Romania Oil and Gas Report Q3 2012

The Romania Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's oil and gas industry.

BMI View: Given Romania’s long history of oil/gas reserves and production, it would be surprising if renewed exploration efforts do not prove-up fresh resources and extend the life and scale of existing domestic supply. However, Romania needs to enlist more help, quickly, in order to avoid increased exposure to energy import dependency. Further, the likely moratorium on shale gas exploration is likely to slow progress and dampen foreign partner enthusiasm.

The main trends and developments we highlight for Romania’s oil and gas sector are:
- Romania’s new left-leaning government has pledged a moratorium on shale gas exploitation. The previous government had in March 2012 awarded US oil major Chevron exploration, exploitation and development rights for shale gas in large areas near the Black Sea. Chevron itself in April suspended its shale gas exploration activities in in respect to the exploration and extraction of shale gas in Romania, due to concerns related to hydraulic fracturing (fraccing).

- National oil and gas company OMV Petrom has started test production at the Totea well in the region of Oltenia, which is said to be the largest onshore gas and condensate well in Romania. Well capacity is put at 3,200 barrels of oil equivalent per day (boe/d). Petrom is to drill two appraisal wells which will provide additional information.

- ExxonMobil and OMV Petrom have discovered natural gas with their Domino-1 deep water exploration well in the Romanian sector of the Black Sea. However, it is too early to confirm the commercial viability of the discovery. The well in the Neptun block, in water depths of approximately 1,000 metres (m), is likely to be drilled to a total depth of more than 3,000m.

- Natural gas consumption – estimated 13.3bn cubic metres (bcm) in 2011 – is expected to reach at least 15.9bcm over the forecast period to 2016, then rise further to 18.9bcm by 2021. Romania’s gas production is forecast to slip to no more than 5.3bcm by 2021, resulting in an import requirement of at least 13.6bcm. There have been a number of new, small discoveries capable of slowing the rate of decline in domestic supply.

- Oil demand has stagnated in recent years and will only grow once underlying economic activity picks up. We do not expect to see demand growth reaching 3.0% per annum until beyond 2012, implying consumption of no more than 236,000barrels per day (b/d) by 2016 and 277,000b/d by 2021. We see domestic liquids production slipping from an estimated 106,600b/d in 2011 to less than 57,000b/d over the period to 2021. This implies rising import levels, with volumes of almost 220,000b/d anticipated by the end of the period.

- The cost of crude imports in 2012 is an estimated US$4.38bn, and could rise to around US$5.62bn in 2016. The BMI OPEC basket oil price assumptions are US$111.47 per barrel (bbl) for 2012, and US$99.00/bbl in 2016. Gas imports could cost the country US$3.88bn by 2016 – taking the combined crude and gas import bill for the end of the period to US$9.49bn.

This should, however, be partially offset by the export of refined petroleum products. #### Since Q108, we have described numerically the banking business environment for each of the countries surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER), a measure that ensures we capture the latest quantitative information available. It also ensures consistency across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratings calculated by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the former and 30% to the latter.

The evaluation of the ‘Limits of potential returns’ includes market elements that are specific to the banking industry of the country in question and elements that relate to that country in general. Within the 70% of the CBBER that takes into account the ‘Limits of potential returns’, the market elements have a 60% weighting and the country elements have a 40% weighting. The evaluation of the ‘Risks to realisation of returns’ also includes banking elements and country elements (specifically, BMI’s assessment of long-term country risk).

However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40% and 60%, respectively. Further details on how we calculate the CBBER are provided at the end of this report. In general, though, three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements of the ‘Limits of potential returns’ are by far the most heavily weighted of the four elements. They account for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than the country elements of the ‘Limits of potential returns’, it usually implies that the banking sector is (very) large and/or developed relative to the general wealth, stability and financial infrastructure in the country. Conversely, if the market elements are significantly lower than the country elements, it usually means that the banking sector is small and/or underdeveloped relative to the general wealth, stability and financial infrastructure in the country.

