On August 22, Turkey announced the discovery of Tuna-1: 320 billion cubic meters (bcm) of natural gas off its Black Sea coast. Though questions remain as to whether it is economically viable to start production – President Recep Tayyip Erdogan has suggested this could happen as early as 2023 – the news could not go unnoticed in other littoral countries of the Black Sea. The discovery may well help spur regional cooperation.
Both Romania and Bulgaria have been prospecting in their continental shelves and Exclusive Economic Zones (EEZs) for years. The Turkish find will no doubt encourage Black Sea nations to double down on exploration in line with ambitions to diversify supplies away from Russia, the traditionally dominant player on local gas markets.
Since 2004, Bulgaria has been extracting small volumes of gas from several offshore fields close to its border with Romania, originally discovered by Texaco in the early 1990s. Petroceltic, an Irish company which also holds a concession for the nearby Kavarna block, had its contract extended to 2026. In 2016, a consortium with France’s Total, Spain’s Repsol, and Austria’s OMV found oil in the deepwater Khan Asparuh field. Britain’s Shell is also probing the Silistar block, in close proximity to Turkey.
Romania, which first discovered hydrocarbons in its continental shelf in 1980, extracts between 10 and 11 bcm a year onshore and has approximately 200 bcm in offshore deposits. This includes the Neptun Deep block neighboring Turkey’s Tuna-1, which is being explored by OMV Petrom (OMV’s Romanian subsidiary) and U.S. major ExxonMobil. Neptun Deep holds up to 84 bcm – six times Romania’s annual consumption. By comparison, Tuna-1 equates to Turkey’s demand (at current levels) for about seven years.
Ukraine already produces over 20 bcm domestically – more than half of the gas it burns. Approximately 4 percent of the country’s 880 bcm in untapped deposits are located in the Black Sea. Needless to say, the Russian annexation of Crimea has made retrieving the gas a difficult proposition. In the spring of 2014, one of the first decrees of the Moscow-backed separatist authorities in Simferopol was to seize the assets of Chornomornaftogaz, a publicly listed company owned by national utility Naftogaz dealing with offshore production. Nevertheless, the Ukrainian government unveiled a tender in April for the vast Dolphin block. There were several international bidders, including the Texas-based Frontera. But as Dolphin includes the Odessa and Bezimenne (“No name”) fields already being drilled by the Russians, prospects are far from clear. The tender has been riddled with legal disputes too.
The Bulgarian government has long touted indigenous production as key to its plans for the so-called Balkan Hub, along with LNG delivered through northern Greece and the 1 bcm of Caspian gas contracted with the Shah Deniz consortium. The government in Sofia insists it is pursuing the objective, even if critics point at continued cooperation with Moscow on the energy front. Prime Minister Boyko Borisov rebranded the extension of the TurkStream pipeline into “Balkan Stream,” a free-standing project compatible with EU competition rules and open to both Gazprom and its competitors. This include U.S. LNG sellers, a point Borisov conveyed during his meeting with President Donald Trump at the White House last November. In reality, only Gazprom has booked capacity on BalkanStream (also known as TurkStream 2) which, once completed, will run from the Turkish-Bulgarian border to Serbia and from there to Hungary and Austria. Officials in Sofia will no doubt use Black Sea gas to sell the project to skeptics in Washington and other Western capitals.
But the experience of Southeast European countries comes across as a cautionary tale for Turkey too. Romania’s Neptun Deep, which lies at a depth of some 7,200 meters and shares geology with Tuna-1, has been riddled with problems. ExxonMobil is trying to sell its stake and, to the Romanian government’s horror, Russia’s Lukoil is a likely buyer. Exxon has been put off by regulatory changes, on top of the technical difficulties associated with extracting the gas.
In Bulgaria, Repsol recently decided to exit Khan Asparuh. Initial finds also are not corroborated as prospecting work moves forward. In 2008, for instance, the UK-based company Melrose Resources discovered close to 2 bcm in the Kavarna offshore field belonging to Bulgaria. Seeing that as a first step, it planned to start production from that and several nearby blocks, including in Romania where Melrose won a tender too. More than a decade later and a merger with Petroceltic in 2012, those hopes look premature.
Admittedly, Turkey is in a different league thanks to the scale of the Tuna-1 discovery and state resources. Offshore hydrocarbons are difficult to retrieve and international companies with the knowledge and capabilities are not enthusiastic given the historically low oil and gas prices and the negative fallout from COVID-19 on economic growth. The Turkish Petroleum Corporation (TPAO) would therefore need to attract international partners to take the project to the next stage. Ankara may well need to chip in through subsidies and tax breaks.
The good news is that the Black Sea is not bedeviled by the sort of sovereignty disputes that polarize the Eastern Mediterranean. Crimea (along with Abkhazia, of course) is the exception rather than the rule. EEZs and the continental shelves are delimited and Turkey is not at odds with either Romania or next-door Bulgaria. Melrose went to Romania after a judgment by the International Court of Justice (ICJ) in 2009 resolved a long-standing dispute with Ukraine over the so-called Serpents’ Island lying close to River Danube’s delta. In December 1997, Bulgaria and Turkey finalized an agreement with regard to the border river of Rezovska/Mutludere which, in effect, settled the boundary of their territorial waters and EEZs.
That means that there is some scope for three-way cooperation between Turkey, Romania and Bulgaria in developing Black Sea gas. Some of it is happening already at the business level. OMV Petrom replaced Repsol in the Khan Asparuh block and was awarded another exploration and production license by Georgia. There are benefits to be had from economies of scale. It will be wise of the Turkish Ministry of Energy and Natural Resources therefore to engage with its counterparts in Sofia, Bucharest and Tbilisi. Joint exploration and even production will advance the energy security of the region as a whole and even the playing field vis-à-vis Russia.