OMV Petrom urges Romania to make gas reforms this year: interview
2021 is a crucial year for the Romanian government to implement legislative changes that will make the 84bn-m3 offshore Neptun Deep gas discovery feasible to develop, Christina Verchere, CEO of the project's operator OMV Petrom, tells NGW in an interview.
OMV Petrom and US partner ExxonMobil discovered Neptun Deep in 2012 but have repeatedly delayed taking a final investment decision (FID) on the discovery since then. The main reason for delays was a controversial offshore law that Romanian authorities introduced in 2018. Among other things, the law imposed additional taxes on producers and restricted where they could sell their gas.
Romania's current government led by prime minister Florin Citu has pledged to make amendments to the law in order to make it more favourable to investors. But these amendments are yet to be discussed in parliament. OMV Petrom is waiting to see authorities begin the public consultation process for the changes, Verchere says.
"What I do see is strong intent by the government to move forward and a sense of urgency," she tells NGW. "2021 is a crucial year to see this legislation change to make sure that Romania capitalises on this opportunity."
Neptun Deep can "fundamentally reshape the Romanian economy in many different ways," according to Verchere, helping the country achieve economic prosperity, phase out coal in power generation and bolster its energy security.
ExxonMobil serves as operator of Neptun Deep, but the US major is seeking to divest its 50% share of the project to Romania's state-owned Romgaz as part of a phased withdrawal from the European upstream sector. If the sale is finalised, operatorship will be transferred to OMV Petrom.
"We have over 40 years of offshore experience in the Black Sea so we know how to manage the logistics etc," Verchere says, noting that the company can also draw from parent company OMV's deep water capabilities.
Black Sea focus
OMV Petrom is looking to use its experience to exploit Black Sea opportunities outside Romania.
"It all comes down to your expertise, where you have your footprint," Verchere says. "There's been a lot of recent successes in Turkey which we think solidifies the Black Sea as the right jurisdiction for us, based on our experience but also based on the opportunities that we see coming forward and the successes being made there."
In September last year the company completed the takeover of OMV's 43% stake in the Han Asparuh block in Bulgaria's Black Sea section, situated adjacent to Neptun Deep. OMV and operator Total, now TotalEnergies, made an oil discovery at the site in 2016. OMV Petrom can employ the geological understanding it has gained at Neptun Deep at Han Asparuh, Verchere explains.
OMV Petrom is moving into other Black Sea waters as well. In March, it signed a production-sharing agreement to explore the 5,282-km2 Block II area off Georgia, after winning a tender. The company is in the process of setting up a Georgian operating company for the project, according to Verchere, and plans to undertake geological and environmental studies at the site this year, followed by a seismic campaign in 2022. A decision will then be taken on whether to drill a well.
Georgia's offshore zone has seen only limited exploration in the past. While this presents considerable geological risks for OMV Petrom, "the country is a very open for business economy," the CEO explains, limiting the project's above-ground risk.
OMV Petrom also signed a memorandum of understanding with Naftogaz in February on joint exploration and production projects in the Ukrainian Black Sea. Ukraine is looking to spur offshore development, which came to a standstill after Russia's annexation of Crimea in 2014.
While doubling down on the Black Sea, OMV Petrom is weeding out non-core assets from its portfolio elsewhere. In May it sold its long-held oil assets onshore Kazakhstan to a local company, drawing a line under its two decades of working in the Central Asian country.
As pressure builds on European oil and gas companies, OMV Petrom has unveiled its own targets for slashing emissions. It is aiming for a 27% reduction in Scope 1 greenhouse (GHG) intensity by 2025 versus the level in 2010. The company has already reached 26%, according to Verchere, and plans to revise its climate objectives later this year, Verchere says.
The company is also working to reduce its methane emissions, by improving pipeline integrity, restoring and modernising equipment and facilities, having strong leak detection and repair systems in place and motivating employees. It delivered a 50% reduction in its methane emissions last year alone, according to the CEO.
The European Commission will publish a legislative proposal later this year to compel gas companies to do more to monitor and address their methane emissions.
"I welcome regulation as long as it's practical and implementable, and that it gives the right timeframe to do things in a logical way, recognising the end goal," Verchere says.
In addition to its upstream operations, OMV Petrom also operates the Petrobrazi oil refinery in Romania, as well as a chain of nearly 800 filling stations in southeast Romania, electricity production assets and a gas and power marketing business. As for Scope 3 emissions from the use of OMV Petrom's products, a lot will depend on how energy demand changes over time, and reducing them is a longer-term objective, Verchere says.
"We see demand for fuel continuing to grow in Romania, underpinned by economic prosperity and better infrastructure," she says. Romania today has comparatively fewer cars than elsewhere in Europe, and the number will grow as living standards increase, she explains, but a change in that trend is expected after 2030.
The CEO sees natural gas as having a big role in decarbonising energy, and as the company shifts its focus further towards gas and away from oil, this will help reduce its carbon intensity, she says. OMV Petrom also sees future opportunities in hydrogen, biofuels and carbon capture and storage.
Commenting on the IEA's recent call to end investment in gas, Verchere stresses it is important "to take into account where each country is in their journey." OMV Petrom counts the Romanian state as its other main shareholder besides OMV. It therefore strives to align its climate policies with those of Bucharest, the CEO says.