BSOG expects Midia startup in Q2

Black Sea Oil & Gas (BSOG) expects to start flowing gas from the Midia project in the Romanian Black Sea in the second quarter, later than previously planned, its CEO told Reuters on March 30.

Owned by private equity firm Carlyle Group, BSOG aims to extract 10bn cubic metres of gas from Mida over the project’s life. But it has repeatedly delayed the field’s launch, urging the government to amend regulations that developers have said are stifling offshore gas development. Midia had previously been due to come on stream in November last year.

“With the constructive co-operation of all the stakeholders … first gas will be achieved in the second quarter of 2022,” BSOG CEO Mark Beacom told Reuters in an interview. “Our view is that continuously undermining domestic producers by constantly introducing yet again new detrimental measures is the reason that Romania has significantly failed to reach its significant production capacity and will only prolong this issue.”

Romania introduced a controversial offshore law in late 2018 that has led to several offshore gas projects being shelved, including the Neptun Deep scheme led by Austro-Romanian firm OMV Petrom. The law imposed additional taxes, and restrictions on where producers could sell their gas and at what price.

Romania’s current coalition government has repeatedly vowed to change the legislation within the first half of this year, but it is yet to draft any amendments. And in March, the government extended a support scheme for rising energy bills by another year, with one of the provisions forcing gas producers to sell part of their output at capped prices in return for tax cuts and exemptions. Beacom said these measures would further undermine investment.

“There is significant underinvestment in bringing already discovered resources that are sitting at Romania’s doorstep … and further discouraging any producer, including BSOG, from looking for more resources through exploration.”

PwC Romania estimates that the country has the highest effective tax rate on offshore gas production of any European country, at 23%. This is more than four times higher than the average, according to the consultancy.

OMV Petrom has similarly complained repeatedly about the poor investment climate in Romania. It recently said it did not expect to take a final investment decision (FID) on the 84 bcm Neptun Deep project. In light of these delays and as part of its broader strategy, US major ExxonMobil is negotiating the sale of its stake in the project to local state-owned Romgaz.

Romania had aspirations to become a net exporter of gas following the discovery of large offshore resources. But amid these continued delays, the country continues to rely on Russian gas imports to supplement domestic supply. Like many other EU states, Romania is scrambling for ways of phasing out Russian gas use in the wake of Moscow’s invasion of Ukraine, while also seeking to ensure energy bills do not grow too steeply.