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    Romania Charges Forward with its Gas Strategy

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Summary

Romania is developing its long-term strategy of becoming the leading gas hub in South East Europe

by: Ioannis Michaletos

Posted in:

Top Stories, , Security of Supply, Azerbaijan-Georgia-Romania-Interconnection (AGRI) , News By Country, Romania, Balkans/SEE Focus

Romania Charges Forward with its Gas Strategy

Romania is gradually unfolding its long-term natural gas strategy. It intends on becoming the major gas hub in the region and will exploit its domestic reserves.

The Azerbaijan-Georgia-Romania Interconnector (AGRI) project, oft-named the focal point of Bucharest's regional gas strategy, aims to open yet another diversification route for the Caspian reserves into the EU markets by passing not only Turkey but also Greece and Bulgaria. The project got an initial kick-off in September 2010 when the participating states declared their intention of proceeding with that project, which also includes a substantial LNG infrastructure.

Gas is planned to be transferred from a terminal in Romania and then via an upgrade of the domestic pipeline transmission system in Hungary and from there it will branch out to the gas hub of Austria and further North to Slovakia, Czech and Poland. It will be an integral artery of the newly conceived Aegean-Baltic gas route.

Commenting to Natural Gas Europe in 2013, energy specialist Liana Jervalidze said, “We don’t see now immediately chances for this project to be realized but in ten years’ time when Shah Deniz Two and TANAP will be implemented and additional volumes of gas will be available in Azerbaijan from other projects… maybe there will be room left for LNG as part of Azerbaijan energy diversity strategy.”

Since then, new developments have shed more light into the subject. In particular, the current Romanian Energy Minister Andrei Gerea, recently relayed in the local media that the vertical gas corridor that will connect Romania with Greece via Bulgaria will have been finalized by 2020 and will also include Hungary via other interconnectors. Thus, by the time the Southern Corridor via TAP and TANAP will be officially on-stream, then the rest of the diversification process via the Black Sea Basin could commence, an attribute to the long-standing AGRI project.

Moreover, the Romanian Energy Ministry strategists have already focused on upgrading indigenous production via the exploitation of potential gas reserves offshore the country's Danube Delta that optimistically would start producing gas by 2020 as well. Andrei Gerea pointed out that "Romania has little import needs, mostly in winter period, thus when new gas volumes come online in the next decade, new investments should be in place to boost the capacity of the local transmission system in order to export excess amounts. Thus, the acquisition of new compressors for the local pipeline system is a necessity to run in parallel with the strategic diversification process the county is investing into."

Romania aims not only to eliminate its gas imports from Russia but also to become a net gas exporter and at the same time becoming a major electricity exporter from gas-fired power plants. In that sense natural gas sector is the main focus of the incumbent administration and for the long-term. Already the country has started exporting small volumes of gas to the neighboring Republic of Moldova, with an average price tag of $260 per 1000 bcm, a competitive pricing compared to Gazprom. The plan is to stabilize in the coming years a 1 bcm per annum export to that country.

On the other hand, for several years Romania placed great importance into its perceived shale gas deposits, which proved to be far less than expected. Chevron has, after a series of in-depth investigations, abandoned its investment program in the country which started in early 2013. Chevron had also resigned from similar efforts in Poland, Lithuania and Western Ukraine. The cost of extracting shale gas in Europe for the moment exceeds conventional supplies and there was intense opposition by local communities and environmentalists.

Presently Romania consumes around 16 bcm of gas per year and produces approximately 11 bcm, whilst it has about 100 bcm of proven reserves according to the US Energy Information Administration. Although it is well positioned as a result of its domestic resources, especially compared to the rest of the EU member states, it faces a long-term supply issue since it has around 20 years before its reserves are completely exhausted. Thus the whole planning of the Romanian government is to speed processes, so as to find new offshore reserves and at the same time secure new suppliers and most notably Azerbaijan. Regarding the latter it has to be noted that Baku has already made the strategic decision fully back the TANAP-TAP system of pipelines and unless the rest of the Central Asian states open up their own supply routes to the EU, there are no amounts of importance to be exported and for the long-term.

In a nutshell, the Romanian energy strategy is on the crossroads of some very important decisions and sooner or later new alternative supply routes should be made known in order to back up the existing policy.

Related Article of Interest: Implications of Chevron's Exit From Romania