2018 SEE UPSTREAM Annual Conference & Exhibition

The tenth edition of the annual conference dedicated to the Upstream segment took place in Bucharest on 24 April. The event brought together once again managers from Romania and South-Eastern Europe, Romanian and international experts, officials from regulatory bodies, consultants and specialists in the field, who discussed hot topics for the energy industry and presented modern technical and scientific solutions applicable for the exploration and production sector of the oil and gas industry.

 

Major themes

• Towards a competitive upstream through innovation
• State-of-the-art solutions, breakthrough technologies and equipment
• Current challenges of the legislative and regulatory framework for upstream companies
• Permitting for construction/land related works. Legal amendments
• Enhanced Oil Recovery (EOR) activities, onshore & offshore operations
• Managing risk in oil & gas operations

 

Structured in the form of four technical sessions and a keynote speech, the conference provided participants with the latest information and the occasion of an open and transparent dialogue on geopolitical, economic, legislative, technical and scientific issues.

The important topics of the conference included the new legislative changes in the field of construction, the current challenges of the fiscal and regulatory framework, implications for the Upstream companies, programs for the efficient use of resources and cost reduction and, not least, innovative solutions for a sustainable development of the industry.

 

What has happened in the last year – industry highlights

Latest estimates by experts worldwide predict stronger oil prices in 2018 that will create more stability, supporting rebalancing in the market and new investment.

Interesting developments last year in the Black Sea Region include EBRD becoming a minority share-holder in Black Sea Oil & Gas (BSOG), that holds a 65% operating interest in the XV Midia Shallow block and XIII Pelican block in the Romanian sector of the Black Sea. BSOG also aims to develop the Ana and Doina discoveries in the Black Sea, as well as carry out further exploration and appraisal work, but recently has been locked in talks with Romania’s government about the regulations and fiscal terms that would underpin the company’s offshore Ana-Doina gas project.

Meanwhile US giant ExxonMobil issued bid documents for a USD 1 billion contract to engineer, procure, construct and install a 154-kilometre gas export line and 10,000-tonne platform for its major Neptun Deep project in Romania’s Black Sea. The contract is expected to be worth between USD 975 million and almost USD 1.3 billion, and represents the biggest Neptun Deep package on offer to the industry. A final investment decision is planned for the second half of 2018 with first gas due to flow in 2021 – and possibly 2020, with production rates for Neptun Deep unclear but may be 600 million to 800 million cubic feet per day.

On the other hand, OMV Petrom started drilling in the shallow waters of the Romanian Black Sea, where it was aiming to redevelop its Lebada Vest field, boosting production in the process.

In analysing the fiscal and legal framework, successive Romanian governments have planned to amend the Petroleum Law including the new royalties scheme, long overdue. It is expected that the National Agency for Mineral Resources (NAMR) would initiate the new bidding round (the 11^th) in 2018, including 6 offshore and 22 onshore blocks.

 

Officials and experts on hot topics in the Oil & Gas Industry

In the introduction to the Panel dedicated to officials and experts, Andrew Costin – President of Petroleum Club of Romania, highlighted some of the most important developments and challenges of the oil and gas industry globally and nationally.

 

Romania to regain its status in the regional energy equation

Iulian-Robert Tudorache – State Secretary within the Ministry of Energy, opened the conference, highlighting that Romania has committed to implement strategic projects that will increase supply security at national and regional level. He mentioned in this regard BRUA project, one of the most important strategic projects of Romania, which recorded significant progress. This new corridor will ensure not only a new gas transmission route at regional level but will be able to have access in the future to natural gas coming from various supply sources, including gas to be carried through the infrastructure of the Southern Corridor, as well as gas coming from the Black Sea.

As part of the Vertical Gas Corridor, BRUA project, together with Bulgaria-Romania interconnector, will be able to represent an important link between the Southern Gas Corridor and Central Europe.

The importance of the Black Sea was mentioned, where there are large volumes of gas, and the possibility that exploitation of these resources could lead to the reconfiguration of energy security of Romania and of the entire region.

“Romania must regain its status in the regional energy equation, have a serious and consistent strategy bringing concrete results, beneficial for the country. Romania has a privileged position at the Black Sea and is open to working with the riparian states in competition for regional energy resources, to turn this region into a strategic energy area,” the State Secretary highlighted.

 

Onshore reserves potential exceeds the potential of Black Sea reserves

The favourable situation in the oil market, namely the increase in oil prices (the highest in the past three years), will contribute to the revival of the service market to the level in 2014-2015, NAMR representative, Sorin Gal – General Director – believes. Despite the often changes at the helms of the agency (4 presidents during several months) and blockage in the regulatory activity, projects have continued.

2018 represents the phase of confirmations, Sorin Gal mentioned, as a commercial decision to invest in the exploitation of Black Sea gas fields is expected.

