Strengthening local companies by having them work on major investment projects along with foreign companies, completion of the talks for reactors 3 and 4 of the Cernavoda nuclear power plant and the Tarnita-Lapusesti hydropower plant, more companies going public and significant investment in the coal mining sector are but some of the few things discussed at a conference on Romania’s energy strategy organized by Ziarul Financiar on Wednesday. If all these plans become something more than mere statements, 2014 looks set to be one of the most interesting for the energy industry in the last two decades.
“The Energy Department published on its website the requirements consultants looking to bid for the new energy strategy have to meet yesterday (Tuesday i.e.). By the end of the first half next year we hope to have a consistent strategy for the next twenty to twenty-five years,” Minister-delegate for Energy Constantin Nita said at the ZF conference organized in partnership with OMV Petrom, E.ON, BRD – Groupe Societe Generale, law firm Ionescu si Sava, Orange and law firm Schoenherr and Opel.
The new document has to address a series of challenges such as the decline in electricity and natural gas consumption, the need for investments in new production facilities to replace the outdated ones, expected natural gas production in the Black Sea, the shale gas, the reaction of an industry that is increasingly more vulnerable to price rises, especially considering the slow economic recovery.
Romania’s energy sector needs EUR3 billion to EUR4 billion investments a year for the next 20 years, Mariana Gheorghe, Petrom’s chief executive officer, believes.
“To attract Romanian and international capital, we need a stable and predictable legislative and fiscal framework besides a credible strategy. Every time we talk with the authorities, we all say the same thing but I think these words need to be backed by facts,” Petrom’s CEO said.
One of the ways to raise cash is to have the state-run energy companies go public and keep the money they get from their initial public offerings, unlike the latest listed company, Romgaz, whose IPO revenue goes to the state budget.
The plan is to have Hidroelectrica, Electrica and Complexul Energetic Oltenia (Oltenia Energy Complex) listed next year and some of them may also be listed in London, Nita said.
Constantin Nita also said the Romanian companies needed to become more aggressive when it comes to major energy projects and foreign investors should start their investments in partnership with local companies. That is especially true when Romanian resources are at stake.
“This isn’t a question of nationalism. (…) We can’t accept companies from neighboring countries smaller than our own to come here and play an important role, while we are relegated to being the poor relative.”
He also said the major projects like reactors 3 and 4 of the Cernavoda power plant or the Tarnita-Lapusesti hydropower plant would go ahead, even though Romania’s power consumption is 7% lower than last year. Nita says negotiations for the two could be completed next year.
“Very many people will wonder why build more power generation facilities when we don’t have the necessary consumption. We cannot live isolated in this region. We need interconnection with the Republic of Moldova, Bulgaria, Serbia, Hungary so as to be able to export a lot of cheap power.”
The major electricity generation companies, too, say these projects are necessary.
“We’d be risking the energy independence of our country if we did not go ahead with the nuclear program. Let’s not forget that such a construction project takes very many years,” said Daniela Lulache, general manager of nuclear power producer Nuclearelectrica.
“If we find partners for the project, say, next year, the project will be completed in eight to ten years. We need to decide what we want to have in Romania at that time.”
In his turn, Mihai Teleanu, member of Hidroelectrica’s management, says that the reactors 3 and 4 of the Cernavoda cannot be built in the absence of Tarnita hydroelectric power plant with its huge pumped storage capacity. The development of renewable energy sector directly depends on the Tarnita plant, too.
“The Romanian system is suffering because of storage. We cannot develop reactors 3 and 4 without nighttime storage. We cannot develop wind farms, which are unpredictable without storage. We’ve had the Tarnita project for about forty years, it’s the most polished project in Romania,” Teleanu said.
“It is extremely necessary to be able to continue developing wind farms and reactors 3 and 4. When these reactors go online we will probably need 2,000 MW of pumped storage. We have another such project in Macin, Dobrudja,” he added, saying that talks to attract an investor in the project “are extremely encouraging.”
The coal-mining sector is to receive investment, too, as EUR70 million will be spent on upgrading the four viable black coal mines of the seven that Compania Nationala a Huilei (National Black Coal Company) had. The four mines along with Mintia and Paroseni thermoelectric power plants are now part of Complexul Energetic Hunedoara (Hunedoara Energy Complex).
Mintia should be retooled and the four mines should receive upgrades in two or three years, which would be the first time the four mines received any investment since 1982, the Minister-delegate for Energy said.
Dan Gheorghiu, Prime Minister Victor Ponta’s energy advisor, says investments in production need to be made and that coal will be important for the electricity business for another twenty years, but might gradually be left out if Romania’s gas production increases as a result of Black Sea discoveries and shale gas drilling.
“We have outdated technologies. We have not made any progress. We need to replace them somehow. Gas will ensure the transition. If we know how to bring it to the Black Sea coast and know how to wisely exploit the shale gas, Romania won’t have a problem,” Gheorghiu said.
“If we continue to rely on coal, and it will probably remain an important fuel for the next twenty years, we will have to pay carbon emission taxes in the future,” he explained.
The authorities regard Black Sea gas as an almost safe ticket to Romania’s energy independence, and to the consolidation of the country’s role in the region.
Minister-delegate for Energy Constantin Nita is optimistic, hoping that Romania will be able to start exports of natural gas from the Black Sea by 2018. However, only a deepwater well has been drilled so far, the Domino-1, a Petrom and ExxonMobil partnership.
Petrom’s CEO Mariana Gheorghe tempers Nita’s optimism, though, saying 2018 is not the year when the company can begin commercial drilling.
“We believe we’ll be able to start production by the end of the decade, if we get the desired exploration results. We only have one well drilled in a place where no other deepwater well has been drilled. It was encouraging, though.”
(English version by Loredana Fratila-Cristescu)