The state may become a shareholder with up to 20% in the consortium of TotalEnergies and OMV Petrom which explores for oil and gas in the Han Asparuh Block in the deep waters of the Black Sea. Talks will be held by the energy minister and the potential investment will be made by the Bulgarian Energy Holding (BEH) which pools state-owned energy companies. The decision was recently taken by the parliament's energy committee on GERB's proposal and promptly endorsed in the plenary hall.
It is difficult to assess the potential risks and benefits for the state at this stage, because the economic parameters of the project are not yet clear, at least publicly. At the same time the consortium does need institutional backing in order to be able to complete its exploration activities before its license expires in May 2024.
Origin of the idea
The draft resolution was proposed by GERB MPs and filed on July 12, a few days after energy committee chairman Delyan Dobrev (GERB) said in a Facebook post that the consortium expected to find natural gas in the eastern part of the block that will allow the production of 13 billion cubic meters a year. This will be an impressive amount given the country's annual consumption of 2.5 bcm. To support his statement, Dobrev published a slide from a presentation shown by TotalEnergies at an earlier session of the energy committee. He said he would try to persuade MPs to mandate the cabinet to negotiate Bulgaria's participation in the project as a shareholder.
In an interview with the state news agency BTA at the beginning of the year, TotalEnergies Bulgaria general manager Yves Le Stunff pointed out that the greatest hopes of finding natural gas lie in the eastern part of the Han Asparuh Block and that new investors are being sought in and outside Bulgaria. "We are looking mainly to international companies which have experience in deepwater exploration, but we are also open to possible participation of the Bulgarian government," he said.
Experts explain that the question is not all about funding, though the project is costly. "They are not seeking financing only but institutional support too. Having state backing is important for them," the chairman of the Bulgarian Energy and Mining Forum, Ivan Hinovski, told the Capital Weekly.
Exploration so far
The consortium of France's Total, Austria's OMV and Spain's Repsol received a permit to prospect for oil and gas in the Han Asparuh Block, which spans an area of some 14,000 sq. m, in 2012. In Dobrev's words, more than 450 million euro has been invested in the project so far.
In the first two years, the consortium conducted a seismic data acquisition campaign in the western part of the block and, based on the information collected, it drilled three exploration wells between 2016 and 2019. The wells showed the existence of a hydrocarbon system in the deep waters of the Black Sea but no commercial quantities were proven.
Later the consortium made a second campaign aimed at 3D imaging the underground of the eastern part of the block. The analysis of the data seems to justify the drilling of exploration wells there: according to Dobrev, the block may contain between 210 and 510 bcm of natural gas. TotalEnergies estimates the needed investment at 80 to 100 million dollars per well.
The seismic data give a relatively high level of probability, about 60%, explained Hinovski, adding it is worth continuing the exploration works. However, he advises that the state should invest in the project once reserves are proven.
The exploration rights are currently held by two companies, after Repsol withdrew from the project in 2020. Later the same year OMV was replaced as a shareholder in the consortium by OMV Petrom, a joint venture with the Romanian state.
The Han Asparuh Block is located between the Neptun gas field in the Romanian exclusive zone of the Black Sea, where the reserves are estimated at some 100 bcm, and Sakarya, which is believed to be the largest gas field discovered in Turkey's history. That gives hopes for finding gas in Bulgarian waters too, though that is not necessarily true.
TotalEnergies' presentation shows the company is targeting two wells, Vinekh and Krum, with a total production potential of 13 bcm of natural gas a year. The efforts will be initially directed to Vinekh, which is located 185 km away from the coast. According to preliminary assessments, it has potential for 5 bcm a year between 2030 and 2040 and for 3 bcm a year between 2040 and 2050. To prove possible reserves, the company will have to drill an exploration well, which is planned to be done in the second quarter of 2024.
The other zone, Krum, is 150 km away from the coast. It is believed to contain more gas, with presumed production of 8 bcm a year between 2031 and 2044 and 4 bcm a year until 2050. Its exploration will most probably be left for a later stage.
If reserves are proven in Han Asparuh, the development of the field will be much more costly than the exploration works: the offshore and onshore facilities are assessed at 4 to 6 billion euro per project. That in turn will substantially increase BEH's investment in the consortium. However, finding gas will be good news for Bulgaria's energy independence.