Third, within the ‘Risks to the realisation of returns’ category, the market elements (ie: how regulations affect the development of the sector, how regulations affect competition within it, and Moody’s Investor Services’ ratings for local currency deposits) can be markedly different from BMI’s long-term risk rating. SHOW LESS READ MORE >

BMI Industry View 5

SWOT Analysis 7

Romania Oil and Gas SWOT 7

Global Energy Market Outlook 8
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) 8
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) 13

Regional Energy Market Outlook 15

Romania Energy Market Overview 18

Industry Forecast Scenario 20
Table: Romania Oil & Gas – Historical Data & Forecasts, 2009-2016 20
Table: Romania Oil & Gas – Long-Term Forecasts, 2014-2021 21

Oil And Gas Reserves 22

Oil Supply And Demand 23

Gas Supply And Demand 23

LNG 23

Refining And Oil Products Trade 24

Revenues/Import Costs 24

Key Risks To our Forecast Scenario 24

Oil And Gas Infrastructure 25

Oil Refineries 25
Table: Refineries In Romania 25

South Development Region 25

South-East Development Region 26

North-East Development Region 27

Service Stations 27

Oil Storage Facilities 28

Oil Terminals/Ports 28

Oil Pipelines 28

LNG Terminals 29

Gas Storage Facilities 29

Gas Pipelines 29

Regional and Country Risk/Reward Ratings 31
Table: Upstream Risk/Reward Ratings 33
Table: Downstream Risk/Reward Ratings 35

Romania Upstream Rating – Overview 37

Romania Upstream Rating – Rewards 37

Romania Upstream Rating – Risks 37

Romania Downstream Rating – Overview 37

Competitive Landscape 38
Table: Key Players – Romania Oil And Gas Sector 39

Overview/State Role 39

Licensing And Regulation 39

Government Policy 39

Licensing Rounds 40

International Energy Relations 41
Table: Key Upstream Players 42
Table: Key Downstream Players 42

Company Monitor 43

OMV Petrom 43

Romgaz 46

Lukoil Romania 49

Rompetrol 51

OMV Romania 54

Eni – Summary 55

ExxonMobil – Summary 55

MOL – Summary 55

Regal Petroleum – Summary 55

Aurelian Oil & Gas – Summary 56

Melrose Resources – Summary 56

Others – Summary 57

Central And Eastern Europe – Regional Appendix 58
Table: Oil Consumption Historical Data & Forecasts, 2009-2016 (000b/d) 58
Table: Oil Consumption Long-Term Forecasts, 2014-2021 (000b/d) 58
Table: Oil Production Historical Data & Forecasts, 2009-2016 (000b/d) 59
Table: Oil Production Long-Term Forecasts, 2014-2021 (000b/d) 60
Table: Refining Capacity Historical Data & Forecasts, 2009-2016 (000b/d) 60
Table: Refining Capacity Long-Term Forecasts, 2014-2021 (000b/d) 61
Table: Gas Consumption Historical Data & Forecasts, 2009-2016 (bcm) 61
Table: Gas Consumption Long-Term Forecasts, 2014-2021 (bcm) 62
Table: Gas Production Historical Data & Forecasts, 2009-2016 (bcm) 63
Table: Gas Production Long-Term Forecasts, 2014-2021 (b/d) 63
Table: LNG Gas Exports Historical Data & Forecasts, 2009-2016 (bcm) 64
Table: LNG Gas Exports Long-Term Forecasts, 2014-2021 (bcm) 64

Glossary Of Terms 66
Table: Glossary Of Terms 66

Oil And Gas Risk/Reward Ratings Methodology 68

Ratings Overview 68
Table: BMI’s Oil & Gas Business Environment Ratings – Structure 69

Indicators 69
Table: BMI’s Oil & Gas Upstream Ratings – Methodology 69
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology 70

BMI Methodology 72

How We Generate Our Industry Forecasts 72

Energy Industry 72

Cross checks 73

Sources 73