Exxon, Total, Melrose Vie for Black Sea Drilling in Bulgaria

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Exxon Mobil Corp., Total SA, and Melrose Resources Plc are competing for a permit to explore for natural gas in the deep waters of the Black Sea off the Bulgarian coast as the country seeks to boost local output to one third of consumption.

The winner of the tender will be selected at the end of July and the contract will be signed in September, allowing the company to start work by the end of the year, Energy, Economy and Tourism Minister Delyan Dobrev told reporters in the Bulgarian capital Sofia today. The exploration permit for the Khan Asparuh block near the northern border with Romania, is for five years, including the initial drilling, he said.

“We have high hopes to discover significant volumes of natural gas in the Black Sea,” Dobrev said. Preliminary estimates show there may be natural gas deposits of 40 billion cubic meters to 80 billion cubic meters, which would cover Bulgaria’s consumption for the next 15 years to 20 years, he said.

The Black Sea, which for 40 years divided the Soviet bloc from U.S. ally Turkey, is now a frontier region, attracting explorers from as far away as Brazil and Texas. The end of the Cold War, combined with record-high energy prices and technological advances, has led oil companies to reconsider its deep, unexplored waters.

Imports, Ban

Bulgaria now imports most of its gas from Russia. It’s seeking to diversify its supply sources after a price dispute between Ukraine and Russia caused an interruption in shipments for two weeks in 2009. OAO Gazprom, Russia’s natural-gas export monopoly, pumps 17.8 billion cubic meters a year to Turkey, Greece and Macedonia via Bulgaria. About 3.5 billion cubic meters of that is consumed by Bulgaria.

The cost of locally produced natural gas is 40 percent cheaper than Russian imports, Dobrev said. Edinburgh-based Melrose Resources started in 2010 producing gas at three blocks in Bulgaria’s Black Sea shelf near the Kaliakra cape that contain an estimated 3 billion cubic meters of gas, which covers 20 percent of the country’s consumption over six years.

Last year Melrose Resources produced 443 million cubic meters of gas or 15 percent of consumption, he said.

Direct Petroleum

Direct Petroleum Exploration Inc., a Denver-based oil producer, found a natural-gas deposit in Bulgaria estimated at 3 billion cubic meters, near the village of Deventsi close to the northern city of Pleven, which will also provide about 15 percent of domestic consumption, Dobrev said.

Bulgaria banned hydraulic fracturing and imposed a 100 million-lev ($65 million) fine for offenders, thwarting Chevron Corp.’s plans to explore for natural-gas deposits in the Balkan country, which limits the country’s options to diversify sources.

Work on an interconnecting pipeline with the natural-gas grids of neighboring Romania will start in August, Dobrev said and the link with Greece’s natural gas grid will be ready in 2015.

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