Bulgaria has picked Royal Dutch Shell Plc (RDS.A) to carry out deepwater oil and gas exploration off its Black Sea coast and plans to sign a contract by the end of October, hoping the project will help reduce its reliance on imports from Russia.

The Balkan country, eager to reduce its near total dependence on Russian gas, had in April opened tenders for two offshore blocks, Silistar and Teres.

Shell, the only bidder for a five-year exploration permit at Silistar, which covers 7,000 sq km (2,703 sq miles), has pledged to invest 18.6 million euros (US$21 million) in seismic surveys of the block.

Silistar is close to a block in Romanian waters, where Austria's OMV has said it could produce up to 84 billion of cubic meters of gas, raising Bulgaria's hopes that it will be able to exploit reserves off its own coast to diversify its energy supplies.

"This is a very serious success for us and one of the most important steps towards diversifying our gas supplies," energy minister Temenuzhka Petkova told reporters on Sept. 29.

However, there had been no interest in exploring the smaller Teres block, she said.

French major Total SA (TOT) along with OMV and Spain's Repsol SA are expected to start drilling for oil and gas in Bulgaria's biggest offshore block, Han Asparuh, between February and May.

Offshore