Romanian Petrom’s daily hydrocarbon output keeps falling

The oil and gas company Petrom (part of OMV Group) decreased its hydrocarbon production by 5.6% y/y to 151,000 boe daily in Q2’19, according to a company release. Output also fell on quarterly basis, from 153,000 boe daily. Besides, Petrom kept on diminishing its output since Q3 last year, on the back of lower production in both gas and oil segments. Gas production decreased more significantly, by 8.1% y/y to 79,000 boe daily in Q2’19, continuing on a negative trend that consolidated in 2018 (7% gas output fall in the entire last year). That would very probably put upwards pressure on gas import next winter, even if Romania should have reduced its dependency on external gas as it is sitting on significant gas deposits discovered in the Black Sea in the past several years.

Petrom’s gas sales to third parties also continued dropping, by almost 9.3% y/y and by 11.8% q/q to 8.6 TWh in Q2. Net electricity generation was the lowest in about a year, down to only 0.05 TWh in Q2’19 from 0.42 TWh in Q2’18, very probably due to falling consumption in industry. On a more positive note, oil production and sales revived in quarterly terms, although remaining lower than last year.

Petrom is Romania’s second largest company and the biggest oil and gas producer. Petrom and Romgaz ensure about 98% of Romania’s total gas production, so their operations have a major impact on the gas price. Petrom will very likely continue reducing its local gas output due to a rather unfriendly legislative and tax environment. The government introduced several measures in the energy field last year, through the offshore exploration law and the controversial bank tax bill, that are discouraging gas producers to further invest and to increase output. In this context, Petrom postponed for an indefinite period of time its major investment plans in the Black Sea, where it discovered some important gas deposits in co-operation with ExxonMobil. Romania’s exploited gas resource is on decline for years and might deplete in about 15 years, according to estimations of the National Mineral Resources Agency.

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