Mazarine Energy is a Dutch E&P company, founded in 2013. After two successful discoveries in Tunisia, the company entered Romania in 2017 by taking over 19 fields from OMV Petrom.
In Romania, Mazarine Energy has focused its work on the redevelopment of mature oil fields. What was the rationale behind this strategy?
The reason stemmed from our belief that this is the most profitable activity in the oil & gas sector in Romania. Should the 11th exploration bidding round be launched, we do intend to participate but we do not believe that the greatest success will come from onshore exploration. Given the 160 years long history of this industry in Romania and the fact that more than 62,000 hydrocarbon wells were drilled during this time, the chances to find new major oil fields are relatively low.
Among the winners of the 10th bidding round, which took place ten years ago and attracted many companies to Romania, almost none have reached commercial oil production. By comparison, we managed to reach an operational profit within the first nine months of our investment. We are unique in what we are doing as a new entrant on the market and the results show undoubtedly that it was the right business model to choose.
You entered the Romanian market in 2017 by taking over 19 fields from OMV Petrom. What progress has been made in these petroleum concessions since?
These first 19 perimeters were among the weakest that were put forward by OMV Petrom at the time, some people were surprised with our decision to acquire marginal fields. We took them over aware that this was the situation but we were driven by the idea that we needed a new country entry, something to establish our base here. Furthermore, given the relatively marginal production performance of these fields, we had confidence in the thought that since nobody had paid much attention to them and they did not benefit from investment, we were likely to come across areas that had not been exploited previously.
We managed to grow production in some of the fields by up to 50% and re-started production in other four concessions in the first year with minimal investment. Thereafter we started applying international re-development best-practices. We began acquiring 3D seismic data and concluded that our bet was right, there were additional oil resources that had not been noticed before, which amounted to a couple of million oil barrels. This year we started drilling based on the seismic data we acquired (we are continuing the process of acquiring seismic data as we speak) and we did so successfully. The four new wells that we have in place are already producing. If everything goes according to our expectations, we will drill another five wells this year and another 15 in 2020. We are well funded and have already identified very good drilling prospects.
Despite recent turbulences in legislation, Mazarine invested in new perimeters this year. What maintained your appetite for investment?
Indeed we acquired new perimeters in the second round that was brought forward by OMV Petrom. We selected nine out of the 53 perimeters that were put forward and we are confident that we selected the best ones this time around. We were not discouraged by the changes in legislation because they affected us much less compared to some of our peers, since GEO 114/2018 (and the subsequent GEO 19/2019) primarily affects gas producers. We do produce some gas but only associated with our oil production, and we do not sell it directly. Instead, through our five Gas-to-Power units we transform it into electricity and sell it on the OPCOM market. This means we were only affected by the 2% turnover tax, that only applies to the electricity we sell.
It is not a simple coincidence though. When we acquired these concessions we purposefully stayed away from gas, and focused instead on oil assets. Historically speaking, in Romania there have never been interventions in the oil market, which evolved exclusively based on international quotations. The conflicts were usually related to the gas market, and this is true in the case of the recent GEO as well. We believe that things are likely to continue in the same manner, so we will maintain our strategy to focus on oil.
What is your assessment of the Romanian business environment? Do you find it welcoming towards foreign investors?
We actually find it rather not welcoming and this is very unfortunate because it translates into many missed opportunities for Romania. There seems to be a perception that there is a long queue of investors just waiting to enter the country but that is incorrect. Even if Romania has many resources left, they are of little to no value unless they are exploited.
The issue is the lack of a long-term vision which is very discouraging. Inviting more competition in the production sector will spill over into other areas as well, for instance the associated services. Presently the few service providers use their dominant positions to set high prices, and more competition amongst producers will inevitably attract new players in the services sector and lead to more competitive prices.
What are the next steps for Mazarine Energy in Romania as well as internationally?
Our ambition going forward is to continue growing in Romania, both organically (we want to increase production by developing new areas connected to our existing perimeters) and also through the acquisition of new fields. Internationally, we aim to increase our footprint in Tunisia and also expand into new areas, namely Egypt and Azerbaijan. We are considering entering Ukraine as well, as a more medium term plan - when we do, we will leverage our capabilities in Romania which we perceive as a hub for Mazarine Energy in the region.
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