On 14 October, Lukoil revealed that the Lira-1X exploration well had discovered 30 billion cubic metres (bcm) of gas – the third deepwater well result announced in the Romanian sector of the Black Sea.
Two of the three have been discoveries, with cumulative estimated resources of between three and four trillion cubic feet of gas, while four exploration wells have been drilled and completed by ExxonMobil and have yet to have their results released.
By any measure, this is a very good start for a greenfield play. Our analysis reveals that Lira, along with the possible ExxonMobil development of the Domino area, could bring up to 10bcm of gas into the Romanian market each year – doubling the country's gas supply, reducing the volumes of gas imported from Russia and potentially turning Romania into a gas exporter.
However, although the project lies outside Russia, Lukoil is subject to western sanctions which place limits on corporate funding - potentially reducing the number of possible sources of capital available to finance the development. While Lukoil is financially strong, these restrictions could force the company to farm-down its position to a more affordable level.
Other threats to development include tax and infrastructure. The Romanian fiscal system is in a state of flux with a new tax code due in late 2015 and implementation from January 2016. Also, the most likely export route, via Hungry, is set up as import only and will require considerable investment to allow reverse flow.
Should Romania double production and develop the infrastructure needed to get the gas to market, the additional liquidity in Europe's southeast gas markets could bring regional prices into line with other major trading hubs in the continent.
One thing is certain - now that Lira has confirmed the potential of the Romanian deepwater sector, the industry will be waiting for ExxonMobil's upcoming drilling results in early 2016 with great anticipation.
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