OMV Petrom to focus on exploration and production in Romania until 2021.

By bne IntelliNews June 20, 2012
Romania's largest oil and gas company OMV Petrom, which operates the vast majority of the country's oilfields and half of its natural gas resources, will focus on exploration and production at home, including offshore activities, according to its 2021 development strategy. The company will also consider business opportunities related to the Nabucco gas pipeline project and will explore the development of a gas hub, the 2021 strategy, which was unveiled in an online presentation after receiving a Supervisory Board approval on June 15, showed. Tapping unconventional resources will also be considered. Local media underlined the company's promise to invest around EUR 1bn per year by 2014 if an investment-friendly environment is provided. This statement was interpreted by daily Evenimentul Zilei and other news outlets in the context of production royalties being re-negotiated for the period after 2014. But this is highly speculative since in the past years the company has anyway invested its whole operational profit. The speculations about an obscure bargaining were spurred by PM Victor Ponta who visited Vienna earlier this week, meeting OMV officials, among others. IntelliNews Comment : The royalties' re-negotiations and the natural gas market liberalisation indeed create an uncertain environment that adds to the global oil market volatility and results in a challenging situation for OMV Petrom. To bargain moderate production royalties against investments would be advisable for the government only in case that OMV Petrom considers investments outside Romania. But as a member of OMV Group, the company does not intend to invest significantly abroad but rather capitalise on local resources. The company's target is to become a "regional" leader, but the region refers rather to narrow SEE. This is in fact the key limitation we see for the growth of the company and for its contribution to the country's development. The gas market liberalisation will predictably increase the company's revenues and profits, while the local hydrocarbon resources are still moderately abundant and insufficiently explored. But the real growth potential comes from overseas operations where Petrom, as a member of OMV Group, is unlikely to participate.

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