Energy Industry Review - July - August 2018 by Energy Industry Review

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Doing more with less he International Energy Agency (IEA) recent report titled ‘World Energy Investment 2018’ points to another year of falling investment in 2017. Another proof that energy investment is failing to keep up with energy security and sustainability goals. The study provides a critical benchmark for decision making by governments, the energy industry, and financial institutions to set policy frameworks, implement business strategies, finance new projects, and develop new technologies. It highlights the ways in which investment decisions taken today are determining how energy supply and demand will unfold tomorrow. There are some critical questions that have shaped the energy industry, including: • Which countries and policies attracted the most energy investment in 2017, and what fuels and technologies are growing fastest? • Is energy investment sufficient and targeted appropriately to realise the world’s energy transition objectives? • How are oil and gas companies responding to higher oil prices? Are they changing their strategy decisions in order to ensure adequate supplies while minimising long-term risks? • Are business models and financing approaches supporting a shift in power generation investments towards renewables? • What policy and market factors drive energy efficiency spending? What new approaches to financing are emerging for efficient goods and services? • How are the sources of energy finance evolving? What roles are public financial institutions and utilities playing? • What are governments and the energy sector spending on energy research and development? What are the main considerations facing investors in batteries and the electric vehicle value chain; carbon capture, utilisation and storage; and hydrogen? The key findings of the report show that total energy investment has fallen again and is increasingly underpinned by governments. Meanwhile the power sector is becoming more

Lavinia Iancu CEO and Publisher

capital intensive and in emerging markets, auctions are supporting larger renewable projects. In emerging markets, the average size of awarded solar PV projects in auctions rose by 4.5 times while that of onshore wind rose by half over 2013-17, helping to support economies of scale. In Europe, tendered large projects are mainly concentrated in offshore wind; auctions have generally not resulted in large, land-based renewables projects. Unfortunately, fewer decisions are being taken for investment in thermal generation. In 2017 newly sanctioned coal power fell 18%, driven by a slowdown in China, India and Southeast Asia. However, despite declining capacity additions and a wave of retirements of existing plants - the global coal fleet continued to expand in 2017. And while investment decisions signal a continued shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology. It seems that oil and gas companies are doing more with less. Following the peaks in oil and gas upstream investment reached in 2014, investment collapsed abruptly as a result of lower prices. 2017 investment rebounded by 2% in real terms, and IEA estimates the same level of growth for 2018. The oil and gas industry has been traditionally characterised by long-lead times projects with predictable production profiles. Yet as a result of the shale revolution in the United States this trend is changing and the industry is re-thinking the way they choose, execute and manage projects. Furthermore, investment in conventional assets remains focused on expansion of existing projects rather than developing new sources of production. One notable trend concerns the relationship between oil prices and upstream costs. In the past, there has been a roughly linear relationship between upstream costs and oil prices. When price spiked, so did costs, and vice versa. What we are noting now is a decoupling. While prices have more than doubled since 2016, global upstream costs have remained substantially flat and for 2018 IEA estimates those increasing very modestly, by just 3%. The companies appear to have learned to do more with less. 3

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The apparition of prosumers, new obligations for energy suppliers, new rules for trading on centralized platforms for gas market operators, new rules for social investments or the increase in the amount of fines are only some of the novelties brought by Law no. 167/2018.

Eugenia Gusilov Director & Founder at Romania Energy Center page 14

Law no. 167/2018 takes effect

The Offshore Law, legislative changes immediately after initiation? The Chamber of Deputies, as decisional forum, adopted the legislation regulating the regime of Black Sea gas exploitation, a law different from the version previously adopted by the Senate.

Daniel Vlasceanu Partner at Vlasceanu, Ene & Partners page 18

Romania, dependent on Russian gas transit through Ukraine? Romania’s particular vulnerability to gas transit through Ukraine highlights the importance of strategic planning and development at once of infrastructure projects and alternative solutions for gas supply – a recent study by the Energy Policy Group points out.

Mihai Toader-Pasti Chairman Future Energy Leaders Romania page 20

58 Ioan-Corneliu Dinu Scientific Counsellor at World Energy Council Romanian National Committee page 24

Bucharest International Energy Charter Forum The Bucharest International Energy Charter Forum brought together high-level politicians, officials and technical experts from Member and Observer countries of the International Energy Charter to discuss ways in which investment in energy efficiency could be ramped up and targeted towards addressing energy poverty. energyindustryreview.com

Co-creating smart and sustainable cities in Europe IRIS (Integrated and Replicable solutions for CoCreation in Sustainable Cities) announces itself as the newest addition to the European Commission Smart Cities and Communities (SCC) lighthouse projects. Focsani is on the IRIS list.

Solution for the coal industry: investments for sustainable development The President of Directorate of the Complexul Energetic Oltenia Sorin Boza reveals the current status of mining in Romania, European prospects in the field, energy efficiency programs, development of clean technologies and companyâ&#x20AC;&#x2122;s projects for the future.

86 Biomass energy in Romania and the new target of 32% Hub or bug It is yet uncertain what Romania will do with Black Sea gas and how it will use it to reach its objective to become a regional energy hub. Maybe the future National Energy Strategy will bring at least partially an answer to this question.

According to a Master Plan, Romania has a great renewable energy potential, especially hydro, wind and biomass. Biomass will play an important role in the National Action Plan for Renewable Energy, which must be developed within the framework established by the Directive on Renewable Energy.

NEWS

ENGIE INAUGURATES FIRST CNG FUELLING STATION IN ROMANIA

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n the context of increasing concerns to protect the environment and contribute to the reduction of CO2 and NOx emissions generated by road transport, Engie proposes an innovating solution, optimal for the transport sector: compressed natural gas (CNG) for vehicles. Compressed natural gas is extensively used in many European countries among which Italy is the leader, where approximately 1,000,000 vehicles using this type of fuel are in circulation. Engie has built 150 compressed natural gas stations, most of which in France and Belgium. Romania is one of the few countries in Europe where the technology of compressed natural gas for vehicles hasn’t been implemented yet on a large scale, but which, given the degree of maturity of the solution and its solution, has a development potential especially for companies with significant fleets. Anticipating these evolutions, Engie Romania has inaugurated the first public compressed natural gas fuelling station in Bucharest. In the medium term, the company’s plan is to develop a network of fuelling stations, in public or private

regime, for partners interested in this solution. This project developing a green mobility solution is in line with the strategy of Engie Group, focused on reducing pollution generated in the transport sector, in the context of accelerated urbanization. “The tradition as a major player in the natural gas sector is an asset we can capitalize on to develop this alternative technology for a large range of customers, from urban transport administrations to companies with significant fleets of high or low tonnage motor vehicles. The station inaugurated today is a first step in a market with an important potential, and Engie Romania has purchased 25 vehicles provided with this technology for the internal fleet,” Eric Stab, Chairman & CEO of Engie Romania, has stated. At the recently inaugurated fuelling station, both large tonnage vehicles, buses and cars can be supplied. Vehicles are supplied in the station by a certified operator, and payment for fuel is made through a dedicated terminal allowing all methods of payment (bank card, fleet card, cash, voucher). The alternative fuels station is also equipped with a fast charging equipment for electric vehicles.

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NEWS

MAZARINE ENERGY TO PROFIT REJUVENATING MATURE OIL FIELDS

ince taking over the 19 petroleum fields from OMV Petrom on August 1st, 2017, Mazarine Energy Romania team performed a thorough well-by-well analysis that resulted in a wealth of well workover and intervention proposals. With the own rig fleet, the company successfully completed with minimal costs 32 workovers and more than 150 well interventions. These activities resulted in the re-activation of three previously not producing oil fields, representing a prime example of mature field rejuvenation. Thus, the Valea Resca, Glodeni and Valcanesti fields are back into production after many years of sitting idle. Based on these encouraging

results, Mazarine Energy Romania plans to intensify the activity of workover and interventions on its wellstock in the same manner, by prioritizing on safety, environmental impact and good relations with the local communities. Recently, Mazarine Energy Romania announced that it has completed the acquisition of 3D-seismic surveys over its biggest producing fields – Ileana (Muntenia region) and Campeni (Moldova region). The surveys were planned and executed within six months from taking over the fields from OMV Petrom. Seismic data processing and interpretation over the Ileana fields is already completed and company’s specialist geoscientists have already

identified several new drilling locations, for which Mazarine is now preparing. Mazarine intents to start drilling in Q3 2018. Processing of 3D-seismic data is ongoing in Campeni and Mazarine expects to mature drilling prospects for Q4 2018. “Our professional team has delivered a great piece of work establishing Mazarine Energy as a solid independent E&P operator in Romania. In less than a year, Mazarine was able to acquire, process and interpret 3D-seismic over the largest fields and is now ready to start infill drilling. In parallel we performed more than 100 well interventions and workovers and have raised production by more than 25%”, Spencer Coca, Country Manager Mazarine Romania said.

MET GROUP, IN TOP THREE SUPPLIERS ON THE ENERGY MARKET IN ROMANIA

ET and Innogy (ElműÉmász) groups have announced the signing of the agreement on the acquisition by MET of RWE Energie (RWEE) Romania, owned by Innogy. Following this acquisition, MET will reach top three suppliers on the competitive energy market in Romania. “This acquisition of RWE Energie is an excellent opportunity to integrate in the Romanian market a significant electricity supply portfolio, with the potential to expand the operations of MET Group in Romania. 8

By combining the two portfolios, MET will reach a share in the energy supply market of almost 10%, the third in the competitive energy market in Romania, with a total of around 5,000 points of consumption,” the press release of MET Group shows. It is present in Romania through its subsidiary, MET Romania Energy. The main activity of RWE Energie is electricity and gas supply to customers in the business environment in Romania, with a focus on SME customers, especially producers in the energyintensive industries and store chains.

