OMV postpones decision to start commercial operations in the Black Sea to 2019

Austria’s OMV, the owner of Romania’s biggest oil & gas company OMV Petrom, has postponed a decision on starting commercial operations in the Black Sea offshore gas to 2019, following the vote on the new offshore law in the Parliament, according to Reuters.

OMV Petrom and ExxonMobil were expected to announce by the end of the year a decision to start commercial operations but they already said that the decision will consider the updates in the regulatory framework.

“We cannot make an investment decision at Petrom in this quarter as planned,” OMV CEO Rainer Seele said, adding that OMV first had to evaluate the conditions for what the company has described as a “billion euro investment.”

The company will now decide next year on starting commercial operations in the Black Sea offshore gas.

The announcement follows the vote in Romania’s lower chamber of the Parliament on the final form of offshore law following a consensus reached by the countries two main parties – ruling party PSD and main opposition party PNL.

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The final form of the law freezes the royalties and taxes for the period of offshore gas production but maintains the limit of 30 percent of investment allowed to deduce when paying taxes, a change disapproved by investors and experts alike.

The exploration of the Black Sea Neptun block is a joint venture between OMV’s Romanian subsidiary OMV Petrom and US energy giant ExxonMobil and includes the first deep-water exploration well in Romanian waters.

In 2012, the two companies said they had discovered 42-84 billion cubic meters of gas reserves at the ExxonMobil operated Domino-1 well, around 170 km offshore.

Unlike other countries in the region, Romania is almost entirely energy independent, importing less than 10 percent of its gas needs from Russia, with the rest produced locally – largely by state-owned Romgaz and OMV Petrom.