Eastern Europe has been producing oil and gas for more than 150 years. Romania in particular has been self-sufficient in oil and gas for many of these years. More recently Romania has become increasingly dependent on Russia for both its oil and gas. PDC worked with Falcon Oil – a small UK independent oil company, to use this background to grow its company.
PDC first carried out economic evaluations of potential drilling targets in order to provide assistance to the exploration programme. The main targets in the three blocks that Falcon has were potentially gas – as shown on bright spots on the seismic image and further defined by AVO analysis. PDC identified that a potential gas discovery would be attractive both to Falcon and the Romanian government.
For Falcon any gas discovered could enter into an existing market replacing more expensive imported gas. The existence of a widespread gas transportation system meant that a gas discovery could be easily connected. For the Romanian government lower prices for domestic gas as compared to imported Russian gas meant that new domestic gas would lower the overall cost of gas to Romanian gas users.
The first well was drilled by Falcon and was a discovery producing 6 mmscfd. At that time PDC began working on preparing a potential development. Although the gas transportation system was extensive, the discovery was located in a remote part of Romania near the border with Ukraine. Transgaz, the Romanian gas transportation company was reluctant to make the investment on a single well and based on a single field. The gas field was also relatively small and was a combined structural/stratigraphic feature. Based on these concerns it was decided that further prospects would be drilled leading to two further discoveries. The second of these (Fratauti 1) produced at a combined rate in excess of 12 mmscfd.
Once Falcon completed its exploration and production programme PDC began preparation of the development plan. A local design contractor was appointed and a plan started to take shape. The most difficult area still remained the connection to the Transgaz system. PDC prepared the open access request and eventually used a new procedure for such access introduced by ANGRN, the gas regulator.
Falcon wished to get the fields into production as soon as possible but it soon became obvious that the major stalling point was the ability of Transgas to deliver a tie-in pipeline on a timely basis. PDC proposed that the joint venture (which included Romgaz the state gas company) would construct the 14km line itself.
In August 2005 the development plan prepared by PDC was approved by partners and the petroleum agency, NAMR. All parties received the same document and were fully involved in the process of preparing the documents. Romanian practice was that full development approval was usually only given once a period of test production had been carried out. PDC however argued successfully that this was not appropriate given that the level of investment for a pilot scheme would involve the full costs of a development. NAMR agreed with our proposals and full development approval was given for the three fields.
The development required a new central processing facility and more than 40 km of pipeline. It soon became clear that obtaining a construction permit was going to be a major task. This was because the local authority that granted the construction permit required all the land access agreements to be finalised and this was to involve more than 600 separate landowners. Without the construction permit it was not possible to start work and this was not received for more than three months. However this meant that all procurement activities could be carried out prior to the start of construction.
PDC supervised a tender which was carried out under Romanian public tender arrangements. Whilst this was underway PDC carried out a study in order to purchase the pipe for the project. It had been established that coated pipe would be used. However, none of the Romanian pipemills could offer an integrated pipe mill and coating service. It was decided therefore that pipe would be bought in Germany from Mannesmann and brought in by train to the nearest railhead. Meanwhile the gas dehydration unit which was being constructed in Canada was being transported by sea. This type of unit was not available in Romania.
Work began in earnest to construct the central processing facility and the pipelines in February 2006, and the plant was commissioned in September 2006. Falcon had gone on the UK AIM Stock Exchange in August 2006 as Aurelian Oil and the successful conclusion of its first development project in accordance with its AIM admission document was an achievement.
PDC\‘s role in the project was based on a project management contract under which PDC supervised the project holding monthly project meetings with the contractors and issuing monthly reports to the partners. PDC also organised the hiring of a local manager as well as assisting in the transfer of the operation to Aurelian staff. The project was completed in 19 months from the completion of appraisal drilling and is believed to be one of the fastest oil and gas projects carried out in Eastern Europe.
“It is an achievement to have completed this project in 19 months”
Frank Jackson, Commercial Director, Aurelian Oil and Gas PLC