Deloitte: Romania’s Black Sea offshore gas to bring USD 26 bln to the state budget and USD 40 bln to the GDP until 2040

Investments in the Romania’s Black Sea oil and gas sector will generate revenues of over USD 26 billion to the public budget and an additional USD 40 billion to the country’s GDP until 2040, as a result of total investments of USD 22.2 billion, according to a Deloitte report released on Monday.

Deloitte estimates a total production of close to 170 billion cubic meters of natural gas in Romania’s offshore fields, based on a prudent scenario.

These conclusions are based on an independent Deloitte Central Europe report entitled “The contribution of Black Sea oil and gas projects to the development of the Romanian economy”, performed at the request of the Romanian Black Sea Titleholders Association (RBSTA).

“The resulting estimates therefore show that each 1 billion USD invested in offshore oil and gas upstream activities in Romania generates 3.0 billion USD in the Romanian GDP over the upcoming 23 years of production. Moreover, it contributes with 1.9 billion USD direct and indirect revenues for the Romanian state, as well as creates and/or maintains, in average, an annual number of 2,198 jobs in Romania over the entire period,” the study estimates.

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The study says that the impact on the labor market translates into creating and annually maintaining an average of over 30,000 jobs.

According to the study, the effect of successful upstream offshore developments would also spread to the midstream and downstream sectors – gas transmission and distribution – and other industries – chemical, petrochemical and gas to power -, where close to USD 9 billion investments would be possible following the gas surplus and the economic competitiveness that it brings.

“At least one million household consumers could be connected to gas distribution networks over the next 10 years. Currently there are over 3 million households not connected to gas networks,” Sorin Elisei, manager at Deloitte Consulting, told journalists.

According to Deloitte, the cumulated value of the future expenditures on Romania’s offshore exploration, development and production is estimated at USD 22.2 billion, out of which USD 15.7 billion capital expenditure (CAPEX) and USD 6.5 billion operating expenses (OPEX).

From this total investments, 63 percent are expected to be domestic (54 percent in case of CAPEX, 82 percent in case of OPEX).

“These investments, in turn, would lead to the creation of approximately 42,000 jobs and maintenance of them up to 2040 and an estimated cumulated impact of USD 18.3 billion to state revenues, as well as almost USD 99 billion cumulated national output between 2020 and 2040,” Deloitte experts say.

Deloitte experts estimate 35 percent of Romania’s production from the analyzed period could be exported, while the difference would cover the decline in the onshore production, in the context of increasing domestic consumption.

The report also presents the strategic value of the Black Sea projects, enhancing Romania’s position in ensuring the regional energy security, after firstly securing the domestic natural gas consumption.

“We estimate that Romania will export around 1 billion metric cubes of natural gas each year to the Republic of Moldova, as a strategic decision,” says Razvan Nicolescu, a former minister of energy and currently head of energy & resources industry leader at Deloitte Consulting.

The impact of the offshore production on the Romanian economy was assessed using the Input-Output model conceived by US Nobel Prize winner Wassily Leontief.

The study covers a period of 40 years, starting with 2000 and data used for the analysis was collected from publically available sources (European Commission, ENTSO-G, ANRM, ANRE, etc.) and Deloitte’s own data and panel of experts.

The forecast is based on Deloitte Central Europe assumptions regarding the evolution of the Romanian economy, in general, and of the offshore industry, in particular.

The Deloitte team involved in the project included Romanian and Polish experts.

The methodology used represents a well-known approach that assesses the impact of a certain industry on the economic environment, of providers and sub-contractors from various sectors of the economy as well as the impetus generated by the remuneration of employees, which contribute to the economic growth.