Recalling the discovery of the field in Caragele, the largest hydrocarbon discovery of the Romanian state in the past 30 years, NAMR representative highlighted that “the potential of Romania’s onshore hydrocarbon reserves exceeds the potential of hydrocarbon reserves in the Black Sea”.

In 2018, a new law on royalties will be drawn up, which will boost petroleum operations, a new mining law and potentially a new petroleum law, he added.

A heavily debated topic, the reference price of natural gas extracted in Romania, was clarified, Sorin Gal mentioning that it will be based on the Romanian gas market. Also, we will have a new reference price for crude oil and stability will be reached in terms of taxation. Massive changes will follow in terms of regulation in the petroleum industry (reserves plus resources), well abandonment and access to land on which petroleum operations are executed.

 

ANRE, an extensive process of alignment to the European regulations

ANRE is currently in an extensive process of legislative changes to apply the European regulations, Otilia Marin, General Director, mentioned. Thus, the institution will review procedures and rules established under the Electricity and Natural Gas Law no. 123/2012, as well as some existing regulations, from several points of view, including technical.

Provisions related to the own technical and commercial rules of operators in the sector will also be reviewed. Changes target inclusively the Upstream supply pipelines (connection to the transmission and distribution system), conditions of validity of licenses and operating permits, development of the natural gas market, the segment of compressed natural gas for vehicles, liquefied natural gas etc.

 

Safety of offshore oil and gas operations

In his presentation, Constantin Gheorghe – President of the Competent Regulatory Authority for Black Sea Offshore Petroleum Operations (ACROPO) referred especially to Directive no. 2013/30/EU on safety of offshore oil and gas operations and amending Directive 2004/35/EC. The objective of this Directive is “to reduce as far as possible the occurrence of major accidents relating to offshore oil and gas operations and to limit their consequences, thus increasing the protection of the marine environment and coastal economies against pollution, establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting possible disruptions to Union indigenous energy production, and to improve the response mechanisms in case of an accident.”

ACROPO’s establishment is a consequence of the mentioned document, the institution subordinated to the Government of Romania exercising the responsibilities provided by Law no. 165/2016 on the safety of offshore petroleum operations.

 

Creating value through integrated product-service solutions

The new strategy of the international group Jereh, specializing in oil & gas, power and environmental management, has as a central goal generating added value by understanding customer needs and personalizing the product-service package, says Leo Liu – Director Central & Eastern Europe. Jereh focuses on delivering integrated, flexible and efficient solutions for companies active in the energy, oil and gas industry and environmental management. With 15 subsidiaries and more than 5,000 employees, the group operates in various areas of activity: oil & gas exploration and development, oil & gas processing and treatment, oil & gas storage and transportation, LNG, CNG, refining and petrochemicals, power, environmental management. The range of customer services extends to areas such as investment & operation, equipment manufacturing, technology service, turnkey engineering. The company’s products and services reach 60 countries and regions in more than 50 cities around the world. The group’s strategy also seeks to optimize costs while respecting environmental regulations and achieving economic efficiency targets.

 

Pumping up the industry – Dedicated solutions

The National Research & Development Institute for Gas Turbines – COMOTI, specializing in aerospace, energy and environment, prides itself with notable achievements in terms of energy and energy saving. Company representative Leonard Trifu – Marketing Manager, has highlighted the most performing solutions dedicated to the oil and gas industry, including gas compression equipment with screw compression units (CU 64, CU 90, CU 128, CU 200, CU 220), centrifugal gas electro-compressor (EGC), centrifugal air compressor (CCAE), expander group – electric generator, skid packages. The mentioned examples included:

• The turbocharger set GTC-1000 installed in Ticleni Tg. Jiu unit, which compresses natural gas resulting from crude oil extraction from oilfields. Compressed gas is either supplied to skimming plants and/or high-pressure compressor facilities for the gas lift process, used in extraction wells, or delivered to the national trunkline;
• GTE 1800 SB cogeneration unit with two groups consisting of turbo-generator with PRATT & WHITNEY ST 18 engine, electric generator and post-combustion recovery boiler;
• GTE 2000 BT cogeneration unit from CET Botosani – electrical system integrator etc.

For the energy sector, COMOTI provides services such as design, 3D modelling, numerical simulations, power group automation, general overhauls, dynamic balancing, inspections, compressor and sub-assemblies functional tests etc.

 

Voice of the Oilfield – Subsurface and surface digitalization

The oil and gas industry, the basis of global energy supply, keeps pace with new automated technologies, aiming to stimulate the development and adoption of computerization and digitization in production processes.

