Vanja Aleksic, general manager of NIS Petrol

Onshore oil exploration field was relatively poor in significant news in recent years, especially in the operational area. Operations are expensive and complicated, especially in a fiscal, legal and regulatory context that is unclear and often adverse. We discussed al these with Mr. Vanja Aleksic, general manager of NIS Petrol, one of the most dynamic Upstream companies in Romania, recently.

Mr. Vanja Aleksic, NIS Petrol is one of the few oil companies to have expanded their portfolio in Romania in recent years. What was the reasoning behind this strategic decision? Does it have anything to do with the overall market climate or is it tied to the specifics of your licensed blocks?

NIS Petrol has been present in the Romanian market since 2012. Our local entry was the expression of our long-term regional development vision for NIS Petrol. We are talking about an integrated approach of several markets, and the evolutions in Romania, whether it is in the upstream or downstream segments, is the result of a unified and coordinated vision for development in the region. When it comes to upstream, our portfolio expansion in the local market is tied to the long tradition of oil production in Western Romania, which gave us confidence to try to identify new petroleum and natural gas accumulations. But this project was part of a wider coordinated approach of NIS for the Pannonian geological basin, across several markets.

NIS Petrol is the operator for all six blocks in its portfolio. What does that entail? What type of operations do you run in Romania?

Together with its partners, NIS Petrol plays the role of operator in six onshore blocks leased by the state in Western Romania. In this role, NIS Petrol bears full responsibility, as operator, for the timely unfolding of all processes needed to meet the targets pledged to the state in the concession contracts. NIS Petrol provides the financial and technological resources needed for the proper management of exploration operations in all six blocks. Furthermore, NIS Petrol manages, directly or through specialized subcontractors, all types of petroleum operations stated in the concession contracts, starting with the seismic surveying and ending with production testing.

Romania has a rich history in oil and gas production. What kind of potential does NIS Petrol expect from its blocks? What clues has your exploration campaign in Romania revealed about the estimated production volume (oil/gas)?

The exploration campaign that NIS Petrol carried out in Western Romania in recent years has identified some new deposits for conventional hydrocarbons in the Jimbolia and Teremia Nord areas. In the case of the Jimbolia block, based on the data collected, we will enter experimental production for natural gas next year, while for the Teremia Nord reservoir we plan to unfold oil experimental production. It is still too early to refer to their commercial potential. We will get back to you with more information once we have analyzed the data gathered from the production tests planned for the next couple of years. Furthermore, we have yet to conclude the exploration operations in our other blocks. What is certain is that 2018 was a great year for our upstream operations in Romania. We launched drilling works on two exploration wells, while two more are in the authorization stage, and we collected 2D and 3D seismic data on 2 of the petroleum blocks. This major achievement places NIS Petrol among the leading companies in 10th Round of concessions in terms of meeting their exploration targets. This is a joint merit and I take this opportunity to thank all our colleagues and partners.

NIS Petrol is part of a group that operates in several countries in the region. Are there any synergies that could boost investments in Western Romania? If so, what are they based on?

Of course. As I outlined earlier, NIS group investments in Romania, whether in upstream or downstream, are part of an integrated approach promoted regionally by NIS. In upstream, our operations in Western Romania are aimed at substantiating the experience obtained here with the ones in Hungary and Serbia in order to get bigger more detailed picture of the whole Pannonian basin. In downstream, besides Serbia, we have a significant presence in several countries in the region: Bosnia Herzegovina, Bulgaria and Romania. To ensure the needed fuel quantities for our entire distribution network in the region, as well as to guarantee its highest quality, NIS Group invested considerable sums in its refining facilities in Serbia, especially Pancevo refinery, which entered a new phase of extensive modernization late last year, estimated at USD 300 million. The proximity of the refining capacities to our distribution markets will enable us to supply fuels to our stations with a high degree of efficiency. That way, we can remain competitive in a highly volatile market.

What are the most challenging aspects of your activities at the moment? Is it securing land access for exploration works, the well drilling, human resources, or something else?

Each of those coordinates you have mentioned raises certain challenges in our upstream operations. That is why we are especially thankful for the significant progress recorded in the exploration campaign in Western Romania, in recent years, but mostly in 2018. To come back to your question, I think the delays and deadlocks in acquiring seismic data are an issue for the industry as a whole, not just for NIS Petrol. This is probably due to two main causes. On one hand, we as an industry bear some of the blame, because local communities need a better understanding of the role and benefits of petroleum exploration. Exploration operations unfold based on an agreement with the Romanian state. The Romanian state, and by extension all its citizens, are the main beneficiaries of these activities, whether by getting a better image of subsoil resources, especially since all investments are pledged by private operators, or by gaining economic benefits in the form of new jobs, budget contributions from profit taxes and royalties, or the consolidation of the country’s energy independence. On the second hand, the current legislation in the field, especially the petroleum law, needs to be updated with the latest exploration particularities. I am confident that with goodwill from all interest parties, these issues can be solved in the coming years, so that this industry with a long tradition in this country can continue to contribute to the welfare of Romania.

What are the commercial prospects for the production planned in Romania? The reference price for oil is at safe levels, for now, and the natural gas market seems to be coagulating towards a free market. What opportunities and risks have you identified so far?

It is too early to talk about commercial prospects for oil and gas production. That is the reason why, I will attempt to answer in a hypothetical manner, taking into consideration one possible scenario in our upstream results and the current profile of the market, which is highly dynamic. For that, whether we look at opportunities or risks, we must always consider both the global and the local outlooks. Globally, it is difficult to make forecasts about the reference price. The situation in Iran, the largest oil exporter, is unpredictable in the light of the United States’ push for sanctions. Saudi Arabia has recently announced plans to reduce its output. Venezuela is going through its own internal turmoil and no one knows how things will evolve. The list can continue and each of these situations can bear an impact on the price of oil. Locally, the opportunities and risks rely mostly on public policies, where the evolution of excises for example is uncertain.