Security of gas supply: New risks on the horizon
- Written by Dumitru Chisalita, Judicial Technical Expert in Oil & Gas
Until a year or two ago, the greatest risk in terms of security of gas supply during winter in Romania was posed by the possible disruption of gas deliveries from Russia. Today, this risk is gone. In January 2012, gas imports (direct and stored) had reached about 65% of the daily consumption, currently they represent about 3%.
In a study conducted in 2012, I have identified five possible influences on the interruption of gas supplies and the largest share was for geopolitical risks.
These risks I have catalogued as coming from the changes in geopolitical, diplomatic, commercial or military relations in a given geographical area causing: interruptions of natural gas imports from the Russian Federation, interruption of transmission of natural gas in intermediate transit countries, diplomatic incidents, commercial misunderstandings and so on.
This risk category includes mainly natural phenomena: earthquakes, extreme temperatures, floods, fires, landslides, storms, snowfalls, frost, etc.
These risks represent a category including: explosions, fires, accidents, use of outdated technologies, unavailability of personnel (e.g. caused by a pandemic disease), errors of the operator’s personnel, errors in acts of third persons, vandalism, failures related to infrastructure next to production or warehousing (transport, distribution, the utilization installations), failures in IT systems (hardware and software), failures of the utilities systems (electricity, water), failures of the communication systems, stealing of equipment or critical parts of the equipment, natural gas quality.
The cost and availability of spare parts, materials and supplies which may be affected by mismanagement, strikes, bankruptcies and technological changes, unavailability of labour force, the bankruptcy of suppliers, poor management of procurement and supply, lack of forecast on supply demand.
If the presented risks are risks Romania has faced during the last 25 years, their measurement (impact, likelihood) being achieved so far, based on historical events, present and especially the future risks are no longer risks that derive exclusively from the events’ history. In my opinion, Romania will face new risks: market risks, financial risks, compliance risks and risk of terrorist attacks.Includes risks coming from how the geological structures results were explored and interpreted, that can lead to short term, medium or long term supply limitations: difficulties in extraction, depletion of deposits, etc.
The main source of risk that causes this category is that the demand for goods and services from the companies in the sector is influenced by the customers’ response to these products and services: lack of predictability on the gas market in Romania (quantity, price) imbalance between supply and demand, energy poverty, oligopolistic situation on the domestic production market, a monopoly on import sources, bankruptcies, insolvencies, arrears etc.
These risks are caused by the resources necessary to ensure and maintain the capital of an organization in the natural gas sector in order to meet the entailed risks; they depend on the government policy reflected in the changes of the interest rate, exchange rate, level of taxes: the unpredictability of the exchange rate, unpredictability of taxes, late payments, limited and expensive warranty tools, etc.
Risks arising from the obligation to observe laws and other regulations, which are observed or not, can lead to the limitations of supply: the lack of a strategy on the medium and long term, lack of stability of the legal framework (primary and secondary laws), the situation of land and access to objectives, non-correlation between adjacent facilities, etc.
The new risks resulting from world and European changes during the past 10 years, which occurred in Romania too, are difficult to identify and anticipate, as probability and impact, due to the lack of historical elements.
The risks of terrorist attacks in Romania are not considered likely, however, if they would exist and be directed for example on the ability of extraction from deposits, could lead to an important cause of supply limitation, probably much higher than all others risks.
Looking back, we see that the number of attacks on energy infrastructure have doubled in the last 20 years, reaching an average of 300 attacks per year, respectively 10,000 attacks in 20 years, according to statistics presented at the Energy Seminar Spotlights Security, Critical Infrastructure, organized by the George C. Marshall European Center for Security Studies.
The same statistics show that most attacked were the oil and electricity infrastructures, but other infrastructures for energy production were not spared either.
The way these attacks were carried out is very different, no form of terrorist attack lacked.
These elements show that energy infrastructure is a target for terrorists, that there are unlimited means of attack, but also shows that areas considered safe suddenly have become targets for terrorists, while in areas where in previous years such attacks occurred, the number of attacks has dropped.
The presented elements highlight the fact that the idea of a safe area is relative, and Romania should consider including this risk category as well and as to find the means to prevent them.
The dynamic of the complex energy markets, complicated by market liberalization, by privatization and by the listing of energy companies, doubled by heated geopolitical but also socio-economic situations, causes permanent changes in risk and requires a different view on the issue of energy security.