​The government wants to approve on Wednesday a 15-year extension of a concession agreement with OMV Petrom for the exploration and production of natural gas in the nine perimeters that it still holds. The concession agreement was signed for 30 years, starting in 1997, and originally included 18 exploration perimeters, but because it did not find resources, OMV Petrom left only 29% of the originally concession area.

Chuke’s government has on the agenda of a meeting on Wednesday a draft decision aimed at extending for 15 years, until September 12, 2042, the oil concession agreement signed with OMV Petrom in 2000.

OMV Petrom has retained only 29% of the initial acreage for exploration

The term of this concession agreement is 30 years, commencing on September 12, 1997, including the exploration period, and initially covers 18 exploration perimeters with an area of ​​over 57,000 square kilometers, shown in the explanatory note.

• VIEW THE ENTIRE FUND APPLICATION HERE

As no resources were found after exploration, OMV Petrom returned certain perimeters to ANRM, so that it currently retains 9 perimeters with an area of ​​over 16,000 square kilometers, corresponding to about 29% of the original area.

In 2 of the 9 perimeters, OMV Petrom is jointly owned by Hunt Oil Company from Romania.

The two companies appealed to the government to extend the concession agreement, referring to Art. 27 paragraph (2) of the Oil Law no. 238/2004, which establishes that “the initial duration of the concession can be up to 30 years with the possibility of extension up to 15 years.”

The extension of the concession term will bring the total duration of the concession agreement to 45 years.

OMV Petrom and Hunt Oil need more time to continue exploring the available hydrocarbon resources

In the request for an extension, the two companies argued that they needed more time to explore the existing hydrocarbon resources, in parallel with the analysis of the data already collected.

• “Exploration and development of areas of great geological complexity, with great final depths or in conditions of high temperature and pressure, such as those located on the perimeters that are the subject of the Concession Agreement, involve large-scale projects (shore wells dug for deep targets that are not have been achieved previously, 3D seismic areal projects), and such projects must be continued and expanded over long periods of time to discover and exploit new resources.
• Last but not least, one must also consider the relatively long duration of obtaining the necessary permits, approvals and authorizations for each of the works that the owners propose to carry out in the nine perimeters.
• Example, the process of obtaining permits for one well takes about a year and a half.
• Without the certainty that hydrocarbon production resulting from successful exploration activities can be developed and exploited, there is no economic justification for owners to budget for new multi-year exploration and development investment programs and thus continue to invest in oil operations in these perimeters.
• The oil agreement provides for a deadline by which the development and extraction of hydrocarbons must be completed in all nine perimeters (the concession period is 2027), the remaining time is clearly insufficient to ensure production from the deposits (for which OMV Petrom SA and Hunt Oil Company of Romania SRL will pay royalties to the Romanian state) and receive economic benefits from investments already made.
• Considering the above-mentioned circumstances, the owners appreciate that this request regarding the extension of the validity period of the Concession Agreement was made in time.” shown in the explanatory note.

Employees or companies from Romania will also participate in oil operations

The document states that during this exploration period, the two companies explored the perimeters that are the subject of the Concession Agreement, adhering to the contractual framework and responsibly, attracting a level of investment that significantly exceeded the minimum work programs.

• “For the last 3 extensions of the initial exploration period alone, namely 2011-2014, 2014-2019 and 2019-2024, OMV Petrom SA has spent more than €600 million to date, which is more than three times the financial commitment for the period. 2011-2024 years.
• For its part, Hunt Oil Company of Romania SRL spent more than 86 million euros in the same period, which is approximately 5 times the financial obligations for this period.
• Currently, the minimum work program for the fifth expansion period for a total amount of 55 million euros is provided by Additional Act no. 4, in order to increase the chances of discovering new potentially commercial hydrocarbon deposits.”, this is stated in the explanatory note.

Last but not least, the document also states that “the adoption of this law may have a positive social impact at the local level, as the oil operations will also use labor or service providers from Romania.”

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