The company could incur $100 million additional costs at its power plant in Brazi that will run on natural gas; at the same time it is subject to the ban on gas exports.
The deputies on Thursday approved the modification of the definition of the natural gas consumer and the modification of the Gas Law, effectively banning export of natural gas.
The former modification would force Petrom to build a natural gas basket for its own facilities that use natural gas, which include the EUR500 million 860 MW plant it built in Brazi.
Natural gas consumers in Romania get gas supplies via a basket made up of domestically produced gas and gas imported from Russia, which is three times more expensive than the locally produced gas.
Petrom, however, could avoid this basket prior to this modification and use only domestically produced gas for its Brazi plant. The gas consumption of the plant could be treated as Petrom’s own consumption.
Gas Law 351/2004 defines consumers as individuals or legal entities that buy natural gas for their own consumption. The changes approved on Thursday turn the consumer into a customer and its definition was amended so as to include all the holders of oil agreements “using these resources for their own operations, at all points of consumption at their headquarters, as well as their subsidiaries, branches, representative offices and all the other secondary offices, in the running of every operation, except for oil operations and consumption thereof.”
What does this mean? According to Petrom information, the Brazi power plant will use one billion cubic meters of gas a year. Prior to the modification of the law, Petrom could use only domestic gas, which cost $165 per thousand cubic meters in the first nine months of 2011. Therefore, Petrom’s costs for fuelling the Brazi plant stood at about $165 million.
With the modification of consumer definition, Petrom has to create a gas basket, which, according to the Romanian Energy Regulatory Authority (ANRE), will comprise 67% domestically produced gas and 33% imported gas as of January 1, 2012. Imported gas costs $495 per thousand cubic meters.
As a result, Petrom will have to spend almost $274 million to keep the Brazi power plant running, that is an additional $109 million cost for fuel. The legislative change came after the Economy Ministry and the National Agency for Mineral Resources (ANRM) had issued a joint order stipulating the same things early this year.
(English version by Loredana Fratila-Cristescu)