#126 issue of the E&P newsletter: The Licensing Tender for DeepWater Black Sea Blocks – Teres and Silistar to kick off next week.

Almost two months after the submission of the tender dossier to the Official Journal of the European Commission the long overdue announcement is expected next week. 

The Government has already made preliminary soft tests with a number of global oil and gas majors, that traditionally operate in the region and have as of late shown interest in similar ventures in the Black, Caspian, Aegean. Adriatic and Mediterranean Seas. The contact list features amongst others Statoil, Shell, BP, Total, Exxon-Mobil. The Bulgarian Government has learnt its lessons from the failed previous attempts to attract interest to those two blocks.

Some observers believe the time is not right to launch tender procedures for deep water exploration and drilling – an area considered as grandmasters play in the industry – with its highest technology, investment, management and operational risks

One could easily come across equally credible counter arguments – notably when considering the duration between the tender announcement and the actual drilling and high spending – a minimum of 3-4 years.

Skeptics could further add a line on the negative impact of Chevron’s pull out from the country after being awarded an exploration license for on-shore block. While true that the Bulgarian government withdrew its license following a mix of unclear hidden backdoor power brokering leading to an effective ban of shale gas exploration with side effect on any production stimulation method, the picture is far from single color black. Those who follow closely developments in Bulgaria are also likely to highlight the disproportionately high impact of disguised as ecoactivists representation of different political and business interests. Suffice to cross read court registers of recent years with contested tenders. In all of the instances court reviews have resulted in significant delays, additional costs and in some cases of investors giving up.

Few would interpret as encouraging the signals of postponement of the drilling works in the block Khan Asparukh further north by the consortium led by Total. The logical explanation – drastic cuts in investment programs due to falling oil prices and the need to focus on balance sheet improving and lower risk - higher revenue operation is not the only one possible. It is regretful that Bulgaria does not have a national oil company or agency, that would allow the country to engage in exploration and when necessary to co-invest and share, at least in part - market risks with private investors.

In such cases the ability of the host country to share market risks in the most critical early stages might prove vital for the further project’s fate.

A very good example along this line are countries like Denmark, Poland and Romania.

In spite of all hypothetical gloom the start of the tender process for the two deep water blocks will put the country, at least for a few months, in the spotlight of some of the leading global oil companies. The chances for a success at the end could hardly be underestimated – yet most of them are not dependent on sheer luck, but on hard work and effective re-tuning, marketing and executing of the tender procedures, the legal and regulatory base and mostly in effective communication.

The good news – at least in part – is that this time it seems the Government of Bulgaria is willing to listen and deliver.