Making Romania a true market hub for Southeast Europe

When the Moftinu Gas Development Project reaches first gas in Q1 2018, Serinus Energy will become the newest gas producer in a country with a long, rich history of petroleum extraction. There were obviously many aspects that impacted the Company’s decision to invest in the project. The move to market liberalization in the country’s gas market was one of the positive aspects in the Company’s investment decision. This liberalization of the gas market in Romania will, over time, become more competitive and more integrated with the European Union, resulting in the natural gas industry of Romania becoming more efficient.
As you may be aware, the Romanian gas market is atypical for Europe. The country’s production almost covers the country’s demand with a small amount of imports entering the market to create market equilibrium, while most of the rest of European countries import large amounts of gas to cover demand. As the Romanian gas market becomes fully liberalized with implementation of European Union policies, it could have dramatic impact on the upstream gas industry. The removal of all regulated prices as of April 1, 2017, was the first step in having the Romanian gas market become fully integrated with the European markets, particularly those in southeast Europe. Proposed trans-border pipelines will also be important in fulfilling this integration as well as upgrades to the Transgaz system that will readily allow for interconnections with the national transmission systems of neighbouring countries. The removal of legislative hurdles to exports must also be carried out to create a full level playing field for Romanian domestic gas production. It will be important to encourage a competitive trading environment through multiple gas trading exchanges. With the physical connection of Romanian gas to European markets, there must also be coordinated effort to harmonize the energy-sector legislation at both the domestic and European level, and strengthening the capacity of the relevant regulatory authorities.
There are two upstream gas industries in Romania, the very mature onshore industry and the burgeoning but immature offshore Black Sea industry. These areas are very different in what they require to continue to attract the necessary investment. The mature onshore contains depleted gas pools that have resulted in the declining onshore production in Romania. To access new onshore gas deposits, new technologies must be adopted that will require large investments of capital. As the government contemplates changes to upstream fiscal regime, it will need to be extremely cognisant in its deliberations to consider the long-term competitiveness of the Romanian gas industry. With the proper policies implemented, the onshore upstream gas sector in Romania could reverse the declines in production. The onshore gas production must also receive the same treatment as the emerging offshore gas production in having open access to new pipeline systems and to potential export markets. New tenders for onshore oil & gas concessions must also be carried out to further create opportunities to grow domestic gas production.
As a member of ROPEPCA, Serinus Energy supports the ROPEPCA’s engagement of the Government of Romania on a number of policy and taxation issues that could have a significant impact on the onshore upstream gas industry. Some of the important initiatives being taken up by the government include a new fiscal regime, natural gas reference price calculations, proposed changes to the Petroleum Law (land access, declassification of documents, and NAMR reformation), and the development of a National Energy Strategy. It will be imperative that these numerous initiatives are undertaken with the objective of protecting the sanctity of existing contracts, creating a level playing field between domestic gas production versus imported gas, and promote and encourage investment in new production and the adoption of new technologies. A stable and growing natural gas sector will be to the benefit of both domestic producers and consumers, and to the long-term economic development of Romania.
As Serinus moves towards first gas for the Moftinu Gas Development Project, it must look at all ways it can best maximize the benefits and minimize the risks from the newly liberalized market. It will be important moving forward that the progress Romania has made to date maintains its momentum. The market liberalization and other policy initiatives can be the catalyst to making Romania a true market hub for Southeast Europe, given its significant current and future gas production as well as the intersection of many transit pipelines.

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