sea to be built since 1989 -- is February 2021.

BSOG CEO Mark Beacom welcomed the government approval of its field development plan. "This approval from NAMR provides the official acknowledgement from the Romanian state that the [Midia] project is an approved project," Beacom said.

INVESTMENT CLIMATE

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

However, 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 implemented a price cap for households of Lei 68/MWh (Eur14.60/MWh) for three years.

Beacom has been critical of the Romanian legislative landscape, telling S&P Global Platts earlier this month that the new gas laws must be revoked and that the central market obligations and the supplemental tax provisions in the offshore law should be rescinded.

BSOG said the FID was taken assuming the situation in Romania would improve, but that the project would move forward even without changes.

Under the field development plan, 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.

SALES DEAL

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.

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.

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

-- Edited by Alisdair Bowles, newsdesk@spglobal.com