“The transaction was concluded following a competitive tender,” the quoted document also mentions. “After the acquisition of the energy supplier Repower in 2016 and now of RWE Energie as well, combining the portfolios will result in an increase in the operational efficiency of MET in Romania, providing high-standard services to customers,” Petre Stroe, CEO of MET Romania, affirmed. The transaction will be completed in the second half of 2018, subject to usual closure conditions - including approvals according to the applicable regulations, the press release also shows. energyindustryreview.com

NEWS

FIRST ROMANIAN GAS STATION POWERED BY RENEWABLE SOURCES

ompetrol Downstream, the retail division of the KMG International Group, recently completed the fitting of the first Rompetrol gas station with highcapacity solar panels, a premiere for Romania and the Black Sea region. The chosen location for the implementation of this project was the Rompetrol station located on the Bucharest ring road and near the fuel depot in Mogosoaia. “By implementing this project, we expect that about 42% of a station’s energy needs be provided from renewable sources, which would also generate a 30% reduction in CO2 emissions. In May, the system produced about 4,600 KWh, with a daily average of 148 KWh, the equivalent of an A+++ refrigerator’s yearly consumption,” said Vlad Rusnac, Chief Retail Officer of KMG International and General Manager of Rompetrol Downstream. The main technical solution adopted for the Mogosoaia plant was fitting it with a photovoltaic power plant (CEF) consisting of 60 panels (total area of the panels - 141.2 sqm, surface area of the panels - 800 sqm, total power of the

panels - 21 kWp) which was connected to the distribution operator’s electrical network through the medium voltage transformer station of the Rompetrol warehouse. With a lifetime of at least 25 years, the plant has a maximum power of 20 KVA and is sized so that the energy produced is consumed entirely in the fuel distribution station. In case the power consumption of the station will sometimes be lower than the minimum powers average (registered at the design/study stage), then it is possible to use it for the Mogosoaia depot or to be delivered to the national power grid. The photovoltaic panels are provided with a system that continuously guides the light source providing maximum output, producing 44% more energy compared to a static system. They also have winter defrosting functions and a built-in strong wind protection system. In addition, the system also includes two last generation inverters, which have a 97.6% efficiency and built-in protection devices (shortcircuit protection, differential protection, insulation monitoring and protection against insularized operation). 9

NEWS

ROMANIAN MINISTER OF ENVIRONMENT VISITING THE REFINERIES IN PRAHOVA

eputy Prime Minister Gratiela Gavrilescu, the Minister of Environment, has made a working visit in Prahova County, the main goal being to assess the status of reviewing the authorizations of refineries operated by OMV Petrom, Lukoil and Rompetrol, as well as to verify how the stations in the national air quality monitoring network (RNMC) work in Ploiesti area. The documentations for the review of authorizations of the three refineries were to be analyzed in the Technical Analysis Committee (TAC), so the competent minister wanted to make sure that they would be completed in due time and that they have already started to implement the measures to reduce air pollution agreed upon during the previous meetings. “I had the opportunity

to convince myself that managers are aware of their environmental responsibilities and that they want to solve their pollution issues as soon as possible. They also understood that air pollution does not close in the yard of their refinery and that the only efficient approach is the unitary one. Thus, we agreed to set up a common working group, including three representatives of the Ministry, of the National Meteorological Administration (NMA) and specialists of the Petroleum-Gas University, to identify solutions for reducing pollution depending on environmental factors, as well as to establish individual measures, implemented however by all the three refineries, which would be included in authorizations: self-monitoring of imissions; identifying and monitoring leakage and monitoring existing fugitives, followed, as of 1 January 2019, by the continuous monitoring thereof; applying the provisions

of the Partnership with the NMA, in order to correlate the production level with the weather factors favorable to pollution; a much better communication with citizens, transparency, including an electronic display board at the gate of the factory”, the Deputy Prime Minister said. The program included a visit to the Ploiesti Waste Mechanical and Biological Waste Treatment Plant, which is undergoing technical tests, owned by Prahova County Council, an investment worth a total of over RON 64 million, entirely Romanian, the largest of its kind in the country, through which the county authorities will be able to better capitalize on municipal waste, by recovering the recyclable waste and using a large part of the others for the production of compost, cement and, in the future, by gasification, to obtain thermal energy.

RECORD RESULTS FOR ATLAS COPCO IN Q2

tlas Copco, a leading provider of sustainable productivity solutions, recently reported record-high order volumes, revenues and operating profit. Demand from most customer segments is expected to remain at current high level. Equipment demand from the semi-conductor industry is expected to be somewhat lower in the near-term. “We have had another quarter that shows our capability to deliver strong results,” said Mats Rahmström, CEO and President of the Atlas Copco Group. “It’s great to see 10

that the hard work of all employees resulted in record results, with all business areas achieving good organic order growth in all major regions”. Orders received in the second quarter increased 13% to MSEK 25 120 (22 286), an organic increase of 10%. Revenues increased to MSEK 24 461 (21 397), an organic growth of 11%. The operating profit margin was 22.2% (21.5). Innovative products launched in the quarter include a new oil-free rotary screw compressor that delivers up to 35% energy savings compared to similar products; a new range of dry

screw vacuum pumps with excellent contaminant handling capabilities; a test bench with new joint simulating technology for best possible torque and angle testing accuracy, and a lightweight and efficient combined mobile compressor and generator minimizing the amount of equipment needed at customers’ site. “We will continue to focus on innovation and creating even better products and more efficient service platforms. We are dedicated to ensure that our customers can grow their businesses and be successful,” Mats Rahmström added. energyindustryreview.com

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PUBLIC CONSULTATION ON THE STRATEGY FOR LONG-TERM EU GHG EMISSIONS REDUCTION

he European Commission has launched a public consultation on a strategy for long-term EU greenhouse gas emissions reduction. All interested citizens and stakeholders can send their contributions by 9 October 2018. In March 2018, EU leaders asked the European Commission to present, within 12 months, “a proposal for a strategy for long-term EU greenhouse gas emissions reduction in accordance with the Paris Agreement”. This followed a similar request form the European Parliament. The public consultation will feed into the Commission’s deliberations for a strategy that will reflect on a long-term vision for a modern European economy

for all Europeans and the opportunities and challenges that a long-term decarbonisation implies. The consultation aims at: • Collecting views and opinions on the technological and socioeconomic pathways that should be explored for a long-term EU greenhouse gas emissions reduction strategy; • Gathering factual information, data and knowledge, including drivers, opportunities and challenges relevant to the longterm strategy. The consultation follows a high-level stakeholder consultation event held in Brussels on 10-11 July 2018. The

Commission aims to put forward its strategy proposal ahead of the next UN climate conference (COP24) taking place in Katowice, Poland in December 2018. The EU is on track to achieve its 2020 targets and is currently putting in place policies to reduce greenhouse gas emissions by at least 40% in 2030 and achieve high level of ambition in energy efficiency and renewable energy (the socalled energy and climate framework for 2030). The policies, legislative instruments and support programmes from the European budget will put the EU on a trajectory compatible with the Paris Agreement, but further measures are needed for the time after 2030.

POSITIVE SIGNAL FOR FUTURE NUCLEAR INVESTMENTS IN EU

ORATOM, the voice of the European nuclear energy industry, welcomes the decision of the General Court of the European Union (EU) to dismiss Austria’s complaint, supported by Luxembourg, against the European Commission’s (EC) state aid approval for the construction of two nuclear reactors at the Hinkley Point C power plant in the United Kingdom. The Court’s decision to uphold the EC’s approval of the aid provided by the UK Government can be perceived as good news for all the EU Member States which are considering 12

nuclear new build projects as it sends a positive signal for future nuclear investments in the EU. In this context, FORATOM recalls the right of EU Member States to choose nuclear energy as part of their energy mix and to favour long-term investments in nuclear energy, in line with the objectives of the Euratom Treaty and in particular Article 2(c) which states that the EU shall “facilitate investment and ensure, particularly by encouraging ventures on the part of undertakings, the establishment of the basic installations necessary for the development of nuclear energy in the Community”.

FORATOM also recognises the indispensable role of the UK Government in the process and its commitment to the project as part of its support for nuclear power. The UK considers nuclear energy as a key means to secure the country’s energy supply and meet its climate goals. Hinkley Point C is expected to provide 7% of Britain’s power needs by producing reliable, low-carbon and affordable electricity which also offers the flexibility of dispatch required to balance the increasing share of intermittent renewable energy sources. energyindustryreview.com

NEWS

SIGNIFICANT DECLINE IN GAS FLARING AT OIL PRODUCTION SITES

ew satellite data released by the Global Gas Flaring Reduction Partnership (GGFR) on July 17 shows a significant decline in gas flaring at oil production sites around the world in 2017, despite a half-percent increase in global oil production. The nearly 5 percent flaring decline begins to reverse years of increases in global gas flaring that started in 2010. The data reveals about 141 billion cubic meters (bcm) of natural gas was flared in 2017, down from nearly 148 bcm in 2016. While Russia remains the

world’s largest gas flaring country, it also saw the largest decline in flaring last year. Venezuela and Mexico also reduced their flaring significantly in 2017. In Iran and Libya there were notable increases in gas flaring. In 2015, UN Secretary-General Ban Ki-moon, World Bank President Jim Yong Kim, and 25 initial endorsers launched the ‘Zero Routine Flaring by 2030’ Initiative that commits endorsers to not routinely flare gas in new oil field developments and to seek solutions to end routine flaring at existing oil production sites as soon as possible

and no later than 2030. It has now been endorsed by 27 governments, 35 oil companies, and 15 development institutions. The data found that in Romania 10 million cubic meters of natural gas was flared in 2017, down from 41 million cubic meters - the maximum value, reached in 2014. Also, Romania reduced its flaring significantly from 1.3 m3 gas flared per barrel of oil produced (m3/b) in 2014 to 0.4 m3/b in 2017. Last year Romania’s oil production was 76,000 barrels/day down from 86,000 barrels/ day in 2013.

