What was the rationale behind Mazarine Energy’s strategy to focus on the redevelopment of mature oil fields in Romania?

The reason behind our strategy to focus on the redevelopment of mature oil fields in Romania stemmed from our belief that this is the most profitable activity in the oil & gas sector in the country. Given the long history of the industry in Romania, with over 160 years of oil production and more than 62,000 hydrocarbon wells drilled, the chances of finding new major oil fields through onshore exploration are relatively low. Furthermore, the results of the 10th bidding round, which took place ten years ago and attracted many companies to Romania, showed that almost none of the winners have reached commercial oil production. In contrast, we managed to achieve operational profit within the first nine months of our investment, showcasing the success of our business model as a new entrant in the market.

What progress has been made in the petroleum concessions acquired from OMV Petrom since entering the Romanian market in 2017?

The 19 petroleum concessions that we acquired from OMV Petrom were among the weakest fields at the time, and some people were surprised by our decision to acquire marginal fields. However, we were driven by the idea of establishing our base in Romania as a new country entry. Despite the relatively marginal production performance of these fields, we had confidence that since they had not received much attention and investment, there could be untapped areas with oil resources. As a result, we managed to increase production in some of the fields by up to 50% and successfully re-started production in four concessions in the first year with minimal investment. We then applied international best practices for redevelopment, such as acquiring 3D seismic data, which confirmed our bet was right, revealing additional oil resources that had not been noticed before, amounting to a couple of million oil barrels. This year, we have already started drilling based on the acquired seismic data, and the four new wells are already producing. If everything goes according to our expectations, we plan to drill another five wells this year and another 15 in 2020, as we have identified very promising drilling prospects and have ample funding for our operations.

Despite recent changes in legislation, Mazarine Energy has invested in new perimeters in Romania this year. What has maintained your appetite for investment?

Indeed, we have acquired new perimeters in the second round of bidding initiated by OMV Petrom. We carefully selected nine out of the 53 perimeters that were put forward, and we are confident that we have chosen the best ones this time around. We were not discouraged by the changes in legislation because they had a lesser impact on us compared to some of our peers. The recent legislation, specifically GEO 114/2018 and subsequent GEO 19/2019, primarily affects gas producers, whereas we produce gas only as a byproduct of our oil production, and we do not sell it directly. Instead, we transform it into electricity through our five Gas-to-Power units and sell it on the OPCOM market. As a result, we were only affected by the 2% turnover tax, which applies to the electricity we sell.

This was not a mere coincidence, as when we acquired these concessions, we intentionally avoided gas and focused on oil assets. Historically, the conflicts and interventions in the Romanian energy market have mainly revolved around the gas sector, and this trend continued with the recent legislation. We believe that this pattern is likely to persist, and therefore we will maintain our strategy to focus on oil

Could you share with us your evaluation of the business environment in Romania? Do you believe that foreign investors are welcomed with open arms in the country?

Unfortunately, our assessment of the business environment in Romania is rather unfavorable. This is truly regrettable, as this attitude results in numerous missed opportunities for the country. There seems to be a perception that Romania is inundated with eager investors waiting to enter the country, but that is not the case. Although Romania still has significant untapped resources, these resources are of little value unless they are properly utilized.

One of the major issues hindering investment is the lack of a long-term vision, which is disheartening. The introduction of additional competition in the production sector would have a positive ripple effect on other areas, such as related services. Presently, a few service providers are able to dominate the market and set prices at a premium. Increased competition among producers will naturally draw in new players in the services sector, leading to more competitive prices.

Moving forward, what are Mazarine Energy’s future plans in Romania and beyond?

Our goal is to continue expanding our presence in Romania both organically, by increasing production through developing new areas connected to our existing perimeters, as well as through the acquisition of new fields. Additionally, on the international front, we aim to grow our operations in Tunisia and extend our reach to new territories, including Egypt and Azerbaijan. As part of our more intermediate strategy, we are also exploring the possibility of entering the Ukrainian market, leveraging our established capabilities in Romania, which we view as a central hub for Mazarine Energy in the region.