Related Articles
In depth
Forward article link
Share PDF with colleagues

Slim pickings for Eastern European offshore

Azerbaijan and Bulgaria are the main areas of European offshore activity east of the North Sea

OUTSIDE the continent’s northwest, the outlook for offshore production in Europe remains subdued, as concerns mount over reduced revenues, weak oil and gas export and delayed investments.

In Azerbaijan’s Caspian Sea fields, oil production dipped in 2015, falling by just under 1% to 41.7m tonnes (about 0.84m barrels a day). The dip was largely attrib­utable to a fall in production at the Aze­ri-Chirag-Guneshli (ACG) fields which account for most of the country’s output.

ACG production in 2015 was 31.3m tonnes (about 630,000 b/d), 200,000 tonnes lower than the previous year, large­ly due to maintenance shutdowns. More closures are planned. Meanwhile, a fire at a rig operated by Socar in the Guneshli field killed more than 30 people in December.

Azeri gas production increased by just over 1% to 29.7bn cubic metres in 2015, though expansion of BP’s Shah Deniz project will add substantially to capacity in coming years. The field is estimated to hold gas reserves of around 1.5 trillion cm.

Shah Deniz I, which has been in opera­tion for a decade, produced 9.9bn cm of gas and 2.33m tonnes of condensate in 2015, roughly the same as in 2014. The next phase, Shah Deniz II, due to start deliveries to Turkey in 2018 and Europe in 2020, will add a further 16bn cm a year and is more than two-thirds built, BP says. The gas will go to to Europe via the 3,500-km Southern Gas Corridor pipeline route.

In southeast Europe, offshore projects have struggled. Exploration of Croatia’s Adriatic has been held back by the poor returns on offer and by domestic oppo­sition. The country’s gas production of around 2bn-2.5bn cm/y of gas accounts for roughly two-thirds of domestic consump­tion. But low oil and gas prices have taken their toll on investment plans.

Last July, Marathon Oil and Austria’s OMV handed seven offshore licenses – awarded in January 2015 – back to the gov­ernment. In September, the government at the time said it would delay signing agree­ments for onshore and offshore drilling concessions until after parliamentary elec­tions in November. It remains to be seen what priority the new centre-right coalition government will give to hydrocarbons exploration. Eni, Medoil and Oando are among those hoping to sign agreements. Besides gas, the country also produces a small amount of oil (under 15,000 b/d).

Bulgaria is an offshore bright spot. A Total-led group is expected to start a three-month exploratory drilling campaign in the 1-21 Han Asparuh offshore block soon, having postponed plans to do so in 2014. The license area covers 14,220 square km in water depths of up to 2,200 metres. Shell signed an agreement in February to explore the 1-14 Silistar block, committing to in­vest around $20m to the project.

Efforts to develop Ukraine’s Black Sea shelf reserves were largely scuppered by Russia’s annexation of Crimea, which prompted a group of majors to put on hold a $0.7m exploration campaign. Ukraine also lost most of the assets of its Black Sea Oil & Gas company in Crimea during the annexation. These may now be being used by the region’s Russian-controlled admin­istration to produce gas, according to local media reports.

This article is part of an in-depth series on offshore production. Next article: North Sea output heads south.

Also in this section
Egyptian optimism
5 August 2020
One of the more regressive fiscal regimes and a generally challenging environment are not enough to dampen United Oil & Gas’ enthusiasm for the Western Desert.
Somalia announces regulator leadership
2 August 2020
Somali Petroleum Authority board has been approved by the Mogadishu government ahead of licensing round
Central bank holds key to Gabon’s oil future
30 July 2020
If oil companies are forced to hold revenues in the local currency—combined with mandated Opec cuts—the Central African country will struggle to attract the new investment it desires