Halliburton, one of the world’s largest oil companies introduces a revolutionary concept – Voice of the Oilfield™, a Landmark solution, to enable smart, connected well and completions for optimized production and reservoir management. Voice of the Oilfield™ helps maximize production rate, improve reserves recovery, and reduce risk by tactically applying technology innovations into core production workflows, states Sebastian Kroczka – Industry Solutions Advisor EESSA, Halliburton. According to company’s representative the digital evolution means: optimized and harmonized data management; delivery of the sensor data and reporting in real time through digital platform; optimization and automation of processes for faster and more efficient decision making process; easier accessibility for users thanks to cloud solutions; utilization of artificial intelligence and analytics; maximizing of asset value through engineered solution; greater control on each project OPEX and maximizing returns.

“A single digital platform is key to integrate the elements into a single solution to connect the Oilfield,” Sebastian Kroczka concludes.

 

Submarine cable systems for power, control and communications

As a worldwide leading expert in the cable industry, Nexans brings energy to life through an extensive range of best-in-class products and innovative services. For over 120 years, innovation has been the company’s hallmark, enabling Nexans to drive a safer, smarter and more efficient future together with its customers. The company focuses on four main business activities – Grid interconnection, Offshore Wind, Oil & Gas, and Telecom, Jørgen Blystad – Sales Manager, Nexans Norway, mentioned. As a turn-key supplier, Nexans provides project management and engineering, installation and subsea cable protection, hook-up on substations at cable ends. The company ordered a new vesel with a 10,000t split turntable capacity, for delivery in 2020. Innovative cable systems from Nexans allow to apply new state-of-the-art solutions, as well as increasing reliability, while cutting costs and reducing maintenance.

 

The importance of the Black Sea Region for the energy sector

The importance of the Black Sea for the energy industry and in particular the importance of cooperation between companies in this region has been underlined by Kees Cramer – Business Development Manager Black Sea Region, Steder Group. Acting as a global freight forwarder, Steder Group organizes the transport of all kinds of goods using all modalities: road, rail, air, inland waterways and sea. The company avails of all relevant certifications, licenses and memberships. Steder Group also provides multi-modal transport solutions, customs brokerage, logistics, cross-trades worldwide. The company representative reviewed the opportunities of the Romanian offshore oil and gas market, as well as the most relevant projects in this area. By anticipating the increasing demanding for an alternative shore base to those already existing, Steder Group has established a partnership with DP World especially to assist customers like ExxonMobil, OMV Petrom, Lukoil Overseas Atash and Black Sea Oil & Gas, and their general contractors to run the daily operations on non-stop activity basis. Therefore, by offering a suitable space for a new shore base with a concrete terminal space, suitable berth(s), best water draft, and free available land to be developed accordingly, Steder Group together with his partner is willing and ready to cooperate with specialized providers for developing such ‘shore base concept’.

“Work together in the Black Sea basin or risk that others will supply the world with energy resources,” concluded Kees Cramer.

 

Research on CO₂ usage, including EOR, in Romania

CCS or carbon capture and storage is a way of preventing the accumulation of large amounts of carbon dioxide released by large industrial plants into the atmosphere. The geological storage of CO₂, the areas of use, the state of implementation at global and national level, as well as the advantages of the method were presented by Constantin-Stefan Sava – Senior Geoscientist at GeoEcoMar. An enlightening example of use for the benefit of the oil and gas industry is that of the United States, where CO₂ storage is combined with Enhanced Oil Recovery (EOR). At international level, although there is progress, the widespread implementation of this process still suffers from economic impediments, mainly due to decrease in the emission allowances trading price. CO₂-EOR has the most significant commercial potential among utilisation methods leading to permanent storage. The objective of ECO-BASE (Enhanced oil recovery with storage) is to develop detailed and integrated roadmaps for CCUS (Carbon Capture, Utilisation and Storage), including EORStore, in South-East Europe.

GeoEcoMar supports the transposition of the provisions of the CCS Directive into Romanian legislation by granting regular consultations to the NAMR, Constantin-Stefan Sava mentioned.

 

Drill string cost analysis – Ways to reduce operating costs

Increasing profitability and reducing operational expenses remain a priority in the business strategies of companies in the oil and gas industry. Mihai Filipas, General Manager at Alfa Drill Consulting, a privately-owned company, providing professional consulting services for the oil and gas industry since 2008, talked about ways and methods to cut costs. Thus, the Drill string cost analysis shows that by reducing the numbers of repairs it can be saved 157,680 EUR/year – for API connection string that means 35 wells rental, and 394,200 EUR/year – for premium connection string that means 87 wells rental. This way, the company could offer wages and bonuses for the people or modern equipment that will help to not happen again. Expenses may also be diminished by simple preventive measures applicable during the handling, loading, offloading, transportation, pipes running activities.

