Sand Hill Petroleum Romania SRL (”Sand Hill”) is one of the newcomers in the Romanian Upstream sector (crude oil and natural gas exploration, development and production). Lured by the potential of the local onshore underground, Sand Hill plans to invest up to 20 million euros in Romania in 2018 for exploration.

Dear Phil A. Christian, you have over 37 years of well-rounded experience in the oil and gas industry all over the world. Until recently you were active mostly in Hungary, before taking over the Sand Hill activities in Romania. Please tell us a few words about the concessions Sand Hill is operating in Romania and how do you find the Upstream sector here, when compared to other regions you know.

Earlier this year, Sand Hill acquired partial interest, and assumed operatorship, in two concession agreements in the Western part of Romania, on the Hungarian border. In general, we believe there is untapped prospectivity in the Pannonian Basin, and our newly-acquired interests here are an extension of successful exploration efforts by our affiliated company in Hungary.

While we see Romania as a rich environment in terms of exploration potential, we also believe that the fiscal regime in Romania, with respect to its impact on the Upstream industry, needs to be stabilized and made more competitive with other countries trying to attract capital spending by operators.

Little seems to have happened in Romania in terms of E&P operations in recent years, as Romania strives to formulate a new fiscal regime for the O&G businesses. What was it that convinced Sand Hill to invest in the N-W of Romania?

Clearly, the exploration potential of the Pannonian Basin was the key driver in our decision to focus our initial Romanian investment in the Western part of the country. Other factors were considered of course, including an educated work force, upstream infrastructure etc., including the tax and royalty scheme in place. It is our belief that Romania will eventually comply with the European standard of unregulated commodity pricing and the free movement by import/export of those same commodities, in our case specifically natural gas. It is also our belief that the Romanian government will ultimately recognize the long-term value of creating a fiscal environment which attracts investment from Upstream Oil and Gas companies.

Sand Hill Petroleum plans to apply modern North American exploration technology — including advanced 3D seismic acquisition and processing — to mature onshore areas with the goal of identifying overlooked conventional resources. What is the level of investment you allocated for getting access to these untapped resources in Romania?

While our exact level of capital expenditures varies year by year, I think it would be reasonable to predict that Sand Hill will invest up to 20 million euros in Romania in 2018.

Please give us some info on the exploration technology you intend to use in Romania. Will there be involved any local contractors?

Our primary exploration goal is to find previously undiscovered hydrocarbon reserves using modern seismic acquisition, processing and analytical tools along with conventional drilling and completion techniques. To accomplish this, we’ll use a blend of service providers, including Romanian companies who have local expertise.

Sand Hill and its affiliate companies are known for reducing the cycle time of exploration, development and production. What obstacles need to be overcome in Romania in order to be able to replicate that model here?

It’s true that as an organization, we’re able to make quick investment decisions and quickly monetize successful exploration efforts and we hope to be able to replicate that expeditious approach. But, there are some concerns, including a) access to land for acquiring seismic and drilling wells; b) ability to freely market any future production we have; and, c) stability of the fiscal regime, i.e. taxes and royalties.

It’s our hope that the Romanian government will recognize the importance of those three concerns to our industry and work with industry groups, such as ROPEPCA, to find long-term, strategic solutions that will encourage investment among current concession holders, and indeed create an environment that is attractive to new companies looking to expand their investment portfolio to the Romanian Upstream sector.

The Romanian Upstream sector is dominated by two large companies. There are also dozens of investors with much smaller footprint in Romania, although some of them are rather big on a global scale. What is your approach in the dialogue with the Romanian public authorities in Bucharest, and also at the local level?

We believe the best approach to the central government is through industry groups that represent member companies on long-term, strategic issues such as those mentioned above. This should be accomplished through representation at various functions as well as direct, face-to-face meetings with appropriate influencing and decision-making bodies within the government, with the purpose of describing the nature of our investment risk, as well as finding solutions to policy issues which are beneficial to everyone. We firmly believe such ”win-win” solutions can be found through open and effective dialog.

On the local level, we want to work closely with the communities in which we are active to help educate local officials on our plans and the impact our work will have on their communities. We always want to be good corporate citizens and working with our local partners in a transparent and forthright way is a large part of that citizenship.

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This interview firstly appeared in the printed edition of energynomics.ro Magazine, issued in December 2017.

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