The Black Sea, which straddles south-eastern Europe and Asia Minor, has long been considered prospective for oil and gas, although this optimism is based mostly on limited drilling and modest success in shallow waters. The industry was further alerted to this potential by a major study undertaken by Purvin and Gertz in 2011, which predicted the development of a Romanian offshore industry on the basis of the potential existence of a 600 Bcm offshore resource.
A number of factors explain the general lack of exploration to date: the littoral countries have traditionally been well supplied with reasonably priced oil and gas by major producers, Turkey and Russia; the lack of technology in the countries bordering the Black Sea has limited the scope for exploration; and, until very recently, terms and conditions offered to private investors in the upstream petroleum industry were poor.
It is less than two years since the Leiv Eiriksson D/S moved out through the Bosphorus after a US$ 200 million three-well venture for TPAO and partners off the Turkish coast; a giant find in the extensive deepwater regions, where exploration has been sporadic, had once again proved elusive. That all changed, however, in February 2012 when ExxonMobil and Romania’s OMV Petrom announced the results of Domino-1, Romania’s first deepwater wildcat, in the Neptun East block. Located in 930m of water, Domino-1, drilled using the Deepwater Champion D/S, encountered over 70m of net gas pay. At the time OMV chief executive Gerhard Roiss declared the discovery had established an in-place resource of around 3 Tcf, making it the biggest gas find in the company’s history. It is understood that while ExxonMobil has plans for additional drilling in 2013, and has recently secured some additional adjoining acreage, the find is also the subject of talks with Bulgaria, as part of the field apparently lies in disputed waters.
Such a resource is not considered large by global standards, but its significance lies in the fact that it is considered to be the precursor to finds at five nearby structures, something that should help ensure strong industry interest in Romania’s 30-block bid round, split evenly onshore and offshore, that is planned to be held in April 2013. With the emergence of shale gas in Europe, where there is increasing evidence of a more united approach on energy, there is a growing belief that the exploration and development of significant gas reserves in the Black Sea would reduce the short-term imperative to supply gas from the Caspian to south-eastern Europe. Not surprisingly, just a few months after the Romanian find, elevated levels of activity have become apparent throughout the Black Sea region, particularly in deepwater, with much of the available deepwater acreage in the western Black Sea already taken.
Romania: High Level of Interest
Although the deepwater Domino discovery was the real gamechanger for Romania, most exploration since then has been in shallow water. Recent developments include Sterling Resource’s drilling in early October 2012 of the Ioana gas prospect in Block XV Midia. Located on the western edge of a large 150 km2 structure, the well targeted the Mid Pontian sandstone formation, and gas saturation in both this and in a shallower secondary objective were encountered, but reservoir development was poorer than expected, so further investigation will be required. A second well tested the Eugenia oil prospect in the more northerly Block XIII Pelican permit and preliminary analysis indicates hydrocarbons in Late Cretaceous sandstones, with further interest evident within an Eocene limestone section. A third, shallower but high-risk objective was a large Oligocene slump or fan structure as outlined by seismic. Although drilled downdip to enable exploration of the deeper main objectives, 100m of good quality sandstones with some minor gas shows were encountered, so the Oligocene, a new play in the area, remains an interesting prospect.
Sterling Resources has also recently mapped prospects in the shallow water part of the Midia block while a new oil structure, Irina, has also been mapped in the Pelican block on trend with Eugenia. Sterling has also evaluated the Anca, Maria and Nadia prospects in water depths of 100–120m that are believed to be in similar formations to the deepwater Domino discovery 35 km to the south-east.
The general level of interest in the Romanian offshore has been demonstrated by the relatively high number of deals. Sterling, for example, sold its stake – the portion of the Midia concession containing Anca and Maria – to ExxonMobil and OMV, and separately secured a 50% operating interest in the 1,000 km2 shallow water Block XXV Luceafarul, west of and adjacent to the Midia Block. This contains an existing gas discovery and multiple exploration plays. Similarly, Beach Energy farmed into the shallow water Est Cobalcescu Block operated by Melrose Resources in mid September 2012. The block has an average water depth of less than 100m and is close to the ExxonMobil deepwater block in which the partnership commenced a 6,000 km2 3D seismic survey at the end of 2012.
Bulgaria: Energy Independence?
