This is the transcript of the message delivered by Sorin Gal, General Director of the National Agency for Mineral Resources, during the 2016 Energy Strategy Summit, held on May 31 at Snagov Palace. For a sum-up of the main ideas, check our previous material: 27 essential ideas after Energy Strategy Summit 2016.

Good morning,

Thank you for inviting me and thank the organizers because they put me between the two major employers’ O&G associations – ROPEPCA and RBSTA. It is a positive thing because they are our most important partners in our activity. Even if sometimes we have opposite position, we keep on moving forward.

A lot has been said about gas, A lot has been said about oil. Earlier, Ambassador Mihnea Constantinescu said something about that rock probes deposit which represents the geological history of Romania. It is not in our posestion [at NAMR – editor’s note]. Part of it is at the Romanian Geological Institute (IGR), in a building to be ceded to the Ministry of Education and Research and then taken over by IGR. Another part is in a very well structured and very well organized warehouse, in Medias, at Romgaz, while the other part is in Campina, at the former Institute for Research and Design in Oil (ICPT).

I will try to point out a few things about our history. In Romania, we have been extracting oil for 160 years. We have the first oil production reported in the world, the first installation of distillate oil, we have Conpet with its 150 years of oil transportation through pipelines. We have so many things in the past. What do we have for the future? This is the big question and challenge for us. At present, the proven reserves of free natural gas are somewhere around 7% of total, associated gas is somewhere above 6% and crude oil at 4.72%. We have a very low oil production rate, being last in the world in number of barrels per well. About mature fields, we still have wells producing both oil and gas even since 1901-1902. From this point of view, the situation is quite complicated.

Of course, everyone hopes that Romania will become a major producer and exporter of natural gas. But this requires substantial investments. On on-shore, probable reserves are placed in the deep sea areas, where there are some oil agreements for exploration. A Romanian company is associated with a US company and a Spanish company. With large investments – a probe at 4,000-5,000 meters deep costs over 30 million dollars – they try to turn the initial geological resource into proven and producing oil reserves. In the offshore sector, everyone says there is great potential. There are some breakthroughs in this area, but there is still a long way to go until natural gas will enter the national transport system.

There is a reluctance, at least from the Minster of Environment’ side, for supportting these O&G exploration and exploitation activities. My colleagues know that we have many meetings, and try to change the law andd regulations for oil and gas, but it is very hard and we are moving at a very slow pace. Exploration activity is the most important at the moment, because it is the only solution Romania has to become the a large producer and exporter of natural gas. Money are needed for exploration and the risks are very high. On offshore area we have a very good success rate, at the moment. However, it doesn’t mean that we will be successful in completing soon any of the gas exploration and production projects. Mr. Mark Beacom can tell you more about the difficulties he experiences in order to build a simple pipeline to bring gas fro sea to shore. I think other operators, whose discoveries are placed at far greater distances in the Black Sea, will have even bigger problems and we are also talking about much higher costs.

This is about the future. Of course, many questions are raised about the future fiscal regime. And in this respect, discussions are equally complicated. The royalties were established by Law 238 / 2004. The law in 2004 replaced an older law which imposed royalties of up to 30%. Today, we talk about keeping the present royalties and abou introduction of a new tax on oil, actually an over-taxation for oil profits. All I can tell you is that discussions are on going at the Ministry of Finance. We will have to look very carefully to the present context. In 2013, when this law was initiated, it was a different context, different oil prices, different gas price in the international market. Today we are in a completely different international economic situation and any misstep at this time from our side can significantly impact on Romania’s objectives from a strategic and energy security perspective.

Given the fact that Romania’s energy strategy is being finalized, ANRM is also working on a strategy of its own – for oil exploration and research. I hope that in a few months we will be able to bring this strategy in public debate and initiate a process of changing both the petroleum law and the subsequent legislation.

Thank you!