Steder Group in Romania is Your link to the world of Energy sector in the Black Sea Region for Transport, Logistics & Storage

Insights from NATO Engages The Brussels Summit Dialogue Eugenia Gusilov â&#x20AC;&#x201C; Director & Founder at Romania Energy Center

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Photo credit: German Marshall Fund of the United States (GMF)

his July I attended ‘NATO Engages – the Brussels T Summit Dialogue’ – the official outreach event of the NATO Summit. Co-located and taking place at the same time (July 11-12) as the actual NATO Summit, the event was organized by Atlantic Council, the German Marshall Fund of the United States (GMF), Munich Security Conference (MSC), Women in International Security (WIIS) in Brussels, in partnership with NATO’s Public Diplomacy Division. A powerhouse event with two full days of intellectually stimulating discussions on the current and future challenges for the Alliance, the event featured a fantastic line-up of speakers ranging from presidents, prime ministers, NATO officials, CEOs, think tank, military and government analysts. Among the high-profile speakers of day one were the Turkish Minister of Foreign Affairs Mevlüt Çavuşoğlu, Polish Foreign Minister Jacek Czaputowicz, Germany’s Minister of Defense Ursula von der Leyen, Canada’s PM Justin Trudeau, Foreign Minister Chrystia Freeland and Minister of Defense Harjit Singh Sajjan, as well as NATO Secretary General Jens Stoltenberg, the Deputy Secretary General of NATO Rose Gottemoeller, the Deputy Assistant Secretary General for Emerging Security Challenges at NATO - Jamie Shea, to name just a few. NATO Secretary General Jens Stoltenberg stated in his opening speech that the Alliance is confronted with “a more complex, a more difficult and a more demanding security environment”, but “on the ground, Europe and North America are doing more together”. He underscored

that “a strong NATO is good for Europe and good for the United States” while reminding that “actions speak louder than words” and that since Donald Trump became president, the “US funding for military presence in Europe (the European Deterrence Initiative) has been increased by 40%”. Fair burden-sharing within the alliance and the different views on defense spending dominated the spotlight. The German Minister of Defense stressed that cash should not be the only metric, and that all three (cash, capabilities and contribution) are equally important. While committed to the 2% goal, the Minister said that Germany will spend 1.5% of GDP on defense in 2024 (which is an 80% rise in a decade), but could not say for sure when Germany will be able to allocate 2% because she cannot forecast how the German economy will evolve beyond 2024 (!). Both Germany’s Defense Minister and Canada’s prime minister talked about looking not at how much is spent, but at what is actually done, suggesting an alternative approach to quantifying Member States contribution to the organization, one which would value outputs over inputs: “A lot of people talk about the 2 percent, but (…) announcing money put in, announcing inputs, isn’t nearly as important as demonstrating outputs,” said Justin Trudeau who stressed that capability, contribution and commitment are just as important as costs. Some of the other key messages were about how the 29-member organization should prepare to respond to modern challenges. There was a lot of emphasis on NATO being a value-based organization, deterrence in a world where disruption is the norm, better telling NATO’s story at 15

OPINION

home, inclusive security, and fighting disinformation. In that sense, countering disinformation with disinformation would be a “race to the bottom of truth”. The panel on the blessings and curses of technology stood out in particular by discussing why the West will not be able to extract itself from the future uses of AI on moral grounds, not while China and Russia have already teams of researchers and military working on leveraging commercial applications of AI. If only for defensive purposes, the West will have to stay in this game, especially in order to counter the potential nefarious uses of AI technology. While the Western lawmakers are really conversant on defense issues, the policy-makers still have a long way to go to become literate on AI, social media or cyber defense issues. During the session on defense and deterrence in the modern age, General Knud Bartels, DKA (Ret.), now Adjunct Professor at the Royal Danish Defense talked about the ‘fit-for purpose’ concept in the intelligence dimension. According to him, the “greatest hurdle today is not so much gathering the information and putting together a coherent picture which can be presented to the decision maker (…) The real issue is when you present that to the decision-maker (…), then comes the real issue: does it fit into the preconceived world which the person in charge has of what is going on? Military history is full of surprises and, generally speaking, the information was available, but it didn’t fit the purpose”. Sharing the news of just having received the invitation to join NATO, Macedonia’s PM Zoran Zaev enthusiastically reminded everyone that “it is cold on the outside” and why it is important “to participate in the peace”. A message that resonated deeply with me as a think tank founder was expressed by Jamie Shea: “you can’t have a democracy without a common public agreement on what is the truth”. The environment has changed dramatically in the last two decades. Previously, there was a clear top-down communication, but now the minds of the public are just as important as the real battlefields. According to him, the next challenge will be to re-establish the respect for accuracy and trustworthiness of what people are reading and to cultivate the public demand for quality products. “Clarity and discipline begins at home”, he said “everyone is entitled to their own opinion, but not to their own facts (…) the stakes for failure and success have never been higher”. Two of the best sessions that I have attended were off the record: the session on the New Nuclear Age and the Night Owl Session on the fate of the liberal order and how to deal with China and Russia. The panel on nuclear featured speakers with radically different views: Beatrice Fihn (International Campaign to Abolish Nuclear Weapons, ICAN – the 2017 Nobel Peace 16

Prize-winner), Karl-Heinz Kamp (German Federal Academy for Security Policy) and Guy Roberts (Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, US Department of Defense). The Night Owl Session had a similar all-star speaker panel with great insight offered by veteran experts such as Lilia Shevtsova (Associate Fellow, Russia and Eurasia Program at Chatham House), Ambassador Alexander Vershbow (former NATO Deputy Secretary General, now Distinguished Fellow at Atlantic Council), Gunnar Wiegand (Managing Director for Asia and Pacific at EEAS) and Bobo Lo (Russia expert at the French Institute of International Relations, IFRI). Day two was no less intensive a marathon: the charismatic Prime Minister of Iceland, Katrin Jakobsdottir talked about Iceland’s goal to become carbon neutral and how implementation of SDGs, environment and gender equality are also security issues. Lt. General Benjamin Hodges (CEPA) spoke about the Black Sea, how the situation there is worse than in the Baltic Sea, and in dire need of Turkish leadership. The president of Afghanistan Mohammad Ashraf Ghani Ahmadzai told the audience there is “no quick fix in Afghanistan”. General Curtis M. Scaparrotti (NATO Supreme Allied Commander in Europe) and two US senators - the Hon. Thom Tillis (R-NC) and the Hon. Jeanne Shaheen (D-NH) were among the high-profile guests of day two, as were Ukraine’s president Petro Poroshenko and Georgia’s president Giorgi Margvelashvili. Georgia’s president called for clear messages towards Russia while Petro Poroshenko said that “when one of the members of the UN Security Council is an aggressor, the [UN] mechanism does not work anymore and is completely destroyed. Practice demonstrates that the only mechanism which effectively works is NATO”. The event also introduced me to novel concepts such as policy design thinking. The sheer diversity of views, topics and expertise presented over the two days was astounding. With an audience as diverse as the speakers (academics, law- and policy-makers, think tankers, business and media experts), the main takeaways from the conference boil down to: Western actions or inactions have consequences, everyone should pay less attention to political messaging and just carry on with their job “as a matter of housekeeping”, involve women in security issues (feminization of security), the need to come up with other metrics to evaluate NATO Member States contribution to the alliance (not just the 2%) and focus on the quality (not only quantity) of investments in defense. All in all, the two-day conference was an inspirational and empowering tour de force which reminded me that NATO is truly a unique institution, the Euro-Atlantic friendship is very much alive despite any disagreements, while values such as peace, rule of law, diversity, multilateral order are worth fighting for now more than ever. energyindustryreview.com

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OPINION

The Offshore Law adopted by the Romanian Chamber of Deputies Daniel Vlasceanu – Partner at Vlasceanu, Ene & Partners

t is beyond doubt that the so-called ‘offshore law’ I is one of the most relevant legal normative acts impacting the oil and gas industry. A lot of ink was spilled to debate on whose interests are served, the reasons behind its adoption or rejection, what to include, what to exclude etc. We have also made several comments when it was first released for public debate (mid 2017); since then, there was a lot of discussion with the relevant ministries, the offshore titleholders and the Committee for Industry and Services. Overall, a substantial consultation process took place (unlike other normative acts recently promoted). On 9 July 2018, the Romanian Deputies Chamber (i.e. the decisional forum) adopted a version of the offshore law that was already submitted at the time of writing this material to the Romanian President for promulgation. We will not focus on the urbanistic & operational aspects already presented in the previous material on the topic1; they anyhow have not incurred major changes and we said - at that time - that their clarification was welcome; instead, we will try to make an objective assessment of

the stability and taxation elements included in the version adopted by the Deputies Chamber.

