One of the key energy themes of 2025 will be continued exploration in gas developments as countries seek energy independence, diversified supply, and alternatives to importing Russian gas.
This week, we look at more of the gas projects that will help drive offshore drilling and construction activity for the next few years. Part one covers the Black Sea and part two (to be published later this week) covers Indonesia and Vietnam.
Gas produces half the CO2 emissions of coal when burnt and far fewer particulates and heavy metals emissions. Offshore gas is safer and cleaner – and extremely lucrative for the oil and gas companies that produce it via huge multi-billion dollar projects.
Anyone who doubted that Russia was an unreliable energy supplier should perhaps talk to Austria’s OMV. The company recently won a €230 million (US$242 million) claim at arbitration against Russian state gas company Gazprom for reducing its supplies in 2022 after the Russian invasion of Ukraine. Austria started importing Russian gas in 1968, the first western European country to do so.
Since Gazprom did not pay the award (strange, that), OMV decided to offset the claim against invoices from Gazprom under its Austrian gas supply contract, where Gazprom was sending gas to OMV via a Ukrainian transit pipeline (despite Russia and Ukraine being at war). Gazprom promptly announced it would not be sending any more gas and terminated all exports to OMV and Austria as a whole.
The Austrian chancellor reassured the public that the country had ample storage and would seek alternative supplies. This promptly pushed up European gas prices and saw LNG tankers divert from Asia to Europe to sell at the higher prices in Rotterdam.
So long as Russia continues killing Ukrainian civilians, occupying Ukrainian territory and using oil and gas to fund its invasion, existing and former Russian gas customers will continue to seek alternative supplies.
The Austrian cut-off leaves only Slovakia and Hungary as direct buyers of Russian pipeline gas in the European Union, although others receive LNG from the Yamal project in Siberia, which is not subject to sanctions.
Slovakia receives Russian gas from the Ukrainian transit route and Hungary receives it via the Black Sea Turkstream pipeline, which runs from Russia’s Krasnodar region to landfall north-west of Istanbul.
No surprise that Viktor Orban has been Russia’s biggest cheerleader in the EU. The Czech Republic, Italy, and Serbia also buy Russian pipeline gas indirectly.
No surprise also to learn that OMV is investing in the US$4.4 billion Neptun Deep gas project in the Black Sea offshore Romania as operator, through its OMV Petrom subsidiary, alongside Romgaz, its 50 per cent partner, in which the Romanian state is the controlling shareholder.
First gas is estimated in 2027 from a 10-well development, split between two fields in 120 metres and 1,000 metres of water, with three subsea production systems. These will be tied back to the new, unmanned Neptun platform in around 100 metres of water depth.
A 160-kilometre long pipeline will take the gas ashore, and this pipeline will be laid by Saipem as part of a US$1.4 billion contract. Total production from the field is estimated at 100 billion cubic metres (bcm), which will make Romania the largest gas producer in the EU.
The project showcases how the dash for gas is stimulating drilling demand and creating offshore services contracts. It also highlights the long lead time for offshore projects. The first discovery well in the Neptun Deep project was drilled in 2011, following 3D seismic acquisition campaigns in 2007 and 2008. First gas will be more than 20 years after the first seismic shoot.
The project is a reminder how incremental harsh environment rig activity is switching from the moribund UK North Sea to other regions.
OMV has contracted the semi-sub Transocean Barents at US$465,000 per day from April 2025 to September 2026, with additional options through to November 2026 at US$480,000 per day for the development drilling.
In order to transit the Bosphorus Straits from the Mediterranean to the Black Sea and pass underneath the bridges connecting Europe to Asia at Istanbul, the rig’s drilling derrick had to be laid down on the deck to give six metres clearance under the bridges. This epic video shows the process that was performed in Cartagena in Spain involving 750,000 man-hours of work.
The rig arrived in Constanza in Romania last week ahead of the integrated drilling programme that Halliburton will manage for OMV, and the derrick is now being re-erected.
