Romania's hydrocarbon reserve replacement rate has droped dramatically lately, as a result of low oil prices. It reached only 25% and, in the lack of new discoveries, oil reserves will be depleted within the next12 years. Investment are less by each day, due to low oil prices.
OMV Petrom, the only oil and gas producer in Romania, reported, for 2015, a reserve 1P reserves (proven reserves) replacement rate of 25%, according to data made public by the company in Fondul Proprietatea's public offering prospectus. The replacement rate dropped dramatically compared to 2014, when it reached 42%. This indicator actually shows how sustainable is Romania's oil production. A reserve replacement ratio of 25% in 2015 means that, for every 1,000 barrels of oil extracted onshore or offshore, new reserves were discoved of only 250 barrels.
We present below, detailed, the statements of the oil company made regarding the reserve replacement rate: "Continuous workover of mature fields and a successful drilling program, combined with diversification of the recovery technologies applied, have helped maintain a three-year average reserve replacement rate based on 1P reserves in Romania of 33% as of 31 December 2015 (2014: 39%). In 2015, the single-year reserves replacement rate in
Romania was 25% (2014: 42%).
Our reserve replacement rate was supported by continuous reservoir studies performed, diversification of recovery techniques and new extensions of existing fields. But, nevertheless was impacted in 2015 by the overall reduced level of investments. In total, our single-year reserves replacement ratio was 31% in 2013, 42% in 2014 and 33% in 2015", Petrom showed.
Romania's proven gas reserves will be depleted within the next 9 years and oil reserves - within 12 years if investments for new hydrocarbon discoveries are not conducted, according to data of the Romanian Petroleum Exploration and Production Companies Association (ROPEPCA), published in mid-September.
Evolution of proven reserves of hydrocarbons. Source: Petrom
But investments can only be supported in conditions of a oil price high enough so that oil companies have resources for new explorations. The oil price reached record historical levels in the summer of 2008, before the outbreak of the global financial crisis. On 11 July 2008, the WTI oil (the reference in the U.S. market) has a price of over USD 147/bbl. A spectacular collapse followed, to USD 30.3/bbl (23 December 2008), in the context of the financial crisis, then the recovery to over USD 80/bbl in 2009. In 2011, oil returned to over USD 100/bbl.
The current decline, if we can call it so, of international oil prices, started in mid-2014, when the oil price was USD 105-107/bbl. The fall was sharp and long, the oil price reaching early this year below USD 30/bbl. Subsequently, prices recovered timidly and are currently around USD 50/bbl. And this
evolution of prices has led to a significant decrease in upstream investments of Petrom, in the recent years.
"While we continue to make significant investments in exploration and development activities, our capital expenditures decreased significantly in 2015 and 2016, as the decrease in oil prices led us to prioritize our investments. Our capital expenditures in the Upstream business segment amounted to RON 4,401mn in 2013, RON 5,349mn in 2014, RON 3,486mn in 2015 and RON 1,064mn in the six months ended 30 June 2016. As a result of the decreased investments in the Upstream business segment, we expect hydrocarbon production in 2016 to decrease by up to 4% compared to 2015 in the full-year average Group production", Petrom says.
The situation is known by government officials. "First we have taken a look at proven reserves and all analyzes show that, currently, with efforts we take, we are heading to a medium and long-term decline of production of energy resources, I refer to both oil and gas", Energy Minister Victor Grigorescu said several days ago. "At first glance, someone could say that it is a bad thing and that Romania will run out of resources, which means that we have invested very little in exploration. Because we have made little exploration, so as to have an accurate image, and the fact that proven reserves follow a downward trend means that we need to focus more on this area", the minister said. Grigorescu also said this issue has to be solved immediately, given the long period in which a petroleum project can be developed.
"It's an effort we need to be aware of and we need to start tomorrow morning to solve this issue, because the exploration activity takes time until we certify the resources, until when we develop, until we attract funding sources and so on", the official claimed. Although it faces a natural decline of oil production, Romania continues to be the fourth largest oil producer in the European Union and the fifth in Europe. The national oil production accounts for approximately 2% of Europe's production and about 6% of EU's production. In terms of reserves, Romania is the fourth country in Europe and has been producing oil since 1857. However, in 2015, 63% of the national oil consumption came from imports and only 37% from domestic production.