Tudor Gafton: Top priorities for Amromco – Increasing production, reserves and obtaining new concessions in order to continue to be a successful growing independent E&P company in Romania
Amromco Energy, the oldest and the largest independent oil and gas producer in our country, pursues its development plans in Romania and Eastern Europe by first focusing on opportunities in Romania then expanding in the region. The company currently operates 30 development and production perimeters throughout the country, employing more than 400 personnel. Mr. Tudor Gafton, General Manager of Amromco Energy, has offered us details on the importance of setting an operational record and to keep the company in the top independent E&P, as well as details on the company’s strategy in Romania and in the region, on the efforts to continue growing in 2015 and beyond.
As an engineer specialized in the oil and gas field you have a rich management experience in the country and abroad. What motivated you to choose Amromco Energy?
Amromco Energy is the largest independent producer of hydrocarbons in Romania. It was a unique chance to have the opportunity to manage, in Romania, an upstream operator such as Amromco and I couldn’t afford to waste it. During the 20 years I worked abroad I’ve always wanted to return to Romania and use my experience and education to contribute to the modernisation of our upstream sector.
You have recently taken over the company’s management (April 2014). How would you assess the activity throughout the year from the point of view of the set objectives? Drawing the line, what is your balance sheet?
The balance sheet is most certainly positive. From the very first weeks with Amromco I have been pleasantly surprised by the entrepreneurial spirit of the management team, by the professionalism of the staff, by the employees’ attachment to the company and by the team’s confidence in Amromco’s development strategy and growth. For me it was relatively easy to integrate and to take over the management of Amromco in Romania. In Amromco team I found some of my former colleagues, while among the Amromco’s contractors and partners there are many companies and persons with whom I had previously cooperated during the intervals when I worked in Romania for Petrom and Petrofac. Again I must say the balance sheet at the end of the year reveals we have significantly exceeded the production schedule and we’ve registered very good financial results. In 2014 we also made substantial progress in implementing modern systems and procedures that will lead to quality improvements, more effective working processes, better ways of evaluating staff’s performance leading to better motivation and reward, local regulatory compliance and full compliance with all applicable legislation. Unfortunately, as I have already mentioned on other occasions, during 2014 we haven’t succeeded in expanding our portfolio with new exploration, development or production perimeters, although we had the financial means and instruments to invest more in Romania.
What advantages does the company’s business model have and what were the peak performances in 2014?
Amromco is one of the few upstream operators in Romania having a business model primarily based on redeveloping of existing oil and gas fields. From this model we expand our focus to include exploration opportunities with similar geology in adjacent areas. We rely on a complete and very efficient organization capable of effectively addressing and managing the entire upstream cycle including:
- participating to tenders and negotiating for exploration and production perimeters;
- designing and running seismic surveys;
- interpreting data obtained from these surveys;
- designing and drilling of wells;
- designing and installing of production facilities;
- ongoing logistics, operation and maintenance.
Amromco is able to identify then focus on development/redevelopment of oil and gas fields in a very short cycle, relying on a direct management system integrated with the operations, personnel quality and experience and new technologies. Amromco has placed on production 13 fields that were previously not producing. Such an organisation including 400 personnel permits Amromco to continuously develop its activity and to increase production and reserves every year to ensure long term sustainable growth and economic profitability. As far as I know, Amromco is the only independent upstream operator in Romania and maybe in the entire Central and Eastern Europe, to successfully put in practice such model.
In 2014 Amromco has exceeded the oil and gas budgeted production, when compared to 2013, our total natural gas production and oil production was increased by 38 percent. We’ve achieved such performance despite not acquiring more fields.
Reviewing your achievable priorities for next year, what issues do you have on your agenda? Do you consider expanding your activities?
As I have mentioned, our business model dictates long term sustainable growth, which can be achieved only by constantly adding to our assets portfolio new fields as result of successful exploration or by acquiring new producing fields. Consequently, the number one priority for 2015 is to take part to the externalisation process initiated by OMV Petrom for the first lot of marginal fields and to successfully conclude the negotiations to take over some of these fields. Additionally, we are going to take part, hopefully with success, to the next tender round organised by ANRM for onshore exploration perimeters.
Another priority for us is, as always, to identify development opportunities for the fields we already produce and to implement as soon as possible the identified development programs. This means mainly to acquire new seismic surveys, drilling of new wells as well as new wells workover/reactivation programs. In 2015 we will also progress to the next phase for the two exploration blocks where we are partnering with Rompetrol.
What programs to increase the output and to maximize the recovery factor are underway and what plans do you have in sight to rehabilitate and exploit the fields?
Our production enhancement and recovery factors maximization programs are centred on three directions:
- Based on 3D seismic acquisition and interpretation/reinterpretation, we identify and put into production new hydrocarbon reservoirs or optimise the exploitation of the existing reservoirs by optimising production wells patterns.
- Optimise production regimes/rates of the reservoirs once the optimum production wells pattern has been implemented.
- Extend as much as possible the production life of all producing wells through implementation of technologies and procedures allowing the continuation of production with high water content, high sand content or low pressure (e.g. efficient water separation, treatment, transport and re-injection, installation of compressors at well sites or at central production facilities).
