Sunday, December 7, 2014

Romania Bets on Own Gas, New Pipeline as South Stream Scrapped

Romania plans to build a new pipeline to transport future gas output from the Black Sea after projects preparing alternative transportation routes, Nabucco and South Stream, where scraped.

The country, which has the lowest reliance on Russian gas among eastern European Union members, wants to invest about 230 million euros ($283 million) to link the coast in the east with its existing gas grid, Energy Minister Razvan Nicolescu said in a phone interview today. The government will seek to tap EU funds to cover part of the cost of the construction, which will start in 2017, Nicolescu said.

The Balkan nation is betting on new gas discoveries in the Black Sea, following exploration by Exxon Mobil Corp (XOM) and OMV Petrom SA, to secure energy independence by 2020. OMV AG (OMV), Petrom’s majority owner, made a preliminary gas accumulation estimate in 2012 for the Neptun block ranging from 1.5 trillion cubic feet to 3 trillion cubic feet (42 billion cubic meters to 84 billion cubic meters).

“The most important project is bringing the off-shore gas to the shore,” Nicolescu said. “We’ll build a pipeline from Dobrogea, on the Black Sea coast, to the southern village of Podisor, where it will connect to existing pipelines.”

Russian President Vladimir Putin announced this month cancellation of the $45 billion South Stream pipeline, which was designed to link Russia directly with the EU through the Black Sea.

Romania supported the EU-backed Nabucco, which was intended bring Azeri gas to Europe and was frozen after it failed to find supply sources. The country wasn’t involved in South Stream.

Petrom and Exxon are currently drilling a third well in the Black Sea as they seek to test the commercial viability and estimate the block’s potential resources. Should production start, the two companies will have to invest in transporting the gas from the sea to the shore, Nicolescu said. It’ll be the grid operator Transgaz SA’s responsibility to secure the transportation onward, according to the minister.

“The results of drilling two more wells will be very important for an accurate appraisal of how big the resources in the Neptun block are,” Nicolescu said.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Peter Laca, Elizabeth Konstantinova

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