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OMV targets Black Sea production expansion

The Austrian company will target higher-risk exploration areas to boost production

Austria’s OMV aims to boost its production to 350,000 barrels of oil equivalent a day (boe/d) by 2016 with a shift in focus to higher-risk exploration areas in the Black Sea and the Caspian region.

Gerhard Roiss, OMV’s chief executive, told the company’s annual media summit, held in London, that its output for 2012 is expected to reach 300,000 boe/d. New exploration projects could add 70,000 -80,000 b/d of new production by 2016. By 2021, OMV hopes to add an extra 150,000-200,000 b/d to its production.

Chief financial officer David Davies told reporters that two-thirds of OMV’s growth in output and revenue over the next few years will come from new exploration activity, with most of its capital expenditure earmarked for these projects.

The company has bought into six new licences this year alone in both the North Sea and Black Sea.

The Black Sea is going to be a particular focus area for OMV in the next few years, after it made its first deep-water discovery in the Neptun Deep Block, offshore Romania, in February. OMV said the Domino gas discovery could contain between 1.5 trillion and 3 trillion cubic feet (cf) of recoverable gas. If Domino’s reserves are proved, it could be the biggest gas find in the company’s history. OMV plans to start appraisal drilling at Domino by the end of 2013.

OMV acquired a 30% stake in the Khan Asparuh Block, offshore Bulgaria, co-owned by Total and Repsol. It has also taken 15% in the Skifska Block, in the Ukrainian sector of the Black Sea. The Skifska partners are ExxonMobil (40%), which will operate the project, Shell (35%) and Ukraine’s state-run Nadra Ukrainy (10%).

Khan Asparuh, Neptun Deep and Skifska are contiguous.

OMV has also bought stakes in three fields in the Norwegian sector of the North Sea, which could add between 80,000-100,000 boe/d to its total production. It has taken a 20% stake in the Lundin-operated Edvard Grieg oilfield (Lundin 50%, Wintershall 30%, OMV 20%); 15% in the Aasta Hansteen gasfield (operator Statoil 75%, OMV 15%, ConocoPhillips 10%); and a 20% stake in the Zidane gasfield (operator RWE 40%, Edison 20%, OMV 20%, Mærsk 20%).

The firm said the new assets have increased its oil reserves to 450 million barrels, up from 280 million barrels a year ago. But Davies admits these will not be profitable in the short term and that the company needs cash and partners to help bring them on stream.

“We have a number of major investments in exploration and production,” Davies said. “For the next few years, cash will be going out and not much will be coming in. It’s critical our core assets maintain stable production.”

This means OMV will rely on its Austrian and Romanian developments. Production in both countries has however been steadily falling because of natural field decline. According to company figures, output from Austria and Romania has fallen from around 232,000 b/d in 2007 down to around 208,000 b/d this year. OMV said it can stabilise production at between 200,000-210,000 b/d by using enhanced oil recovery techniques, such as water injection.

Elsewhere, OMV has suffered production outages and delays to its exploration plans. Earlier this year, it was forced to shelve its shale-gas drilling plans in Austria after environmental protests over hydraulic fracturing. In September, it said that a new law requiring companies to carry out a detailed environmental inspection before beginning projects meant the project was no longer economically viable. However, Roiss insisted that the scale of the Domino find far outweighed any missed opportunity the delay to its Austrian shale plans presented.

OMV’s 5,000 b/d production in Yemen, around 2% of the company’s total output, has suffered outages due to repeated attacks on pipelines. Roiss said 21 November that OMV’s Yemen production was temporarily offline again, following a series of attacks earlier in the year.

Divestments are also a part of OMV’s medium-term strategy. “We want to get out of those small areas with 2,000 b/d production,” Davies said. “We’re building the portfolio, but we’re also clearing up.”

OMV plans to relinquish the Mala Omar and Shorish blocks, in Iraq’s semi-autonomous Kurdish region, after failing to find hydrocarbons. In June, it sold its 5% stake in the Beryl Area fields, in the UK sector of the North Sea, for $118m and its 1.5% of the Boa field, which straddles the UK/Norway median line in the North Sea, to Bridge Energy for $18m.

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