Game On for Neptun Deep

In 2008, OMV Petrom entered a joint venture with ExxonMobil for the exploration of the Neptun Block in the deep-water sector of the Black Sea. The block covers an area of approximately 7,500 square kilometres in water depths ranging from 100-1,700 meters. According to OMV Petrom, over 1.5 billion USD were invested between 2008 and 2016 in exploration and appraisal activities in the Neptun Deep block. The exploration included two 3D acquisition campaigns and two exploration drilling campaigns, with eight exploration and appraisal wells drilled, the company website says.

In 2012, Domino-1, the first deep-water exploration well in Romania, confirmed the existence of a natural gas reservoir. In January 2016, the second exploration drilling campaign in the Romanian deep-water sector of the Black Sea was successfully completed, with seven wells drilled, the majority of them having found gas. In 2017, extensive engineering activities took place in preparation for the potential final investment decision, the company said. Since then, OMV Petrom’s position is that it continues to evaluate the technical and commercial viability of the project.

The energy crisis prompted by the war in Ukraine has led to a reappraisal of the energy transition, with natural gas now included under the EU taxonomy rules. However, in the absence of economic carbon capture solutions, gas is expected to be virtually phased out by 2050. It looks like the final investment decision on the Neptun Deep project could not be delayed any more.

Key challenges of the Neptun Deep project
The Black Sea offshore gas resources offer a huge opportunity for Romania to decrease its energy dependency, to bring additional budget revenues, and to create jobs. There are challenges, mainly of technical nature given Neptun status as practically the first deep-water project in the Romanian Black Sea. There are also external political challenges, with the conflict in Ukraine looking nowhere near its end, and the peril of ongoing instability and tensions in the Ukrainian waters dragging on for years.

Key challenges of the Neptun Deep project

There were also internal political obstacles that Romania finally managed to overcome in 2022. The significant amendments to the current Offshore Law were passed in May 2022. They show Romania as an attractive country to investors, ready to offer long-awaited predictability and stability to holders of deep offshore and onshore petroleum agreements, regarding the royalty regime and the specific tax regime.

Now the Offshore Law encourages the purchase of goods and services from the European area and from countries which have concluded bilateral/ multilateral trade agreements with the European Union. It also offers the possibility to sell freely the hydrocarbons extracted, as a general rule and under normal conditions. At the same time, domestic consumers will be protected under exceptional terms. The changes to law were made in view of a fair sharing of possible windfall gains between the investor and the Romanian state, while allowing the full recovery of the investment in the upstream segment from the value of the additional tax.

Speaking in Vienna in April 2022 Alfred Stern, the OMV CEO and Chairman of the Supervisory Board of OMV Petrom, said Neptun Deep was expected to require investments of about €2 billion, and OMV and Romgaz would be able to agree upon the final investment decision on the project within a year. The development is expected to enter into commercial production four years after that.

In August 2022, Romanian gas producer Romgaz announced it completed the acquisition of Exxon Mobil’s 50% stake in the Black Sea offshore project Neptun Deep for 1 billion EUR. Another Romanian company, TRANSGAZ, the technical operator of the National Gas Transmission System, plans to invest approximately 350 million EUR in the Tuzla – Podisor gas pipeline. Its total length will amount to 308.32 km, from the Black Sea shore to Podișor, in Giurgiu County, with construction works expected to start after OMV Petrom FID (Final Investment Decision). This significant project will greatly benefit local contractors, suppliers, and constructors.

On November 21, 2022, a delegation of OMV Petrom, led by Mr. Stern, paid a rather surprising visit to President Klaus Iohannis in Bucharest. On that occasion the Romanian president requested the OMV management made the final investment decision and started the offshore exploitation within the perimeter as soon as possible, “considering that the Offshore Law in force at this moment is favourable.” The statement could be interpreted in the sense that OMV should expect no more amendments to the Offshore Law or relevant paragraphs of the Romanian Fiscal Code.

In its turn, the OMV management presented the status of the project and the key steps taken and promised to adopt the final investment decision in mid-2023, so that the exploitation of natural gas from the Neptun Deep perimeter may start “as soon as possible.”

Natural gas reserves in the Black Sea are estimated at more than 200 billion cubic metres, and a Deloitte study shows that exploitation will bring in about $26 billion by 2040 from corporate taxes, royalties, social contributions, and other taxes. In addition, it would generate more than $71 billion to Romania’s GDP and create or maintain more than 30,000 jobs. If that is not enough and now not the moment, then when?! It is high time we said game on for Neptun Deep!

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