Bloomberg News

Bulgaria Signs Black Sea Exploration Contract With Total

August 29, 2012

Total SA (FP), Europe’s third-biggest oil company, signed a five-year contract with Bulgaria to explore for natural gas and oil in the deep waters of the Black Sea off the Bulgarian coast.

Total will explore for gas and oil deposits in the Khan Asparuh block spreading over 14,400 square kilometers (5,560 square miles) near the border with Romania, Patrick Pluen, Total’s vice president for exploration and production, told reporters in Sofia today. Austria’s OMV AG (OMV) and Spain’s Repsol SA (REP), as venture partners, each hold 30 percent while Total holds 40 percent, Pluen said.

“Today’s agreement is a huge step toward Bulgaria’s diversification of energy sources,” Prime Minister Boiko Borissov said after the signing. “It will ensure that future generations will have access to cheaper fuel.”

Bulgaria imports all its gas from Russia and is seeking to diversify supplies after they were cut for two weeks in 2009 following a price dispute between Ukraine and Russia. The European Union’s poorest state spends as much as 1.4 billion euros ($1.75 billion) a year on gas imports.

The Total-led venture will immediately pay a 40 million- euro bonus to the government as part of the agreement plus annual concession fees, Borissov said. Investments may reach as much as 1 billion euros to fund development if gas or oil deposits are found, Borissov said.

Exploration Costs

Total estimates exploration costs over the five years at around 100 million euros, Pluen said. Work will include drilling of two wells at 5,000 meters (16,405 feet) below sea level and 6,000 meters, Pluen said.

“It is a high-risk exploration,” Pluen said. “In our estimates, we can find either oil or gas. There is a probability that we’ll find significant accumulations. In the next year we’ll acquire a seismic image of the area and then we will drill wells and will have a better view and understanding.”

Pluen declined to give an estimate for potential deposits. Bulgarian Energy and Economy Minister Delyan Dobrev said he expects the natural-gas deposits to be no less than the accumulations found in the Romanian block earlier this year. OMV, which is exploring with a unit of Exxon Mobil Corp. (XOM:US), said in February it discovered what may be its biggest gas find in the Black Sea, estimated at as much as 84 billion cubic meters in accumulations.

“The Bulgarian block is three times bigger, so we hope these will be the minimal quantities,” Dobrev said at the same briefing.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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