1 Please see page 20 of the January 2018 edition of the Energy Industry Review.

2 In October 2017, a draft royalty law was open for public debate, only to be withdrawn after two months.

GENERAL REMARKS It is widely accepted that for any final investment decision (‘FID’), (apart from other conditionalities) the stability of the fiscal regime is a must (as there have been many precedents – on a global scale – when a simple subsequent change turned the projects uneconomic). No investor can engage in a several-decade project (especially in offshore where risks and complexities are substantially higher than onshore) without having certainty on the applicable fiscal regime. Apart from the inherent sensitivities of this topic, the Romanian landscape nurtured uncertainty as in the last five years various taxation options have been discussed, proposed or withdrawn2. 1. Fixed royalty (Art 18) Like the other existing petroleum agreements in force, it was adopted that the royalty levels existing at the time of enactment of the Offshore Law will be maintained. It is the

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OPINION

application of a fair, simple principle: the investor needs to be taxed as per the level applicable at the time when it decided to enter the petroleum agreement. 2. Removal of the tax on the supplementary income (Art 18) The Government introduced in 2013 a tax on supplementary incomes generated following the gas price liberalization; it was considered that the producers would benefit from the higher/liberalized prices without incurring the corresponding expenditure and, as such, the supplementary tax was meant to support primarily the vulnerable consumers that would pay the higher prices. It would not make sense to have such tax applicable to the future Black Sea projects. Consequently, the Offshore Law takes this burden off the Black Sea projects which are to be sanctioned. 3. Fiscal credit removed The version previously adopted by the Romanian Senate included an article which enabled the offshore titleholders to get a fiscal credit for anything they would pay in addition to their obligations under the Offshore Law. It was conceived as a ‘stability mechanism’ to the benefit of the titleholders in case they would have been required by the authorities to pay other amounts (than those under the Offshore Law). This right was removed from the version adopted by the Deputies Chamber. Hence, there is no doubt this will weigh substantially in the business cases put forward for taking FIDs. 4. Tax on supplementary offshore income (Art 19) Compared to the Senate version a tax on ‘offshore supplementary revenues’ was introduced. Such tax is computed by applying certain percentages (from a scale starting with 15% all the way to 50%) to the sale revenues. The tax percentage increases as the sale price increases. The highest sale price threshold is 190 RON/MWh; anything equal or above this threshold will trigger a 50% tax percentage; these price thresholds are to be indexed with the annual consumption price index. As for the lowest threshold, it is set by the Offshore Law at 85 RON/MWh; yet, similar to the mechanism kept under the NAMR Order no 32/2018 on the gas reference price, the tax computation formula will consider whichever is higher between the NAMR reference price and the actual sale price (i.e. if the sale price is lower, than the NAMR communicated reference prince must be considered). There is no need to restate the arguments against this mechanism that obliges the titleholders to pay tax on an income they may never get (if the sale price will be lower than the NAMR reference price). One positive aspect is that the computation formula

takes into consideration the expenditures made by the titleholders; in other words, titleholders will be allowed to deduct their expenses from their sale income prior to the application of the tax percentage. However, there is a maximum threshold set at 60% of the sale revenues. It is important to mention that only the expenditures made during the month when the physical gas sale takes place are to be deducted. The destination of the offshore royalties and of the supplementary tax is the Special Fund for financing public-private partnerships (which has a 1-year deadline to be set up as of the adoption of the Emergency Ordinance no 39/20018 on public-private partnerships). 5. Obligation to sale 50% of the annual deliveries on the Romanian market (Art 20) The Offshore Law also brought an obligation on the titleholders to sell on the Romanian centralized markets minimum 50% of the annual gas deliveries. Apart from the wording of the provision which may clearly be improved (…), such an obligation reflects the legislator’s intention to ‘keep’ the gas in the country. But, the Romanian market is anyhow the most profitable sale market (from a commercial perspective): if there is demand on the Romanian market, commercially it would not make sense to sell the gas outside Romania (because other costs, such as transportation/contractual/commissions etc., would take away the sellers’ profit). So, the obvious solution (to the justified concern that the titleholders might sell the gas outside) is not to set a legal obligation forcing them to sell domestically (which anyhow may be circumvented, given the existing wording of the provision), but to economically create the conditions for an organic growth of the internal gas demand. As titleholders have initiated (since several years now) processes for identifying their sale markets, this obligation will pose significant constraints on them.

CONCLUSIONS Final adoption of the Offshore Law is a major step forward towards clarifying a key element for the offshore titleholders. Now, considering all aspects of the version adopted by the Deputies Chamber, both the positive ones as well as the less favourable ones for the investors, it remains to be seen whether this version has put in place the right mechanisms (or not) to enable the titleholders to take FIDs. Yet, at the time of writing this material, just one week after the adoption of the Offshore Law, there have been statements made by Romanian officials requesting its modification through emergency ordinance. It seems this is not the very ultimate version and subsequent amendments are to be made in the very near future. 19

OPINION

Future of work for energy leaders in a sustainable future Mihai Toader-Pasti â&#x20AC;&#x201C; Chairman Future Energy Leaders Romania

Who builds the amazing future we want to live in? We somehow believe that future is inherently better and progress is all guaranteed, but we can see throughout the history that what comes next is not always better. The question is what we can do today and how in order to create a better world, what are the things meaningful and exciting enough for our generation in order to be inspired to pursue. This is the most amazing time to be alive, the speed and opportunities that lie in front of us are just there for us to take. All throughout the history there has never been a more peaceful, healthier and comfortable period than the one we are living now. Today we have an incredible power we can use to shape the world for the better and this is where energy leaders could and should play a vital role, pursuing their own dreams while also having a positive impact in society.

Energy consumption and production, with climate change and jobs landscape are 3 of the main challenges ahead. Our lives came to depend on electrical energy. Besides Facebook, sending a message or giving a call, we 20

depend on energy for food and water supply, health, trade and much more. The world will need to produce 70% more food in 2050 than it did in 2006 in order to feed the growing population on Earth. But Energy is also the main contributor to greenhouse effect and climate change. Furthermore, due to digitalisation, automation, AI and cleaner energy production, we are going to see a massive disruption in how the energy jobs landscape will dramatically change in the next 30 years. By 2050, which is not that far away, Earth population will increase by 3 billion people, consuming more energy, reaching 30 billion IoT device in 2020 and 76 billion until 2025. The communications industry could use 20% of all the worldâ&#x20AC;&#x2122;s electricity by 2025 while Bitcoin and Servers energy consumption will rise significantly. All this will have a massive impact on climate change and along with the digitalisation and automation it will also drastically affect the job landscape. But the problem is not mainly generated by the increase in population, even if the population will stay as today; progress, technology and how we came to be as a civilisation is generating the same issues. Increase in population is an amplifier, it amplifies the problems, but it could also amplify solutions. But how can we look at energy consumption, climate change and jobs landscape from a holistic point of view? energyindustryreview.com

OPINION

Energy consumption will increase by 61% in the next 30 years. The World Energy Council estimates that total primary energy supply (equal to consumption) will increase globally from 546 EJ (152 PWh) in 2010 to 879 EJ (144 PWh) at the current pace of evolution; this corresponds to a 61% increase. In 2017 bitcoins used as much amount of electricity it takes to power a country like Switzerland in one year and it keeps growing. Virtual Reality and Artificial Intelligence will need more power and will consume even more energy. Fossil fuels have helped build today’s world and powered human progress across centuries and industries, but it has also generated a lot of pollution and other negative consequences. We have to find ways to transit to a greener alternative of fuelling progress from now on. Our generation is expected to live more than 100 years so it makes more sense to look on the long-term trends even just from individual perspective, to look beyond the next 30 years. Humans are a Type 0 civilisation on the Kardashev scale. Michio Kaku, an American theoretical physicist and futurist, predicts we will approach a Type 1 by 2100. We will capture all the solar energy that reaches Earth increasing our energy supply by a factor of 100-billion. We will have harnessed nanotechnology and warp drive propulsion and will be a civilization of this world and off this world, but this is the future that needs being built.

Life on Earth is possible due to a long period of climate equilibrium. Climate Change is already affecting our lives and it gets worse. Just as a good pie does not need too much heat but also not too little to cook properly, this is what life as we know it and humans need, a proper amount of energy and equilibrium. Our planet is not too far and not too close to Sun to get a good amount of energy, this is called Goldilocks Zone (yes, after the cartoons). Earth average temperature is 160C thanks to GHG emissions and atmosphere. Without GHG emissions the temperature will be -180C and life as we know it wouldn’t be possible. Therefore, GHG are not bad, too much GHG are both bad and dangerous and this is what happened in the last 100 years. Earth is warming very hard and it’s expensive to 21

OPINION

solve the problem we are creating and we do not even know today if it is possible. For example, we can fix deforestation and plant trees, but we do not know how to fix ice caps melting or oceans warming, we know how to cool interior spaces with lots of energy, but we don’t know how to cool the rest. We have moved on beyond unsustainable energy consumption. Climate change has had significant impacts; 5.5 million people died in 2017 due to air pollution, storms are more dangerous than ever in modern times. About a third of Europe is covered by forest. Last year, the burnt area in Portugal, Spain and Italy alone was almost double the half a million hectares that wildfires damaged in 2010 and things are getting worse. Experts are predicting that climate change ‘will create world’s biggest refugee crisis’; devastating climate change could lead to 1 million migrants a year entering EU by 2100. Every year since 2008, an average of 26.4 million persons around the world have been forcibly displaced by floods, windstorms, earthquakes or droughts. Climate change is affecting economy. Sea-level rise, floods, droughts, wildfires and extreme storms require extensive repair of essential infrastructure such as homes, roads, bridges, railroad tracks, airport runways, power lines, dams, levees and seawalls. Farmers will need to spend more money on protection and irrigation. Climate change is not an option, it is a responsibility and today we kind of ignore it because we are too busy doing nothing. Climate change, pollutions and lots of problems could be easily solved with small steps taken on a large scale, but this is not simple and it needs our joint effort.

