2015 – A Year of Opportunity for Romania?
A few topics will continue to dominate the Romanian energy policy-making landscape.
The deregulation of natural gas prices, for all the clear and indisputable nature of Bucharest’s international commitments, will likely continue to be subject to political interference. Indeed, the new leadership of the Energy Department decided to postpone until July 1 the first step of the price deregulation schedule for household consumers – a step that was initially set for October 1, 2014. Unsurprisingly, the Government plans to capitalize on the coming wave of cheaper gas and low household demand in the summer time. It remains to be seen whether the European Commission – which is yet to validate the delay proposed by the Government in September 2014 in the price liberalization calendar – will agree to yet another change that risks lending an erratic note to the entire process.
Another thing to watch on the topic of gas market liberalization is the transition for non-household consumers from the formerly regulated to a liberalized, unregulated market, as of January 1, 2015. On 6 November 2014, less than a month before the regulated market for industrial gas consumers ceased to exist, the National Authority for Energy Regulation (ANRE) made the decision that in the time left till the year’s end, the gas utilities were to negotiate with their regulated clients new contracts in free market terms, or the old contracts would otherwise simply be extended with gas prices set by suppliers. No doubt, such a precarious information and negotiation process was not the proper start into developing a workable unregulated market.
The O&G fiscal regime is yet another piece of unfinished work of ample consequences. Announced as imminent for the end of 2014, a new royalties system was expected as of January 1, 2015. Instead, the Government procrastinated and referred the matter to the Parliament. The issue has been hyped in the public opinion mainly through the notion of too small a Government’s take, and accordingly used in contests of populist politics that capitalized on confusion and poor public information.
For illustration, there is a widespread belief that the “old” royalties of the 2004’s Petroleum Law were due to expire at the end of 2014, yet this notion has rested on a confusion about the 10-year stability clause in Petrom’s 2004 privatization contract. In effect, oil and gas royalties were fixed for 30 years as per the concession agreements closed by the title holding companies with the Romania Agency for Mineral Resources (ANRM). Therefore, new royalties can only apply to new concession agreements.
Another reason why the issue cannot just linger for yet another whole year is that ANRM announced its intention to open a new – the 11th – tender round for oil and gas perimeters this summer, hence any new fiscal O&G regime ought to enter in force before that date.
Oil and gas companies are themselves interested in clarity and predictability in fiscal and regulatory matters, generally, so they are keen to see the royalties matter decided upon and stabilized for at least 20 years.
The fate of RES and their legal support scheme – Law 220/2008 – will also need clarification. Since 2013, the number of green certificates bestowed on each RES technology type was reduced by Government Ordinance, with the difference due to be paid as of April 1, 2017. Combined with the drastic price fall of green certificates and the diminished capacity of the National Transport System of electricity to take up growing volumes of intermittent power generation, the future of Romanian RES is uncertain. The problem is only compounded in a context of low oil and gas prices, in which investments in relatively expensive RES equipment are discouraged. By the same token, costly energy efficiency spending becomes harder to justify economically. Thus, the context does not really favor climate protection actions by means of RES, energy efficiency and capped carbon emissions.
Other than the policy making sector, some major energy development directions will mostly (though by no means exclusively) depend on geology. Shale gas prospects are a case in point. The results of Chevron’s exploration works in Vaslui county, finished in 2014, will define the future of shale energy in Romania. For the Black Sea offshore, a final investment decision is expected in 2015 and, there again, deep-water geology has to play along.
Finally, 2015 will be the year of new gas transport projects, which are to connect at regional level the Southern Gas Corridor to Central Europe’s North-South Corridor. Domestically, theBlack Sea coast will have to be linked to the National Transport System. One such proposal is Transgaz’s Danube Pipeline, meant to link Giurgiu to Arad and to extend to Tuzla (Constanţacounty). Another notable concept, Eastring, was proposed by Slovakia’s TSO, Eustream. Eastring endeavors to connect Romania’s Isaccea (Tuclea county) to Medieșu Aurit (Satu-Mare county) and go across 85 km of western Ukraine to Slovakia’s Velke Kapusany. In any event, one gas transport solution will have to be pinned down in the first months of 2015.
All-in-all, 2015 can be a year of opportunity for Romania if its regional role is better understood and acted upon by its own decision- makers.
Radu Dudău
Radu Dudău is Director of the Energy Policy Group, a Bucharest-based non-profit, independent think-tank specializing in energy policy. Energy Policy Group is a National Gas Europe Knowledge Partner.