Sterling Discovery Supports Black Sea Potential

BMI View : Another gas discovery by Sterling Resources in the Black Sea confirms the latter ' s hydrocarbons potential. We expect drilling activity in the Black Sea to continue to pick up, which would be to the advantage of countries with Black Sea coasts such as Romania, Bulgaria and Ukraine. We forecast that gas production from the Romanian Black Sea will take off by 2018, and alleviate the country ' s net gas import burden in face of a current moratorium on shale gas exploration that is limiting the output potential of its unconventional sources.

Canada-listed Sterling Resources reported a gas discovery at the Eugenia-1 well, drilled at the Pelican Block offshore Romania in the Black Sea. Operated by its subsidiary Midia Resources SLR , gas was discovered in two formations while a third also exhibited gas potential.

The deepwater well was drilled to a water depth of 2,248 metres ( m ) . It hit a 22m gas-bearing column at the Cretaceous sandstone formation and a further 20m zone of interest at the Eocene limestone section. The Oligocene structure - the secondary objective of the drilling campaign - also had minor gas shows and was deemed an ' interesting prospect ' by Sterling. Further appraisal will be conducted to assess the production potential of the prospect.

Midia Resources has a 65% operating interest in the Pelican block. Its other joint venture partners are Petro Venture Europe (20%) and Gas Plus International (15%).

Black Gold In The Black Sea

This well is part of Sterling ' s 2012 exploration campaign in Romania. It is a good result for the firm, which Romanian operations make up 42% of its business activity. The drilling of Eugenia-1 had been long planned , but a failure to secure a construction permit from the Romanian National Agency for Mineral Resources (NAMR) obstructed plans for work on its Midia and Pelican blocks . In April 2011, it had to declare force majeure on these blocks as a result . This was not resolved until November 2011.

Despite the difficult regulatory environment in Romania exposed by Sterling ' s delay, its offshore sector is still attractive to the company and other industry players alike. The Canadian firm is on its way to first production from the Ana and Doina discoveries - made between 2007 and 2009, with contingent resource estimates at 37.3mn barrels of oil equivalent (boe) - expected in 2015. Sterling believes that the rest of its offshore Romanian acreage could hold as much as 325m n boe in prospective resources. A gas discovery at Domino-1, in the neighbouring Neptune block, by supermajor ExxonMobil and partner OMV in February 2012 also support s Romania ' s offshore potential ( see our online service, February 23 2012, ' Black Sea Potential Boosted By Romania ' s First Deepwater Gas Discovery ' , February 23 2012 ). Sterling ' s latest discovery no doubt further supports the prospect ivity of the Romanian Black Sea.

Activity offshore Romania could further pick up as the country rides on the wave of growing interest in the Black Sea ' s undiscovered resources. ExxonMobil and OMV will be carrying out more 3D seismic studies in the Romanian Black Sea to better understand its potential ( see ' OMV Petrom, ExxonMobil Conducting 3D Seismic Study In Black Sea ' , December 7 2012 ).

This is part of a wider regional trend with n eig hbours Bulgaria and Ukraine also seeing increased interest in their Black Sea acreage from big name industry players. Exxon and Royal Dutch Shell will lead a consortium to explore and develop Ukraine ' s Skifska field ( see ' Despite Rising Production, Import Dependency To Endure ' , August 16 2012 ). French major Total will be prospecting the 15 sq km Khan Asparuh block in the Bulgarian Black Sea ( see ' Total Clocks In Black Sea Acreage ' , July 16 2012 ). Current rig utilisation in the Black Sea is also at 100% and we expect it to remain high as interest in the region grows while the number of rigs available to support deepwater drilling there remains limited.

Too Few Rigs In Growing Black Sea Play
Current Rig Count By Region*

Offshore, Not Shale - For Now

it jointly holds with Hungary and Bulgaria (according to US Energy Information Administration estimates) is not likely to contribute to domestic gas production.

Energy Security Banks On Offshore Gas
Romania's Gas Production, Consumption & Net Gas Exports* (bcm)

In our forecasts, Romanian gas production is expected to fall through to 2016 while domestic consumption rises in tandem with economic growth. Hence, its import requirement is expected to more than double from an estimated 2.3bcm in 2011 to 7.8bcm by 2016. However, we forecast that offshore gas production from the Black Sea, based on the results of current exploration activity, is likely to take off by 2018, reversing a declining trend in output. This could see Romania's net gas import requirement decrease to 2.8bcm by the end of our forecast period in 2021.

Table: Rig Utilisation Rates By Region
Region Current One Year Ago
Source: RigLogix
Africa - Other 86% 50%
Africa - West 86% 83%
Asia - Caspian 100% 0%
Asia - Far East 80% 89%
Asia - South 88% 81%
Asia - South East 79% 76%
Australia 92% 80%
Black Sea 100% 50%
Europe - East 100% 100%
Europe - North Sea 89% 90%
Mediterranean 80% 78%
MidEast - Persian Gulf 80% 85%
MidEast - Red Sea 80% 78%
N. America - Canadian Atlantic 67% 0%
N. America - Mexico 80% 78%
N. America - US Alaska 100% 100%
N. America - US GOM 80% 77%
S. America - Brazil 95% 85%
S. America - Venezuela 80% 90%
This article is tagged to:
Sector: Oil & Gas
Geography: Romania, Bulgaria, Ukraine

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