In the following decades there will be lots of shifts on jobs due to automation, digitalisation and Artificial Intelligence. We are now living the 4th Industrial Revolution, which had profound implications on how we live, work and relate, changed power spheres. By 2019, computers will have an emotional intelligence comparable to humans, making them indistinguishable from us on essential levels of being. By 2045, computers will be one billion times more powerful than the human brain. These are just 2 of the amazing predictions of the futurist engineer at Google, Ray Kurzweil. Not to mention the fact that another worldfamous futurologist, Ian Pearson, predicts humans will be able to cheat death by the year 2050. Technology will transform products and organisations, the way we design, make and build, use and maintain. Furthermore, it will change us, how we consume, 22

produce or feel. This is the fastest change ever happened. Automation, Digitalisation and AI will lift productivity and economic growth, but millions of people worldwide may need to switch occupations or upgrade skills. In the next 25 years around 47% of today’s jobs will disappear according to Oxford, anything that is routine or repetitive will be automated. Furthermore, Dell tells us that 85% of jobs that will exist in 2030 haven’t been invented yet. We have to change the way we understand and teach education. Today education should focus on creating skills like independent thinking, creativity and team work, on understanding of feelings, empathy and team building.

Lots of newly invented jobs will be related to Energy and Cities. In this sustainability race to save Earth, to find quick and innovative solutions to problems, one of the most fundamental shifts I believe will be generated by the model ‘Product as a service’ along with Building communities, Grassroots movements and Carbon taxation. All this creating numerous and different jobs. We need to create public policies on facts and predictions based on data, not decide on perception and few incomplete info. The World Energy Council trilemma is still unsolved, Energy Security, Environmental Sustainability, Energy Equity are the 3 pillars we need people to solve. There are new technologies that are emerging that will create millions of new jobs, and old ones dying destroying millions of other jobs. You should better focus on the growing industries and technologies and prepare yourself to shift jobs as the average life expectancy is constantly rising. We will live longer and we will have more than one or two jobs. This is important for everyone, the young and the restless in mind and spirit, independent of biological age. We need more education on energy, to get people more interested in how and where energy comes from. There’s no magic, nor rocket science, but as we need collective actions, we need everyone to understand energy and for that we have to make it easy to understand. As a conclusion, I believe that trying to understand how the world is run today and where it is heading, to learn as much and as vast as we can in space in time, with an open and critical mind, can provide all the answers we need. While it is excitant to fantasise about the future, creating it needs actions, sacrifices and will on the long run. When talking about energy there is no silver bullet, but hard work and civic involvement can deliver extraordinary change. We need to go beyond just creating strategies and start implementing them, because there’s a lot to learn from test and trial. We need to start creating roadmaps, education plans, career plans. World is a big puzzle waiting to be solved. energyindustryreview.com

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OPINION

The Black Sea Basin Geopolitical, economic and energy diplomacy considerations Ioan-Corneliu Dinu â&#x20AC;&#x201C; Scientific Counsellor at Romanian National Committee of the World Energy Council

eographically positioned at the crossroads of Europe and Asia, the Black Sea is a permanent presence in geopolitical approaches, but more so in those diplomatic in essence, of economic and energy diplomacy. Countries of interest are not only those bordering the Black Sea, but even the farthest ones. Azerbaijan would be one example. Moldova could be considered as the theme for a geopolitical study. Resorting to history, this basin is the fruit of an ancient culture, religions etc.; it has represented and continues to be an extensive perimeter of great geostrategic but also geopolitical importance, given both Byzantine hegemony and Asian migrations, as well as the colonization of Venice and the Ottoman invasion. Then, with the presence of the USSR, a real struggle for the control of this part of the Black Sea coast was born, especially by the creation of the two military blocs, the Warsaw Pact on the one hand and NATO, on the other. That control was thought to have even brought stability. But, over the past 20 years, the conflict between Ukraine and Russia has brought back as theme of global politics the complexity of situation in this area. First, the disaggregation of the Soviet Empire has contributed decisively to the assertion of new national political actors directly involved in regional disputes characterized by current geopolitics specialists by endemic weakness. Returning to Ukraine, one of Europeâ&#x20AC;&#x2122;s largest energy consumers, it covers 37% of the entire Black Sea coastline, and the demographic influence and mineral resources, agriculture, Odessa port etc. give the country a major importance, so Russia strongly expresses its sphere of influence on Ukraine.

All these obvious truths are geopolitical determinations of a special relationship between Moscow and NATO. The new naval doctrine of the Kremlin ensures that the complexity of the balance around the Black Sea is of permanent importance, taking into account the ethnic and religious heterogeneity, as well as the economic and political-military potential of each state in the region. From the point of view of the diplomatic and energy analysis, the discovery of hydrocarbon deposits in the Caspian Sea, which is considered important, makes the Black Sea more recognized as a transit corridor for energy products to Europe. Many countries in the area, in the context of external interference and erosion, to say so, of nonstate boundaries due to globalization, have attracted new actors, not from the area, such as multinational companies, transforming the Black Sea basin into a nodal point of various interests. On the other hand, the presence of these large companies is a powerful argument, defined as a driver for the economic development of the whole area. For example, the United States assign to the Black Sea and Southern Caucasus a strategic functional role for their own interests in the Middle East, as well as for the Russian and Iranian military needs as a balance to strengthen NATOâ&#x20AC;&#x2122;s presence in partnerships with Georgia and Ukraine. Against this background, geopoliticians appreciate that the Black Sea, as the eastern part of the European Union and an important component of Euro-Atlantic security, is a perimeter of instability, instability which must be taken into account. The annexation of territories (see Crimea), hybrid wars, potentially destructive conflicts (see Trans-Dniester), various misunderstandings (see Poland) make NATO the only force of influence and diplomatic and military pressure for balance.

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OPINION

Romania has always granted, for both historical and geopolitical reasons, an absolute priority to security, stability and democracy in the Black Sea region, in order to anchor this area of the Euro-Atlantic community. Using its advantages of geographic positioning, demography, a privileged extension between the Carpathian chain and the Danube with the channel to the sea, Romania has managed to become the ‘oasis of relative stability’ in Eastern Europe. Political leadership after 1990 was aimed to permanently ensure the continuity of this process, building the appropriate infrastructure for Romania to be recognized as the ‘Eastern key’ for the European Union and NATO in a region, that of the Black Sea, with plenty of latent conflicts. It is the merit of Romania that, by joining the two structures/institutions, NATO and the EU, it has moved balances of power in the region, proving that it could be considered an eastern pillar of these two bodies and to

strengthen relations between them and Russia, but also with the Arab countries. Do not forget the Strategic Partnership with the US, which is one of the key points of Bucharest’s foreign policy. This type of policy of Romania can also be seen in a positive manner in terms of the economic diplomacy in general, and of energy diplomacy in particular, for example the policy related to the hydrocarbon resources, both onshore and offshore, in the Black Sea area, being based on unanimously accepted international principles. Another political and military signal is the Ballistic Missile Defence (BMD) system in Deveselu, which provides even greater stability. The outlook is good for Romania in maintaining the Black Sea balance - considering also the unpredictability of Erdogan’s policy, of Turkey itself - so Bucharest can compete in becoming a pole of major importance, basically a cardinal point of the Atlantic Alliance for the Eastern Area.

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Solution for the coal industry: investments for sustainable development Complexul Energetic Oltenia, one of the most important players in the energy services sector in Romania, can ensure over 30% of the electricity consumption in the national energy system. We are talking with the President of Directorate & General Executive Manager Sorin Boza about the situation of mining in Romania, European prospects in the field, energy efficiency programs, development of clean technologies and projects for the future.

INTERVIEW

Dear Mr. Sorin Boza, for the beginning, a brief introduction to your professional career... What were the main steps on the road to development towards the position of General Executive Manager of Oltenia Energy Complex? I graduated from the PetroleumGas University in 1995, with a Master’s Degree in the field of Mechanical and Electrical Engineering and, later, a series of management courses within universities in Paris, Virginia-USA, Shanghai. During 2005-2016 I held managing positions within the Lafarge Group (in Romania and in the Republic of Moldova) and within the Imerys Group France, and since December 2016 I have been the President of Directorate of Complexul Energetic Oltenia - Romania. For the results obtained by Complexul Energetic Oltenia, as well as by the previous institutions within which I carried out my activity, I obtained appreciations such as: • The special distinction ‘THINK BIG’ of Business Magazin and Forbes Magazine, granted by an independent jury; • Designated one of the best 100 managers in Romania for achievements in the industry in 2010 and 2012; • The distinction ‘MANAGER OF THE YEAR 2010’ within the Lafarge Group; • Designated member of the working group in Romania for the reduction of CO2 emissions; • Awarded for ‘PROFESSIONAL MANAGEMENT’ of Complexul Energetic Oltenia, within the Gala of the European Decade of the Centenary of Romania, in 2017; • Received the ‘EXCELLENCE AWAD’ granted to the management of the company for contribution to the safe operation of the national energy system, in 2018; • Designated the ‘MANAGER OF THE YEAR IN ENERGY’ within the 2018 Romanian Energy Awards Gala. 28

According to company’s presentation, Complexul Energetic Oltenia has been guaranteeing for 40 years the safety of the National Energy System and can still supply energy to Romania for other 40 years from now on only with reserves discovered so far. What is the current situation of mining in Romania and what are the prospects for the future? Many want to eliminate coal-fired energy and replace it with renewable energy, but we should take into account that Complexul Energetic Oltenia today produces clean energy following environmental investments for which it has spent approximately EUR 1bn. Throwing unreal statements into the public space in order to abolish coal-fired energy is a constant action of environmental organizations. They have repeatedly supported the idea that emissions from coal burning adversely affect the health of population, knowingly ignoring the existence of high performance electrofilters, installations for flue gas desulphurization and for dense slurry evacuation of ash and slag resulting from the combustion process - investments due to which environmental impact falls within the limits currently imposed by European directives. Investments for sustainable development represent the solution for the coal industry, as, for Romania, it is well known that coal-fired energy is, every year, the main pillar for the safety of the National Energy System.