In the future, for the oil fields, we are considering the implementation of secondary recovery processes such as water injection.
What rate of success do you have for the drilling operations and capital repairs and how do you intend to maintain a top position?
Statistically, the historical success rate for the workover operations since 2003 is 83% while the success rate for the development and exploration drillings is over 80 percent.
Of course, the main merit goes to our teams of geologists, geo-physicists and reservoir engineers, however, an important factor is represented by the implementation of efficient working procedures, by the improvement of decision-making process and by the quality of works in the field. In this regard, Amromco is operating its own drilling rig (a new rig, automated, made in the US) and two of its own workover rigs.
Maintaining and improving the success rate could be achieved only by maintaining and improving the quality of Amromco technical and decision-making staff, by implementing procedures meant at reducing risk factors (phase-gate processes, peer and multidiscipline reviews, ‘learning curve’, considering the experience of other operators and continuous inclusion of feedback during planning and design as well as during execution). The ‘front end loading’ concept for planning and design is applied with very good results.
Amromco is paying special attention to personnel improvement (presentations, workshops, lectures, seminars) and applies the newest and most efficient work processes.
What are the company’s strategic directions in Romania and in the region for the coming period?
Amromco’s strategy is growing in Romania by increasing its portfolio of production perimeters. One of our objectives is to double production by end 2016. Amromco is currently operating solely in Romania; nevertheless our investors’ intention is to use the structure, experience and Amromco Romania team to grow the project to other countries in Central and Eastern Europe. If enough opportunities will be on the table and the investments volume available to us will be entirely absorbed by Romania, then the development will only target Romania, alternatively the Company will expand or move to other countries in the region.
What could you tell us about the existing partnerships and your relationship with collaborators?
Our main partner is Romgaz. We started the cooperation with Romgaz in 2003, by setting up a joint venture Romgaz-Amromco to produce and redevelop 11 perimeters outside Transylvania – a priority area for Romgaz. With Romgaz we cooperate very well, with very good results; the cumulated production over the past 10 years is approximately 10 times higher than the one estimated in 2003, calculated based on the estimated production decline, Romgaz and Amromco equally contributing to this result.
We’ve successfully negotiated with OMV Petrom the takeover of three oil fields in Moldavia and, as I’ve mentioned, our goal is to obtain additional perimeters from Petrom. We are interested in developing with OMV Petrom a similar relation to the one we have with Romgaz, however this depends on Petrom strategy.
We regard as partners many of our contractors (for example Prospectiuni) and we always try to set long term business relations based on mutual interests. We believe in and promote the ‘win-win’ concept. We always try to set partnership relationships with local communities and with their representatives. Through our investments we contribute to the local community’s welfare, we contribute to the creation of new jobs, we develop local infrastructure and offer opportunities to local companies. Amromco currently operates concessions in 12 counties and more than 20 localities.
How do you assess the evolutions in the region regarding the development of the natural gas market, within the context of new priority measures from the European Commission for the EU members, including Romania (securing natural gas supply, interconnections stand, the reverse flow at the cross-border interconnections, transparency regarding reports on gas storage capacity, etc.)?
It is logical for the EU and Romania to consider, in the context of securing energy supply, the issue of stabilising decline and maximising domestic oil and gas production as one of the top priorities for the years to come. It’s a logic outcome that within a European Union that integrates the economies of the member states, the interconnection and integration of the national gas transport and distribution networks will need to become a reality in the near future. A common market, aiming at near perfect competition, will not be able to function efficiently and register sustainable growth without all entities active on this common market being able to access energy in similar, ideally equal conditions. The competitive advantage should come from the efficient use of resources, including energy, and not from preferential access or monopoly over cheaper energy resources. Amromco supports the liberalisation of natural gas price and the free access to the common market for all gas producers. The gas market should work freely, with no administrative constraints or procedural penalties set up by the regulator.
Regarding gas storage, gas storage capacities should be available, on demand, to all gas producers on same conditions, depending on the proportion to which the producer contributes to the total output in his geographical area. The increase of gas storage capacities should be an energy policy priority for the EU member states. Obviously, data and information regarding gas storage capacities should be absolutely transparent.
What opportunities and what challenges is Amromco Energy expecting to face in 2015?
In 2015 we hope to extend the scope of our cooperation with Romgaz, both in developing/redeveloping production fields and in the exploration activity, and to successfully finalise negotiations with Petrom for more production perimeters.
Another opportunity is putting in production more reserves identified by the seismic campaign completed in 2014.
As until now, the challenges will be related to obtaining in due time land owners agreement and, implicitly, getting the construction permits in due time.
Another challenge would be to convince Petrom of the benefits coming from the cooperation with Amromco and to maintain the positive trend in our relationship with Romgaz.
The oil and gas price and the taxation system of the upstream activity will have, obviously, a decisive influence on our activity in 2015.
We trust in our company’s ability to materialize all good opportunities we’ll have over the next several years and to overcome all obstacles we’ll face in the future, a future I’m convinced, will only follow an ascending trend.