Bulgaria, Shell sign Black Sea off-shore oil and gas exploration contract

Written by on February 23, 2016 in Bulgaria - Comments Off on Bulgaria, Shell sign Black Sea off-shore oil and gas exploration contract

Royal Dutch Shell signed a contract on February 23 to explore for oil and gas in Bulgaria’s Black Sea economic area, as the government in Sofia hopes to diversify its energy sources and diminish dependence on Russian imports.

Last year, Shell won the tender for the 1-14 Silistar block, which covers about 6900 square km on Bulgaria’s sea shelf. The company committed to invest 18.6 million euro in exploration, as well as a 4.9 million euro bonus, the Energy Ministry said in a statement.

The five-year permit can be extended twice, by two years each time, the ministry said.

“With this contract signed today, we are making the most important step towards the diversification of gas sources for Bulgarian industrial and household consumers,” Energy Minister Temenouzhka Petkova said.

Prime Minister Boiko Borissov, who attended the signing ceremony, echoed the sentiment, saying that “now no one can say that Bulgaria is not working actively towards its energy [sources] diversification.”

The deal with Shell is the second major offshore exploration contract signed by Bulgaria in recent years. In 2012, it awarded an exploration permit for the Khan Asparoukh 1-21 block on the Bulgarian Black Sea shelf to a consortium led by France’s Total, which also included Austria’s OMV and Spain’s Repsol. (OMV, alongside ExxonMobil, is also drilling for oil and gas on Romania’s Black Sea shelf in an area close to the Silistar block, with some estimates pointing towards reserves of up to 80 billion cubic metres of gas.)

The decline in oil prices over the past two years, which has prompted oil companies to cut investment into exploration and production, has caused several delays in exploration of the Khan Asparoukh block, but Borissov has said he was hopeful that the Total-led consortium could start drilling in 2016.

Bulgaria imports more than 85 per cent of its annual gas consumption from Russia and has stepped up efforts to secure supplies from other countries following the supply disruptions in 2006 and 2009 – the latter hit the country especially hard as it coincided with a cold spell, emphasising the high degree of dependence on Russian gas. (Bulgaria is also one of several EU member states in Eastern Europe where Russia’s state-owned gas company Gazprom, according to a European Commission anti-trust investigation, has been using its dominant market position to prevent meaningful competition.)

Sofia has already lined up gas deliveries from Azerbaijan’s Shah Deniz gas field, with deliveries set to begin in 2019, and has explored the prospect of possible gas deliveries from Cyprus and Turkmenistan, should those countries begin exports to the EU.

Bulgaria is building gas grid interconnectors with Greece and Romania, with another pipeline to Serbia at the draft stage, which could be used to pump gas in case of future supply cuts, although the process has been slow and beset by technical failures.

Borissov also hopes to build a gas hub serving the Balkan peninsula, trying to entice Russia to serve as a major supplier, but such a prospect appears unlikely at this stage, given the fact that Russian president Vladimir Putin has repeatedly blamed Bulgaria for the cancellation of the South Stream pipeline, a major Kremlin undertaking that was meant to bypass Ukraine as a gas transit route.

(Photo: veetec/sxc.hu)

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