The company will operate offshore in Romania

LUKOIL and Vanco International received the right to explore and develop two blocks on the Romanian shelf. This is LUKOIL’s first production asset in Europe; the company is also operating on the Black Sea shelf for the first time. The consortium will begin geological exploration no earlier than next year. According to experts, the geological exploration phase may be delayed, but if successful, LUKOIL will receive a production asset in Europe, which will replenish its resource base and provide the company’s European refineries with raw materials.

The consortium of LUKOIL Overseas (a subsidiary of LUKOIL engaged in foreign projects) and the American Vanco International signed an agreement with the national agency for mineral resources of Romania on the exploration and development of two blocks on the Black Sea shelf, the Russian oil company reported. LUKOIL owns 80% of the consortium, Vanco's share is 20%.

In July 2010, the consortium won the tender for the implementation of the project to develop the Est Rapsodia and Trident blocks. They are located at a depth of 90-1000 m underwater and at a distance of 60-100 km from the coast, near the city of Sulina, the company said in a statement. The total area of the blocks reaches 2 thousand square meters. km. Their resources have not yet been announced. At the first stage of exploration, the consortium plans to conduct 3D seismic to clarify the geological structure of the blocks, LUKOIL said in a statement. LUKOIL Overseas explained to Kommersant that the oil company is now registering an office in Romania. Plans for exploration and development of the blocks will be presented by the consortium in early summer, and geological exploration work is unlikely to begin until next year, the company said.

The distribution of the Romanian shelf began only after the settlement of relations between Ukraine and Romania regarding the division of shelf territories in February 2009. Then the International Court of Justice in The Hague ruled that out of 12.4 thousand square meters. km of the disputed shelf of Romania should go to 9.8 thousand square meters. km. The resources of the Romanian sites (there are 11 of them) are estimated from 100 billion to 1 trillion cubic meters. m of gas and 5-10 million tons of oil.

LUKOIL already has its own oil business in Romania. The oil company owns the Petrotel-LUKOIL oil refinery in the city of Ploiesti with a capacity of 2.4 million tons. There are also 299 gas stations operating under the LUKOIL brand in Romania.

Vanco International has experience working on the Black Sea shelf. The company carried out geological exploration of the Prikerchensky area in Ukraine. However, in 2008, due to a conflict with the government, Vanco International had to withdraw from the project. Now the oil company is trying to negotiate its resumption.

LUKOIL has not yet worked on the Black Sea shelf. The oil company has offshore projects in the Caspian and Azov seas, and outside Russia - in the Gulf of Guinea on the shelf of Ghana and Côte d'Ivoire in Africa. LUKOIL is developing two blocks in the Gulf of Guinea together with Vanco International’s parent company, Vanco Energy.

The resources of the Black Sea shelf are poorly studied, so oil companies are now unclear about either the type of resources or the depth of their occurrence, says Konstantin Yuminov from Rye Man & Gor Securities. The choice of equipment and, consequently, the cost of production depend on these factors, so geological exploration may take longer, he adds. Mr. Yuminov believes that everything will depend on the results of the seismic survey and the first exploration well: if resources are found, the work will speed up. According to Grigory Birg from Investcafe, LUKOIL will be able to complete geological exploration within five years. The company needs to increase reserves due to the depletion of its own assets in Western Siberia, and in the future the project could become a resource base for LUKOIL’s refining assets in Europe, the expert notes.

Olga Yagova

LUKOIL entered the Black Sea