Romania's Romgaz steps up conventional gas, no shale hunt for now

BUCHAREST (Reuters) - Romania's biggest gas producer Romgaz ROSNG.BXSNGRq.L does not plan to tap shale gas exploration in the next few years, but will invest heavily in conventional wells using its existing financial resources, it said on Tuesday.

“We always stressed our base activity is conventional exploration, there are many things to do here, on the other hand as a perspective, it would be good to find out (the country’s) non-conventional potential,” Romgaz’s General Director, Virgil Metea, told the Reuters East European Investment Summit.

“Let’s say in the medium term, up to five years, we do not plan shale gas (exploration). This is our current stance.”

U.S. oil major Chevron Corp CVX.N said earlier this year it had given up shale gas exploration plans in Romania, after an assessment showed the Black Sea state "does not compete favourably" with other investment opportunities.

Metea said Romgaz has an overall gas production potential of about 5.6 billion cubic metres this year, when the company plans to invest 1.3 billion lei ($333 million) from its own resources, with more than half earmarked for exploration work.

“From the point of view of production we can meet this. A problem is (if) we see a fall in consumption ... which can affect output.”

“There’s bigger investment scheduled for this year,” said Metea. This year’s plan to invest 1.3 billion lei represents a 22 percent increase from 2014 and will be the minimum per year in the coming years.

Metea said Romgaz’s investment plans in exploration have been hindered because it has become “harder and harder” for its engineers to access fields.

“We’ve been encountering quite big opposition because people suspect we’re searching for shale gas.”

The company does not plan to resort to foreign capital markets for now, Metea said, adding that no Eurobond issuance plans are on the cards in the next 2-3 years.

Romgaz reported a net profit of 767 million lei for the first half, down 12 percent on the year and hurt by around a 6 percent drop in demand for its natural gas due in part to a slump in output in the agro-chemical sector.

Romania, the least reliant state in the region on gas imports, bought a scant 3 percent of its gas needs from Russia this year, due chiefly to a drop in domestic consumption with some chemical plants cutting output.

Metea said falling oil prices have prompted Romgaz to postpone its planned exploration drilling of wells in Slovakia this year on a licence 25 percent owned by Romgaz.

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Editing by Susan Fenton