Many want to eliminate coal-fired energy and replace it with renewable energy, but we should take into account that Complexul Energetic Oltenia today produces clean energy following environmental investments for which it has spent approximately EUR 1bn.

From losses recorded in the previous years, you ended 2017 with profit. Moreover, at the end of last year the Energy Minister named Complexul Energetic Oltenia ‘The energy champion of Romania’. How did you manage to reach this performance and what are your estimates for this year? The gross profit for 2017 was RON 276mln, respectively a net profit of approximately RON 181mln was recorded, compared to losses of energyindustryreview.com

INTERVIEW

approximately RON 140mln posted in 2016. The financial indicators’ values were achieved in conditions in which, in 2017: • The unitary production cost per MWh fell by 2.24% and the cost per ton of lignite decreased by 7.2% vs. 2016; • The company reimbursed to banks instalments, interests and commissions for loans contracted in order to comply with the European Directives on environment, worth RON 225mln, by 23% more than in 2016; • The degree of realization of investments was around 80%, compared to the previous years when it reached 30-35%;

•

2017 was the first year when Complexul Energetic Oltenia had every month the Tax Clearance Certificate 0, i.e. no debts to state budget. The activity carried out in 2017 allowed the reclassification of Complexul Energetic Oltenia among profitable companies and it ranked the 94th in the catalogue Top 100 the most valuable companies in Romania, edited annually by Ziarul Financiar. Estimates for this year are optimistic, given that the first six months were also ended with profit. You are the Vice-President of the Euracoal Association (The voice of coal in Europe). What is the situation in Europe? What are the challenges the industry is currently

INTERVIEW

facing and what measures are looming to support transition to an economy with low carbon dioxide emissions, in accordance with Energy Union’s strategy? What estimative costs does this transition process involve for Complexul Energetic Oltenia? The current European guidelines in the energy field list coal-based energy as the main responsible for global warming. Although there are a number of studies showing that emissions of greenhouse gases in Europe reach only 10% at global level, Complexul Energetic Oltenia is strongly disadvantaged by the current legislation resulting from the ‘decarbonization’ trend. The European Union has set for 2030 an ambitious target of reduction of CO2 emissions by at least 40% compared to 1990. This target must be achieved gradually, by 2030. The platform for carboniferous regions in transition is meant to support Member States in their efforts to maintain economic growth and jobs in these affected communities. For

this purpose, national working teams have been established in Germany, Slovakia, Poland, Greece and Romania, which include representatives of Complexul Energetic Oltenia. The future of coal-based energy in Romania depends on the national energy strategy relative to constraints imposed by the European legislation, but while considering that its obligation is to maintain the electricity supply safety. Romania cannot afford to diminish or give up the production capacity of Complexul Energetic Oltenia without considering an acute risk and a crisis of energy supplied. EU’s targets for 2030 and the new EU Directive on ETS support the development of CCS technologies for carbon capture and storage at industrial scale. Introduction of the CCS technology, considered essential for achieving national and European objectives of reducing CO2 emissions, ensures the maintenance of fossil fuels and mining plants, which will have a positive economic and social impact for Romania, while contributing to the energy security

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INTERVIEW

Romania’s commitment on transition to an economy with low emissions of greenhouse gases does not involve stopping coal-fired energy generation at this point.

of the country. Support granted from European funds would contribute to the quick development of CCS at EU level. Romania’s commitment on transition to an economy with low emissions of greenhouse gases does not involve stopping coal-fired energy generation at this point. Applying the SWOT analysis on the business you are running, what are the strengths and threats highlighted? Complexul Energetic Oltenia has obvious strengths, known by everyone, even if they are not recognized by environmental organizations, in particular. I would name them as follows: ENERGY SAFETY • Complexul Energetic Oltenia ensures safety in supply to consumers, as the production process does not depend on atmospheric factors. SUSTAINABLE DEVELOPMENT • The capacities of Complexul Energetic Oltenia have an increased energy efficiency through the programs for the rehabilitation of groups, and a reduced negative impact on the environment, through the projects implemented. MARKET SHARE • Complexul Energetic Oltenia is one of the most important players in the energy services sector in Romania, being able to ensure 30% of electricity consumption in the National Power System and covers over 95% of Romania’s lignite production. • Complexul Energetic Oltenia is a major producer at regional and European level. POSITIVE SOCIAL IMPACT • Complexul Energetic Oltenia ensures jobs for around 13,000 employees directly and for 130,000 employees indirectly and contributes substantially to the environmental fund and state budget. Definitely there are also threats of the unfavourable external environment, resulting from the current decarbonization trends or the current organization of energy producers in Romania depending on energy production sources, unique in the world. As known, in July 2017 the European Commission published BAT Decision on the best available techniques for large combustion plants, under which it established very strict limit values for NOx, SO2 and particulate matter emissions.

The process of implementation by 17 August 2021 of new installations that comply with these limits, from all points of view (conclusion of contracts, mounting, commissioning), will have a major impact on ensuring electricity to the National Power System, by making unavailable during 2019-2021 of an installed power between 1,800 MW and 2,600 MW. According to our analyses, in order to avoid endangering the safety of the National Power System, it is imperative that the 2021 deadline be delayed to 2024. There are also certain provisions of the Romanian legislation that are detrimental for coal-fired producers as compared to other producers, by charging a number of additional taxes. For example, although the law establishing the promotion system for energy from renewable sources mentions that producers are exempt from the payment of green certificates corresponding to energy used in own technological consumption, ANRE does not consider that energy used by Complexul Energetic Oltenia to exploit coal represents own technological consumption. Large energy consumers in Romania, except for Complexul Energetic Oltenia, were exempt from the acquisition of a considerable amount of green certificates, and Complexul Energetic Oltenia is the third largest energy consumer in Romania, after Alro Slatina and ArcelorMittal Galati. Thus, Complexul Energetic Oltenia supports part of the costs necessary to enter in the competitive market, with minimum prices, of green energy. Since 1998 to date, more than 500 mines have been closed in Romania, while some of the deposits have not been fully exploited. The solutions include the development of clean technologies for both extraction and capitalization of coal deposits, energy efficiency programs. What are the concerns of Complexul Energetic Oltenia in this regard? Are there plans to upgrade the existing capacities? Complexul Energetic Oltenia has a program for the upgrade of mining equipment (excavators, graders and high capacity conveyors) for the period 2018-2030. Through this program it is aimed at modernizing at least two technological flows per year. The total value of the mining equipment modernization program is approximately RON 950,000. 31

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INTERVIEW

The company has carried out investment projects to comply with the environmental conditions imposed, as well as to extend the lifespan and increase efficiency and reliability of the existing production capacities. For 2018, investment programs worth a total of over RON 800mln have been prepared - a value higher than that allocated in 2017.

Also, major investments are in progress to rehabilitate one energy group for each of the energy branches of Complexul Energetic Oltenia. The procedure to implement denoxing plants at three energy groups was started, according to compliance deadlines. At the same time, works are being executed to arrange the new coal deposit in Rosia, which will comply with all environmental requirements. Regarding clean technologies, it should be mentioned about Complexul Energetic Oltenia that it is the only producer that owns flue-gas desulphurization plants and installations for dense slurry evacuation of ash and slag resulting from the combustion process, at all the component energy groups. What is the status of negotiations with Chinese investors for building a new energy group in Rovinari? Complexul Energetic Oltenia is entirely open to this collaboration. The latest negotiations carried out with Chinese investors focused on coal price and costs involved by purchasing CO2 allowances. The new European environmental standards, namely the reduction of carbon dioxide emissions to 550 grams/kWh, would mean the closure of all mines in Romania. How will this problem be solved? What are the technical solutions available? What measures will be taken at European level? What will Germany do for example, as the largest lignite producer in Europe, or Poland? The performance standard of 550 grams of CO2/kWh you refer to has a provision included in the legislative package â&#x20AC;&#x2DC;Clean Energy for all Europeansâ&#x20AC;&#x2122;, launched by the European Commission in 2016. The Commissionâ&#x20AC;&#x2122;s proposal is to establish this standard as criterion for the participation of electricity production installations to capacity mechanisms (markets for technological system services). This threshold will apply to existing installations 5 years after the entry into force of the Regulation, and to new installations immediately after its entry into force. It should be noted that the provision addresses only to capacity markets. In order to producer and sell electricity currently this standard does not apply. Thus, if the provision is approved in the form proposed by the European Commission,

coal-fired power plants will be affected only in terms of access to these capacity markets. Currently, the proposal for amendment is in the stage of three-party negotiation - the European Commission - the European Parliament - the EU Council. In a document of the complex the new deadline mentioned for the completion of the privatization process is 19 June 2019. Will this process be resumed, will this date be observed? It is one of our objectives. It remains to be seen... In order to be listed on the stock exchange, the company must register profit for 3 consecutive years. We hope the path started in 2017 will continue in a positive manner. What priority projects and investment programs does Complexul Energetic Oltenia have in mind for the following period? Do you also intend to expand regionally? For 2018, investment programs worth a total of over RON 800mln have been prepared - a value higher than that allocated in 2017. The company has carried out investment projects to comply with the environmental conditions imposed, as well as to extend the lifespan and increase efficiency and reliability of the existing production capacities. Following these investments, Complexul Energetic Oltenia can currently produce safe, performing, clean and relatively cheap energy, the production cost being below the average of the national energy system. Besides the technological investments made or in progress, Complexul Energetic Oltenia allocates important amounts to restore land affected by mining exploitation to its former condition as forest and agricultural land (around 720 hectares were restored, and other 800 hectares are in the process of restoration), as well as to mitigate social problems determined by carrying out the mining exploitation activity (for example, works have been executed to supply water to nine localities, works to arrange two village settlements, as well as to repair roads affected by mining works). Romania has the potential to become a major energy centre in the region (in the South-East of Europe) and it can be a net electricity exporter, if the current form of organization of producers (of single-source type), unique in the world, is given up. 33

