7 wells drilled by NIS Petrol in 8 years of activity in Romania (interview Vanja Aleksic)

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In recent months, more signals have been heard that NIS Petrol, one of the most active companies in the hydrocarbons E&P in Romania, is approaching the moment to start commercial exploitation. We talked with Vanja Aleksic, the general manager of NIS Petrol about the present status of the company’s operations in Romania and the prospects for the near future.

Dear Mr. Vanja Aleksic, I was talking to you about almost a year ago, when we mainly talked about the NIS Petrol exploration campaign in western Romania. Are we closer to the start of commercial operations today, as suggested by the permits requested and obtained by the company this fall?

The year 2019 was indeed a very busy one for us. The activities of NIS Petrol in the Upstream division, concentrated in the western part of the country, have recorded a significant progress from the previous year. NIS Petrol managed to start the experimental production operations in two of the six oil concessions held in Romania. In both cases, we are still in the exploration phase and it is too early to refer to commercial production yet. A decision in this regard will be made once exploration phase will be completed and will be grounded on the analysis of the results from the experimental production operations, which will give us the information about the reserves. Once the feasibility study will be conducted, the quantities of the reserves will be determined, and NAMR will approve these figures, the company could determine the economics of the project and decide upon entering the next phase.

For 2019, the start of the experimental production of natural gas at Jimbolia block, respectively the start of the oil production at the North Teremia block, was scheduled. What can you tell us about these actions? Has the program been respected?

The start of the experimental production represents an important milestone for our operation. It is the pinnacle of our teams and our contractors’ efforts to build from scratch these two infrastructure facilities on both fields: Jimbolia field located in DEE V-20 Jimbolia petroleum block, and Teremia North field, which spreads out on both EX-7 and EX-8 blocks, located in Timis county.

Both experimental production facilities were put into production in the third quarter of this year. The up-to-now given results are in line with our initial plans and the natural indicators obtained are in accordance with our expectations and calculations in both generation of electricity from the natural gas production in Jimbolia, but also as far as concerns the hydrocarbon oil production in Teremia North. Therefore, we are optimistic and we hope that future prospects will confirm the opportunity of moving forward to a different stage of development.

In 2019, did you continue the exploration operations? With what results?

Along with the two field where we started the operations of experimental production, we have completed the geophysical surveying activities on an area of 170 square kilometers in the EX-2 block, in Bihor county, and we are currently running a similar campaign in the EX-12 block in Timiș county. Completion of this latest seismic data acquisition project by the end of this year will amount for over 1000 square kilometers of collected 3D data in total, and over more than 200 kilometers of 2D geophysical surveying.

In addition, we completed the drilling operations at two wells where the works had started last year; we also initiated and completed drilling operations at two other new exploration wells in the EX-7 and EX-8 blocks. In total, up to now, NIS Petrol has drilled six exploration wells, for four of which we performed testing and workover operations.

The works on drilling the third new well this year are planned to start in December of this year. Thus, we will reach no less than seven wells drilled in eight years of activity of NIS Petrol in Romania.

The commercial production of the identified hydrocarbon resources depends on many short-term factors, including the reference prices on international markets and the fiscal regime in the area of action. What are your expectations for 2020 from these two perspectives?

As far as the internal market and the applicable fiscal regime are concerned, we would like to experience, like any other investors in the energy field, 2020 as a year characterized by a proper degree of stability.

The investments made in oil industry are considered investments on a long term and it is important to have a high predictability of the general business environment on the local market, including the fiscal regime aspects concerned.

Regarding international oil price developments, they can be influenced by an extremely complex mix of factors, both economic, including global and regional economic growth, as well as political and geopolitical. For this reason, it is extremely difficult to formulate a clear prediction.

We will continue to follow the future perspectives in terms of the two factors of referral and consequently we will adjust our priorities based on the further developments, however in close regard to the long-term group strategy.

Is the gas-to-power option on the table for the exploitation of the extracted natural gas or do you analyze it strictly to cover the technological consumption at the well?

Following an in-depth analysis of the various options identified, the decision was made to transform the natural gas obtained from experimental production into electricity.

According to our expertize this was the optimal solution, bearing in mind the considerable distance from the nearest gas pipeline and the still low level of the demand for CNG on the local market. Hence, the Gas-to-Power plant was installed on Jimbolia infrastructure facility.

The production of electricity allows both covering the internal technological consumption of the two wells, as well as the valorization of the production through the delivery of electricity into the national grid. Currently, we are working on increasing the production capacity for 2020.

In the areas where oil operations are carried out, there is a growing level of expectation from the local community in relation to various forms of direct benefits that local people could benefit: jobs, access to natural gas sources, etc. I suppose that the response of the operators depends essentially on the local specificity. How did these benefits materialize for the local communities where NIS Petrol is active?

NIS Petrol implements in Romania the CSR program entitled “Growing Rural Romania”. This program was launched in Romania in 2014 and continues today, supporting projects proposed by local communities, projects focused on increasing the welfare of communities and improving the quality of life of their citizens.

If in the last five years, NIS Petrol spend over euro 70,000 on an average per year, in 2019, due to an increased number of operations carried out, the CSR projects financed under the Growing Rural Romania program overcome the double of the annual average.

Nevertheless, the benefits the local communities have in the area were our operations are unfolded are not restricted to the social responsibilities programs, but they account for various other types, like jobs created for the local citizens by our contractors and also procurement of various types of services from local companies, on one hand.

On the other hand, it is worth mentioning the contribution through the payment of different taxes to the local budgets, as for example the authorization fee for the construction of a well, which is calculated as a percentage of the value of the investment. Another element that comes to the support of the communities and the agricultural activities at the local level refers to the rehabilitation of agricultural roads that facilitate the access to the wells, which are used both by the company and also by the other economic agents and of course by local citizens.

Once the commercial production phase is reached, the benefits for the community will definitely increase respectively, our involvement in the community becoming a tight long-term partnership.

The Romanian authorities have announced that the launch of a new round of bids for oil concessions is very close. Are you interested in new purchases through this instrument? Do you evaluate other ways to expand the portfolio in Romania or, more broadly, in the region of the Panonian geological basin?

Romania represents for the NIS group a market with good potential for growth and significant opportunities for development, both on the upstream and downstream segments. Nevertheless, we are pursuing a steady and sustained growth. One evidence supporting our commitment consist in the fact that, in the past years, NIS acquired the participation of two of our partners in two of the concessions and become operator in all six petroleum blocks.

Therefore, I would like to reiterate the fact that NIS Petrol is constantly monitoring and evaluating all available opportunities on the Romanian market. The planning of the 11th round of bidding for new petroleum concessions is a clear sign from Romanian authorities, that there is will and interest to development the petroleum industry. In addition, I would appreciate that it is an encouraging signal to any player in our field of activity, and this is one of the reasons NIS Petrol is willing to closely analyze all the information available regarding the new petroleum blocks.

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This interview firstly appeared in the printed edition of energynomics.ro Magazine, issued in December 2019.

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