Interest in Bulgaria has been rising since March 2012, when the industry was invited to tender for the deepwater (up to 2,000m) 14,220 km2 Block 1-21 Khan Asparuh permit, which was eventually offered in July 2012 to a consortium led by Total. It is understood that two wells are to be drilled during the initial five-year exploration phase to test a structure thought to have between 700 and 1,400 Bcf potential.
Melrose Resources declared in July 2012 that 3D seismic data acquired over the central area of the offshore shelf Galata permit in 2011 had confirmed the presence of seven structures in the area with a total combined unrisked P50 prospective resource estimate of 125 Bcf. The highest ranked prospect, Kamchia, has an estimated P50 of 27 Bcf and a 40% chance of success. Preparations are underway to drill this in April 2013 as part of a multi-well programme that possibly includes two exploration wells in Romania. This was followed late August by the award to Black Sea Energy EOOD of the 1,319 km2 shallow water Block 1-19 Sveti Atanas, located south of the Melrose production acreage.
The authorities opened a tender for the 4,032 km2 deepwater Block 1-22 Teres in the Black Sea exclusive economic zone near neighbouring Turkey in December 2012; the bid deadline is May 2013. This adjoins the Silistar block that was awarded to Lederbel BG but is being contested as the tender process has identified ‘substantial irregularities and indications of fraud’. A new tender for the acreage is planned once the investigation is concluded.
At present, production from the Melrose Resources fields off north-eastern Bulgaria accounts for 10–15% of the country’s domestic needs and the Bulgarians hope that the result of this increase in drilling will be gas supply independence in a few years.
Ukraine: Another Domino?
A long-running border dispute with Romania was resolved in 2009, allowing companies to look more closely at this country. Until recently, the only area in the Ukrainian Black Sea under a PSA was the Prykerchenska Block, which lies in water depths between 700m and 2,100m and which has been the subject of an extended legal dispute. This was finally advanced in May 2012 with the grant of a licence to Vanco for an initial eight-year term, requiring a large but unspecified amount of 3D seismic to be acquired and the drilling of six deepwater wells.
Then in August a consortium of ExxonMobil, Shell, OMV Petrom and Nadra Ukrainy won the right to sign a PSA for the 16,698 km2 Skifska area, pledging to invest US$ 400 million in the initial exploration phase together with a signature bonus of US$ 325 million. Lying adjacent and geologically similar to the Domino discovery, there are high expectations that the Skifska field could produce up to 4 Bcm of gas annually from the end of the decade. Analysts see the exploration projects as a game-changing shift for Ukraine, whose energy inefficient economy is being squeezed by high fuel import prices, and whose price disputes with Moscow have twice since 2006 triggered supply disruptions to Europe.
Russia: Black Sea Core Region
Rosneft, which is owned by the Russian government, has stated that the Black Sea is one of its core regions in its drive for increased resource potential. The company signed a strategic cooperation agreement with Eni in April 2012, whereby the two companies will form a joint venture for the development of the deepwater Zapadno- Chernomoskaya block. Rosneft says the tract hosts multiple prospects and estimates the three largest to have combined reserves of 3.5 Bbo Drilling is expected in 2015–16.
At about the same time Rosneft signed a deal with ExxonMobil creating a joint venture to explore the 11,200 km2 Tuapsinsky Trough acreage in the waters off the Krasnodar region. Seismic acquisition is complete and interpretation of the data underway with the drilling of the first exploration well planned for 2014–15.
Turkey: Deepwater Available
Turkey holds the largest Black Sea acreage and TPAO, the national oil company, believes that the sector holds reserves of 10 Bb of oil and 53 Tcf of gas. The company announced it will invest US$ 4 billion in the Black Sea over the period 2011–13 while the ministry has announced it is aiming for commercial production in either 2015 or 2016. Although there is plenty of available acreage, so far this investment has yielded little in the way of commercial reserves, and concerns that the Black Sea’s prospectivity may be overrated have affected investment levels. At the present time TPAO has all the deep and ultra-deepwater licences and, following the exit of Petrobras and ExxonMobil, no international players are involved.
Shell chief executive Peter Voser has indicated his company, now conducting a shale gas exploration programme in the south-east of the country, is assessing oil exploration and production opportunities in the Black Sea with TPAO; media sources indicate the award of ultra-deepwater acreage to Shell is imminent.
Georgia: Limited Prospects
Offshore acreage is limited and Georgia has attracted little industry interest since Anadarko withdrew from exploring the Rioni Basin on the Black Sea shelf in 2009. The deepwater remains virtually unexplored and while little is known about offshore reserves, they are likely to be modest.