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Law no. 167/2018 takes effect NEW REGULATIONS AND HIGHER FINES The apparition of prosumers, new obligations for energy suppliers, new rules for trading on centralized platforms for gas market operators, new rules for social investments or the increase in the amount of fines are only some of the novelties brought by Law no. 167/2018 amending and supplementing the Electricity and Natural Gas Law no. 123/2012. It came into force as of 19 July 2018, after being promulgated by the President of Romania and published in the Official Journal. Adrian Stoica

nergy suppliers will be obliged E to acquire electricity so as to ensure the coverage of their customersâ&#x20AC;&#x2122; consumption, with priority for customers beneficiary of the universal service in their own portfolio. Unlike the other energy market participants, suppliers are no longer entitled to unilaterally terminate electricity supply contracts concluded with end-customers. Regarding investments, if making them is not economically justified for the distribution operator, they are made by co-financing from own funds of the distributor, funds from local budgets and 34

from the state budget under the law, as well as from funds of natural and legal persons who requested connection to the network in that area, according to ANRE regulations.

SMART METERS WILL HAVE TO WAIT According to the new regulations, natural and legal persons will have their electricity meters replaced with new, smart ones by 2028, after initially it had been established that approximately 80% of electricity consumers had to have smart meters by 2020.

The schedule for installing smart meters was changed as follows: â&#x20AC;˘ Customers with an annual consumption higher than a threshold in kW/h to be determined by ANRE and those with production sources with a power lower than 10 kW will have their meters replaced with smart ones by 1 January 2024; â&#x20AC;˘ The other customers will have their meters replaced with smart ones by 31 December 2028. The schedule of replacements will also be determined depending on information obtained from the pilot programs from the previous years, under energyindustryreview.com

OIL & GAS

which smart meters have been installed for certain customers. However, ANRE will be able to bring forward those deadlines if it considers it is possible.

TRANSGAZ WILL REVIEW THE NETWORK CODE Within 6 months from the entry into force of this law, the gas transmission and system operator, Transgaz, is required to review the Network Code so as to be in line with the provisions of this law. In the natural gas sector, ANRE has the responsibility to ensure a higher information, education and awareness of the rights of the end gas customers in relation to the economic operators participating in the natural gas market and take all necessary measures to provide them with practical information.

NEW OBLIGATIONS FOR GAS DISTRIBUTORS Gas distributors have the obligation to prepare and submit to ANRE for approval investment plans prepared based on forward-looking studies, conducted for a duration of minimum five years, by consultation, as the case may be, with the transmission and system operator and with local authorities in the license area. The distribution operator or the transmission and system operator will not be able to refuse connection to the system and is required to finance all works for the execution of the objectives/ pipelines necessary for connection of consumers within the perimeter of the distribution system held in concession. Expansions are carried out under conditions of economic efficiency in accordance with ANRE regulations. In the performance of the concession

agreement, at the request of local or central public administration authorities, based on regional or local development and urban plans, the distribution operator is required to ensure the development of distribution systems and financing for the extension of distribution systems in the area covered by its concession agreement and license respectively. At the same time, distribution operators will purchase natural gas supplied to household customers in conditions of minimization of the cost of resources allocated, based on own procedures ensuring the transparent nature of the gas acquisition process and, at the same time, equal and non-discriminatory treatment of persons participating in the gas acquisition procedure, as tenderers. Similarly to energy suppliers, gas distributors cannot unilaterally terminate gas supply contracts concluded with end-customers. 35

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NEW RULES FOR TRADING ON CENTRALIZED PLATFORMS The new regulations mention that gas market operators are required to trade, by public offer, in a transparent and nondiscriminatory manner, on the centralized markets for natural gas, in accordance with ANRE regulations. Between 1 January 2018 and 31 December 2018, every natural gas producer, to the extent it contracts the sale of natural gas in one calendar year, is required in that calendar year to conclude agreements on the centralized markets from Romania, in a transparent and nondiscriminatory manner, in accordance with the regulations issued by ANRE, for the sale of a minimum quantity of natural gas from own production, which cannot be smaller than that represented by a percentage share set through Government decision from the quantity of natural gas for which it concludes salepurchase agreements in that calendar year as seller. Between 1 January 2018 and 31 December 2018, every natural gas supplier (which is not a producer as well), to the extent it contracts the sale/ purchase one natural gas in one calendar year, is required in that calendar year to conclude agreements on the centralized markets from Romania, in a transparent and non-discriminatory manner, in accordance with the regulations issued by ANRE, for: â&#x20AC;˘ The purchase of a minimum quantity of natural gas, which cannot be smaller than that represented by a percentage share set through Government decision from the quantity of natural gas for which it concludes sale-purchase agreements in that calendar year as purchaser; â&#x20AC;˘ The sale of a minimum quantity of natural gas to wholesale customers, which cannot be smaller than that represented by a percentage share set through government decision from the quantity of natural gas for which it concludes salepurchase agreements in that calendar year with wholesale customers, in its capacity as seller; â&#x20AC;˘ In the event the delivery period 36

stipulated in the contracts is in a different calendar year from the one in which contracts are concluded, the obligation of transaction on centralized markets from Romania shall be realized in the calendar year of delivery.

RULES FOR THE GAS MARKET Starting with 1 January 2019, all gas producers, insofar as they contract gas sale in a calendar year, have the obligation to conclude in the calendar year in which natural gas is delivered, contracts on the centralized wholesale markets, in a transparent, public and nondiscriminatory manner, in accordance with regulations issued by ANRE, for the sale of minimum gas amounts that cannot be lower than that represented by a percentage rate of 50% of the amount of gas for which they conclude sale-purchase contracts with delivery in the respective calendar year, as seller. Starting with 1 January 2019, all gas producers, insofar as they contract gas sale in a calendar year, have the obligation to conclude in the calendar year in which natural gas is delivered, contracts on the centralized wholesale markets, in a transparent, public and nondiscriminatory manner, in accordance with regulations issued by ANRE, for the sale of minimum gas amounts that cannot be lower than that represented by a percentage rate of 50% of the amount of gas for which they conclude sale-purchase contracts with delivery in the respective calendar year, as seller. Starting with 1 January 2019, all gas market participants, insofar as they contract gas purchases on the wholesale market in a calendar year, have the obligation to conclude in the calendar year in which natural gas is acquired, contracts on the centralized markets, in a transparent, public and nondiscriminatory manner, in accordance with regulations issued by ANRE, for the purchase of minimum gas amounts that cannot be lower than that represented by a percentage rate of 40% of the amount of gas for which they conclude

contracts in the respective calendar year, as buyer. ANRE may increase annually the percentage rates following an analysis. According to the law, all trading prices, including from intra-group contracts, gas from domestic production, import, export shall be made public, on types of transactions, in aggregate form if the commercial interests of the parties involved in the transaction are affected, according to ANRE regulations.

VIRTUAL TRADING POINT The energy law, in the new version, defines the virtual trading point (VTP) as being an abstract point, unique at the level of the National Transmission System (NTS), between the entry points of the National Transmission System and the exit points of the National Transmission System, in which transfer of ownership on natural gas from one participant to another participant in the gas market is allowed. VTP is used by gas market participants for both commercial purposes and for individual balancing of their own portfolios, according to ANRE regulations. The gas transmission and system operator, as operator of the Virtual Trading Point, will ensure, based on the license and regulations issued by ANRE, the organization and management of the VTP.

INCREASED FINES Another change operated by the new law targets an increase in the amount of fines. Operators failing to comply with the law will be subject to fines, established at RON 4,000-400,000. The law also provides for a fine ranging between 5% and 10% of the annual turnover. For contraventions committed repeatedly by legal persons, the regulatory authority shall enforce a fine between 1% and 5% of the annual turnover of the contravening entity. Repeatedly committed contravention is understood to be the previous committing at least 2 times the same contravention during the 12 consecutive months. energyindustryreview.com

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Legislative changes immediately after law initiation? Adrian Stoica

he Chamber of Deputies, as T decisional forum, adopted the legislation regulating the regime of Black Sea gas exploitation. A law different from the version previously adopted by the Senate, but which could incur certain changes in terms of taxation of companies since its inception. In the version awaiting promulgation, the law requires operators to pay progressive taxes on windfall gains, 50% of the entire production will have to be traded on the Romanian market and the amounts obtained will be directed to public-private partnerships. Currently, eight foreign and domestic companies have concession agreements in the Black Sea. One of the changes operated by deputies was the elimination of fiscal credit. It means that it is no longer guaranteed for companies that are or will be titleholders in the Black Sea that they will benefit throughout the concession agreement from the fiscal credit at the time when the agreement was signed. In Senateâ&#x20AC;&#x2122;s version, the fiscal credit was introduced, and if the titleholders were required to pay taxes other than hose at the time when they acquired the fields, the state had to compensate them. No less than USD 20bn would the 38

