|  2013-06-27

Challenges for the Romanian oil and gas sector

Romania has seen a constant decline in its oil and natural gas output over the past 30 years, against the backdrop of depleted reserves in the active fields, with many onshore sites having been in use for several decades

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Although the decline has been somewhat tempered by investments made over the last ten years, we have witnessed the collapse of Romania’s oil and natural gas wealth myth.


Despite that, there is still cause for optimism, as Romania ranks among the top three European states least dependent on energy imports, with only 21% of national consumption being covered by imports.  Only Denmark and Estonia rank above Romania, while the EU average for energy import dependence is over 50%. However, Romania’s dependence on a single source of natural gas imports is a risk. 


State-of-the-art technologies provide new opportunities for exploitation of fresh resources. Romania must cope with three major challenges at the same time: increasing the recovery rate of mature fields, while developing offshore natural gas deposits and shale gas.  Recent exploration of the Romanian perimeters of the Black Sea, as well as the onshore Dobrudja and Moldavia regions of Romania, has generated enthusiasm regarding the potential of deep-sea offshore gas and shale gas fields.  Romania is not, however, a new El Dorado for oil and gas production, with its mature onshore deposits being almost depleted and the new deposits being difficult and expensive to exploit.


Accessing these resources involves massive investment in the upstream sector and in the transport infrastructure.  Romania has a relatively well-developed infrastructure for crude oil, but that for natural gas requires substantial investment.  A large part of the transportation network – including the one to be used for handling Black Sea gas output in anticipation of the actual exploitation forecasted for the 2020s – is in need of rehabilitation and development.  The system used by the gas transportation operator is manual and needs upgrading.  Connecting fully to the EU’s and neighbouring states’ gas networks is also a must to achieve diversification of sources and ensure access to the EU market.


The government has committed to continuing the privatisation of state-run energy companies and deregulation of the natural gas market (by 2014 for industrial consumers and by 2018 for household consumers, respectively) to make the local energy market more attractive to investors.  A reduction of the price paid by end-consumers is also possible, further to the expected increase in unconventional gas production, as was the case in the US, where prices fell considerably ($115 /1,000 mc).


Substantial investment funds are available worldwide for the upstream sector


According to recent analysis, worldwide financial resources available for investments in the upstream sector are estimated at USD 1,800 billion between 2011 and 2014.  Investments by government and national oil and gas companies represent 35% of that total, with 65% coming from private sector investors.


In terms of resource types, 85% of investments will be directed towards conventional deposits, deep sea offshore exploitation, low porosity gas reservoirs and shale gas.


In terms of geographical coverage, the largest investments will be drawn by the dominant players on the energy market:  the US, Russian Federation, Canada, China and Brazil. Newer and highly dynamic players, such as Australia, Angola and Nigeria will also draw significatnt investments. 


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