Meanwhile, Saipem has begun construction of the topsides for the Neptun production facilities at its fabrication yard in Karimun, Indonesia, and last month, the Italian contractor commenced construction of the jacket at the Saipem yard in Arbatax, Sardinia.
Unfortunately for international supply boat owners, we understand that the drilling support vessel contracts have all been awarded to Romanian national champion Grup Servicii Petroliere (GSP).
Another country where national champions are heavily tied up in the diversification of the country’s energy supply is Turkey.
Turkey is a net importer of oil and gas, and coal, buying over 700,000 barrels a day of crude oil, over 500,000 barrels a day of refined product, and large quantities of LNG and electricity. Local oil production meets only seven per cent of demand, as per the US Energy Information Agency. Turkey's energy import bill was over US$80 billion in 2022, when prices peaked after the Russian invasion of Ukraine, causing a large foreign trade deficit and inflation problems.
As a result, Turkey has invested heavily in both nuclear and renewables. Readers may be surprised to learn that the country’s Kalyon Karapinar Solar Power Plant is now the largest solar power plant in Europe and one of the top five largest in the world. It has a capacity of 1.35 GW and entered operation in 2022.
The country’s first nuclear reactor with a generation capacity of 1.2 GW began operating in April 2023. At full capacity, the four reactors will be able to generate 4.8 GW by the end of 2026. Both South Korea and Russia have proposed additional nuclear power plants to Turkey.
The country’s total power generation capacity is just over 100 GW, and fossil fuels generated 63 per cent of electricity production in 2022.
In this context, like Hungary, it is easy to see why Turkey has been soft on Russian aggression, despite its NATO membership. Turkey is dependent on Russian gas imported through the Turkstream and Bluestream pipelines across the Black Sea. Turkey imported an estimated 21 bcm of Russian gas in 2023, less than the EU or China, but still a significant share of Russia’s 99 bcm piped gas exports.
Turkey has been very successful in building up its deepwater gas resources through its state-owned energy company the Türkiye Petrolleri Anonim Ortaklığı (TPAO). TPAO used the market downturn to buy four distressed deepwater drillships, beginning with Fatih ("Conqueror") in late 2017. Fatih was originally built by South Korea's Hyundai Heavy Industries as Deepsea Metro II for Greek shipowner Theodore Angelopoulos and Odfjell.
The discounted acquisition of Fatih for 40 cents on the dollar from the rig’s creditors was quickly followed by the purchase of Yavuz (ex-Deepsea Metro I, sister ship to Fatih) in 2018, the former Sertao (renamed Kanuni) in 2020 for a “near scrap price” of only US$37.5 million, and finally, in 2021, the Abdülhamid Han, the ex-Cobalt Explorer, which Vantage Drilling had abandoned at Daewoo Shipbuilding in 2015. The company then bought some second hand Siem Offshore platform supply vessels (PSVs) to support the drillships, including Siem Hanne in 2021.
TPAO immediately set about utilising the drilling rigs on domestic prospects in Turkish waters. In 2020, Turkey's President Recep Tayyip Erdogan announced TPAO had made the 320 bcm gas discovery in over 2,000 metres of water in the Black Sea, 165 kilometres offshore, named Sakarya. Further exploration drilling has boosted the field’s proven reserves to over 700 bcm, TPAO claims.
The first phase of production from ten wells and US$1.8 billion of investment came online last year via a pipeline to shore laid by Saipem, meeting seven per cent of Turkey’s gas needs. Now TPAO is moving to drill another thirty wells in the second phase of the development, with a view to meeting 30 per cent of national gas demand.
TPAO plans to deploy a floating production unit to more than quadruple Sakarya’s annual gas output from 3.5 bcm in phase one to 14 bcm by 2028.
Whilst foreign drillers may not be able to win work in Turkey, TPAO’s strategy of buying its own rigs has proved very successful as an engine of national growth and reducing the country’s import dependence.
Ankara and Bucharest are not alone in seeking to develop national gas reserves. Later in the week, we will look at how Indonesia is finally moving ahead in its own dash for gas with BP announcing a US$7 billion new LNG project.