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Petrom plans to boost output by 40% by 2010

SNP Petrom SA, Romania's biggest oil company, plans to boost production by at least 40% in three years as it invests at home, the Caspian region and Russia.

The company aims to raise output to the equivalent of 280,000 barrels of oil and gas a day by 2010, CEO Mariana Gheorghe said in an interview in London today. „This is a very ambitious target,” she said. „The biggest challenge is to reverse the natural decline in Romania this year.” Petrom's oil and gas output fell by 6% last year to 205,000 barrels a day as fields in Romania depleted. This year, it may dip below 200,000 barrels a day, Georghe said. The company and Austrian parent OMV AG are looking for new sources to meet rising demand for energy across Eastern Europe and the Balkans and to avoid losing out to regional competitors such as Hungary's Mol Nyrt.

Petrom is now investing in new wells and upgrading equipment to extract more from its existing fields while at the same time turning to Kazakhstan and Russia. Petrom plans to increase its international output to about 70,000 barrels a day from the current 4,350 barrels. Kazakhstan nationally plans to almost triple output to 3.6 million barrels a day by 2015. The central Asian country has 3.3% of the world's proven oil reserves and 1.7% of its gas, according to BP Plc's Statistical Review of World Energy.

OMV, based in Vienna and central Europe's biggest oil company, in December 2004 bought 51% of Petrom for €1.5 billion ($2 billion) to expand in the Balkans. The company added €677 million to OMV's earnings before interest and taxes in 2006, up 16% from a year earlier. OMV said February 7 it's investing €900 million each year to upgrade Petrom, including the Petrobrazi and Arpechim refineries. Petrom also cut employment by 25% to 32,837 at the end of last year to save money. The company operates 593 filling stations in Romania and 211 in Moldova, Bulgaria and Serbia. That number could increase as the company is considering opening more stations in countries such as Ukraine and Albania. Gheorghe expects the Romanian government to allow the price of natural gas to „gradually increase over the next two years” after it said last year gas prices should reach European market levels by the end of next year. „We will see whether we have news on March 31,” Georghe said, referring to the date the regulator is scheduled to announce prices for the Q2.

Analysts at Merrill Lynch estimate that gas prices will gain by 35% this year. Petrom sold gas for $147 per 1,000 cubic meters at the end of last year, while the price of imported gas was $315 in the Q4. OMV expects the price to rise to between $200 and $250 by the end of next year. (Bloomberg)