 

Types of defects in natural gas pipelines and methods for their evaluation and repair

Most pipelines used for the transport of hydrocarbons have been built many years ago, which is why the most important studies currently concern the level of safety, especially with regard to the technical capacity to further operate these pipelines. The paper delivered by the representative of the Petroleum-Gas University of Ploiesti – Prof. Andrei Dumitrescu, aimed at identifying, evaluating and repairing defects of natural gas transmission pipelines. Starting from the classification of anomalies (imperfections and defects), the peculiarities of the technological repair processes were highlighted, as well as the main types of additional elements that can be applied to the maintenance works and the types of welded joints that are used for their application. Repair with coatings made from composite materials is a class of modern technological processes that enables repair of pipelines without stopping the operation of the pipelines and without applying welding operations on their tubing, Prof. Andrei Dumitrescu pointed out.

 

Camiro long life hydraulic equipment technology

Camiro Engineering is a company established in 2001 by a top manager in the maintenance of marine drilling platforms Gloria, Jupiter and Saturn, with activity and expertise within companies with a strong tradition like Petromar, Rig Service, GSP Offshore and OMV Petrom. The company’s competencies include: research-experimental development in natural sciences and engineering; engineering and technical consultancy; machine design; industrial processes and tribology. Continuous tribological research of state-of-the-art composite materials is the basis of Camiro long life technology, says Miron Procop – Director General. He delivered a presentation on the methodology that started to improve the hydraulic equipment of the duplex and triplex drilling mud pumps used in the drilling of oil wells on the Black Sea platforms. According to Miron Procop, the new unitary technology guarantees: drilling programs management and salt water injection of triplex and duplex pumps; well drilling will be executed over a given range, with a single set of hydraulic equipment.

The methodology is subject to the Camiro Engineering’s request for the Romanian State Office for Inventions and Trade Marks (OSIM).

 

Managing risk in oil & gas operations

Risk management is a priority chapter for companies in the industry, as there are significant risks of accidents during oil and gas operations. Pandele Neculae – Romania Representative, the WPC Programme Committee, has assessed the most important risks that may arise during exploration and production activities, in different stages of projects. Methods and solutions to minimize risks associated with production activity and economic risk have been identified. The conclusions prove that the integrate risk management is an essential key for achieving the projects targets. Thus, the integrate approach of uncertainty and risk application for E&R business improves the portfolio management. The basic risk workflow must be applied for exploration, drilling, reservoir, production, and economic activities.

The optimum solution for the overall portfolio takes into account all the data and the associated risks. So, in other words, risk management leads to E&P success, underlined Pandele Neculae.

 

Current challenges of the legislative and regulatory framework for upstream companies

The legislative and regulatory framework for Upstream activities has lately been the target of debates, most often contradictory, the reason being that the Romanian legislation does not provide a stable framework for the optimal and competitive development of operations. For example, the comparison between the level of taxation in Europe and the level in Romania (according to the Deloitte study from March 2018 – ‘An overview on royalties and similar taxes. Oil and gas upstream sector across Europe’) proves that compared to the rest of Europe, where the level of taxation has decreased steadily between 2014 and 2017, in our country it’s the opposite. Thus, in Romania, during 2014-2016, taxation increased, the exception being 2017, when a decline was recorded due to elimination of the tax on special constructions. ROPEPCA President, Harald Kraft, commented on this subject, also expressing the point of view of the association on the determination of the reference price of natural gas. The Romanian Petroleum Exploration and Production Companies Association (ROPEPCA) stands against the NAMR order approving the methodology for establishing the reference price for natural gas extracted in Romania. According to this order, the reference price for natural gas extracted in Romania will be calculated according to the trading prices of the hub from CEGH Vienna, well above the weighted average price of gas traded on the Romanian Commodities Exchange (BRM). Thus, gas market liberalization brings new challenges: OUG 64/2016 provides for the obligation of producers to trade 30% of their production on the centralized markets – BRM and OPCOM; transposing the OUG into law, with a minimum of 70% obligation, to trade on one single centralized market – OPCOM (the obligation might be extended up to 100%). ROPEPCA advocates for a voluntary quota and for the use of both exchanges.

According to Harald Kraft, ROPEPCA’s priorities for 2018 are: amending the Petroleum Law no. 238/2004; streamlining the bureaucratic procedures specific to Romanian institutions; the 11th licensing round organized by NAMR; educating the general public and the political class on the benefits having a performing petroleum industry.

The new amendments to Law 50/1991, updated in 2018, on the authorization of construction works, were extensively explained by Daniel Vlasceanu – Partner, Vlasceanu, Ene & Partners. He insisted on the implications of legal provisions on the Upstream sector. Given the recent evolutions on both the projects in progress and those to be implemented (BRUA, capitalization on gas reserves in the Black Sea) and oil price increase, it is necessary to have a clear legal framework, consistent practice and accountable authorities, the expert pointed out.