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June 27, 2022

Sterling Resources, one of the most proactive investors in Romania’s Black Sea

Interview with Mr. Mark Beacom, Vice-president Romania of Sterling Resources Ltd & Director General of Midia Resources.

What can you tell us about Sterling’s activity in Romania and its background?
Sterling Resources has been a loyal, patient and proactive investor in Romania.  Sterling originally entered Romania by taking a small interest in the Black Sea Concession of Midia and Pelican as far back as 1997.  Over the next ten years as each company in the Concession decided to exit Romania Sterling picked up the retiring interests until it had a 100% working interest and became operator in 2008.  Sterling remains the Operator in the concession but has brought in Petro Ventures and Gas Plus as partners thereby reducing its interest to 65%.  Sterling also entered the Luceafarul Black Sea Block with 50% interest and as operator as well as taking a 40% interest in the Melrose operated Muridava Concession both in 2012.
How much has Sterling invested in Romania?
Sterling has spent around $70mm to date exploring in the Black Sea.  The main activities are running seismic programs and drilling offshore wells.
As Operator Sterling has drilled 5 wells and has made discoveries at Ana and Doina in the Midia Block and Eugenia in the Pelican Block.  In addition Sterling has been conducting investigations relating to developing its discoveries.  Last year alone Sterling was involved in drilling of 2 offshore wells, shooting 930kms2 of 3D seismic and 300kms of 2D seismic.
What is the economic potential of Sterling’s interest?
The Company has both Contingent and Prospective Resources of oil and gas. To date none of the resources have been declared to be economically viable.  The prospective resources must be proven up through exploration and further appraisal wells and the contingent resources require a viable development plan that takes the gas from reservoir all the way to the burner tip.  Sterling continues to drill the exploration prospects and also continues to investigate solutions for the viable development of its Black Sea discoveries.  We are probably 5 years away from producing gas.  This time frame could be reduced in the event some of the hurdles to development could be resolved.
What are the challenges of working in the Black Sea of Romania?
There are many challenges involved in exploration, appraisal, development and production from the Black Sea.  Generally drilling offshore is very costly versus on land and the time frames are much longer. This is common to many offshore regions, for Romania, however, the inability to obtain market based gas prices means the risks and costs remain high but the viability to develop these expensive reserves is not possible.  In addition there is not the gas infrastructure to bring Black Sea gas from the coast to a market.  The cost of all this required infrastructure has to be factored into the overall project.  There are however Transgaz operated Transit lines only 25kms from the coast.  One helpful solution is to have a new line built to handle production from producers from the coast to the Transit lines and then allow access into the Transit lines.  Also although the regulatory system for construction onshore in Romania is well documented there is not as well established a process that allows the developer to obtain consents or permits for undertaking construction activities offshore or for obtaining a license for operating the facilities.  Finally the government is looking to increase the tax and royalty burden on producers.  With the risks and cost associated with developing the high risk and expensive offshore fields the possibility of increasing the tax burden, or merely the possibility of an unstable tax regime, makes developers less willing to invest.
Which is Sterling’s vision for Romania’s Black Sea?
Estimates will vary widely for Black Sea production but the likelihood is that if all the hurdles mentioned before could be overcome then gas from the Black Sea will displace imported gas from Russia and furthermore Romania could be an exporter of gas.

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