Romanian state gain from the adoption of the new measures, as Liviu Dragnea, Chamber of Deputies Speaker, claims. As in the case of onshore concessions, the windfall tax on revenues obtained from gas prices liberalization is maintained, but it will not be in a single rate, of 80%, but will be applied according to progressive taxation. It will be applied in several rates, reported to a base price of RON 45.71/MWh (valid in 2014, when gas market liberalization started), as follows: a) 30% of the windfall gain for prices up to RON 85/MWh inclusively; b) 15% of the windfall gains obtained from prices between RON 85/MWh and RON 100/MWh inclusively; c) 15% of the windfall gains obtained from prices between RON 100/MWh and RON 115/MWh inclusively; d) 25% of the windfall gains obtained from prices between RON 115/MWh and RON 130/MWh inclusively; e) 30% of the windfall gains obtained from prices between RON 130/MWh and RON 145/MWh inclusively; f ) 35% of the windfall gains obtained from prices between RON 145/MWh and RON 160/MWh inclusively; g) 40% of the windfall gains obtained from prices between RON 160/MWh

and RON 175/MWh inclusively; h) 45% of the windfall gains obtained from prices between RON 175/MWh and RON 190/MWh inclusively; i) 50% of the windfall gains obtained from prices exceeding RON 190/MWh. The Offshore Law also brings a deductibility of investments within the limit of 60% of windfall gains, which means that companies will compensate two thirds of investments made, but with the specification that it will be staggered over time. Also, the obligation for companies involved in exploration and production activities in the Black Sea to purchase goods and services from legal persons with capital owned at a rate of 25% by Romanian natural and legal persons was removed. On the other hand, the law introduced the obligation that 50% of Black Sea production be sold on the domestic market, on OPCOM platforms, the current energy exchange.

TITLEHOLDERS, DISSATISFIED WITH THE FINAL VERSION Companies that are titleholders in the Black Sea have repeatedly requested the elimination of supplementary charges, to keep only royalties under the law. The new law questions their energyindustryreview.com

OIL & GAS

future investments, the representatives of ExxonMobil, OMV Petrom and Black Sea Oil and Gas have warned in unison. Mark Beacom, CEO Black Sea Oil and Gas, company that aims to extract the first Black Sea gas as of 1 July 2019, has stated that the new amendments to the law create new barriers for project development. “Today (9 July - Ed.) we saw words that we had never seen before. We had received constant and firm assurances in this regard from the governments that have come and gone. And we see that these assurances are currently violated. With a number of new provisions, there is a possibility to create new blockages for these projects.” The representatives of ExxonMobilOMV Petrom consortium have had a similar attitude towards the final form of the law. “What you debated today (9

July - Ed.) will make it much more difficult for every investor to make the investment decision,” Richard Tusker, Managing Director of ExxonMobil Exploration and Production Romania, has stated. Black Sea concession agreements were concluded for 30 years, with the possibility of extension by other 15 years. “We believe that the amendments adopted by the Chamber of Deputies will have a significant negative impact on the offshore oil and gas industry in Romania and will discourage investments in the Black Sea, with the immediate consequence of diminishing the potential of additional hydrocarbon production in the offshore area. Our association believes that the stability and predictability of the Romanian legislative environment, in general, and of the fiscal regime, in particular, throughout the duration

of concession agreements, are an essential condition for the successful development of offshore hydrocarbon resources” - this is the official point of view of the Romanian Black Sea Titleholders Association (RBSTA), sent to our editorial board via e-mail. The law has generated controversies in the PSD-ALDE coalition government, ALDE’s spokesperson, Deputy Varujan Vosganian, saying that what ALDE wanted to be included in the Offshore Law was not found and “an urgent intervention on the legislative act” was necessary. He said there was no dialogue in the coalition on this legislative act and that ALDE’s proposals received a negative opinion from the Government, ALDE parliamentarians being put in a ‘delicate situation’.

OIL & GAS

Gas well deliquification overview Vasile Stanculescu and Laurentiu Niculeanu - OMV Petrom Mihnea Nistor - IRCAT

eliquification is the term used to D describe the process of removing the liquids (liquid loading) which could be water, oil or condensate, from the wellbore and reservoir to the surface. Liquid loading in the gas wells is very common in oil and gas fields, over 90% of natural gas wells being affected by this phenomenon. It creates difficulties throughout the exploitation period but mainly towards its end when, due to the decrease of reservoir energy, the gas extracted no longer ensures the liquids from the wells. This will lead to lower gas flow or even the shutdown of the gas wells. Maintaining the wells production under such circumstance is only possible by applying technological measures either to prevent liquid loading in the gas wells (by insulation, changing the production rhythm…) or to remove the liquid accumulated on the surface. Several methods, technologies and equipment were tested and are used for removal of the liquid in the process of gas production, to mitigate the impact of liquid loading. Choosing the optimum solution for specific conditions of loading in the well is 40

a very challenging task. This may be used individually or in combination. The optimum deliquification method is defined as the one that is most economical for the longest period of operation. A proper solution can improve field productivity and enhance the projects economics. On the contrary, a poor choice may adversely affect the projects economics after implementation. In order to choose the right candidates and technology for deliquification, it is very important to recognize the liquid loading indications in a gas well. The three most common ways to recognize liquid loading are: • Observation of the well production, fluid rates (gas & liquids) and pressures; • Calculating critical velocity; • Performing standard nodal analysis.

•

RECOGNIZING LIQUID LOADING Taking into consideration the activity in fields, the main signs for recognizing the occurrence of liquid loading are the following: • Differential tubing and casing

• •

pressure - In wells with open ended completions when the wells begin to load liquid, the tubing pressure is decreasing and casing pressure is increasing. The increase in the casing pressure is an indicator for the accumulated fluids. Orifice Pressure Spikes - If the gas measurement device shows variations in differential pressure across the orifice, this is an indicator of unstable flow. Liquid Slugging - Liquid production does not arrive to surface in a steady continuous flow but instead arrives in slugs of fluid. Fluctuating Gas Production - Daily gas production is dramatically different while no changes are made to the flowline pressure. Variance from Decline Curve Typical Gas Production wells will follow an exponential type curve, while when liquid loading occurs there will be in general a deviation from the curve with a lower than predicted production rate. Liquid Production Stops Pressure Survey reveals a heavier gradient in the tubing pressure. energyindustryreview.com

OIL & GAS

DELIQUIFICATION TECHNICS Solutions for gas wells deliquification, high GLR (over 180 scm/cm/305 m)

is repeated several times throughout the day. A valve mechanism, controlled by a microprocessor, adjusts gas input to the casing and automates the process. The controller has a solar panel to recharge the battery and can be a simple timercycle or have solid state memory and programmable functions based on the sensors.

Foam lift injection Foam lift consists in injection of chemicals through the annulus, in order to reduce specific gravity of the fluids, so that fluids can be evacuated at the surface. Injecting a surfactant in the annulus reduces surface tension and density of produced water. This lightens the column of fluid from the well and reduces the back pressure on the reservoir and as a result it increases the gas production in the well.

Solutions for gas wells deliquification, low GLR (below 180 scm/cm/305 m)

the capillary of the foam chemicals is in order to reduce specific gravity of the fluids, so fluids can be evacuated at the surface. The injection of the chemicals is done using a dosage pump, the same pump used for simple foam injection into the well. The chemical is injected into the well using a solar powered chemical injection pump. The pump is portable and has an own foam tank. The pump has its own measuring gauge for measuring the chemical injection pressure and rate into the well, has check valves and filters to prevent pump damage. Capillary lift The capillary string is a ‘micro tubing’ that is mechanically hung in the well, in a similar fashion with regular oilfield tubing. This is run through the Christmas tree under pressure, while the well produces. At the bottom of the well the capillary string is connected to a valve adjusted to well conditions and only permits chemical injection with a positive stroke on the surface with the chemical injection pump. Running in the well the capillary string, outside or inside the tubing at the perforating interval and injection through

Plunger lift Plunger is a mechanical interface between the produced liquids and gas which use the well’s own energy for lift. This is accomplished through the movement of an independent piston/ plunger traveling from the bottom of the tubing to the surface. Plunger drive pressure is provided by formation gas stored in the casing annulus during a shutin period. When the well is opened, the shut-in tubing pressure is bled-off and the pressurized gas in the casing annulus expands pushing the plunger to the surface. This intermittent plunger cycling

Gas lift Gas lift is a method of artificial lift that uses an external source of high-pressure gas for supplement of formation gas to lift the well fluids. The principle of gas lift is the gas is injected into the casing, reduces the density of the fluids in the tubing, and the bubbles have a ‘scrubbing’ action on the liquids. Both factors act to lower the flowing bottom-hole pressure (BHP) at the bottom of the tubing. Typically, in gas wells is important to inject sufficient volume to increase the rate above the injection point to above critical velocity. There are many different types of gas lift systems that work well in gas production environment, including the extended perforation systems, which allows for gas lift in extended perforations zones effectively unloading the entire perforated interval rather than only optimizing the production above the packer. Hydraulic piston pump The hydraulic piston pump is an alternate type of hydraulic pump and consists of a surface power fluid system and a downhole piston pump. The downhole pump is actuated by the power fluid (oil or water), supplied from the surface by the power-fluid storage unit. It’s run in the well through the Christmas tree at the same time with the coiled tubing. At the bottom of the injection tubing string, the power fluid is directed into the 41

OIL & GAS

hydraulic engine of a piston pump, both of which have been set well below the producing fluid level. In a piston pump, power fluid actuates the piston engine from top of the pump and then the fluid returns to the surface with accumulated liquid. The gas from reservoir will flow to the surface through the casing-tubing annulus using a parallel tubing or concentric tubing installation. Wellhead compression Compression is vital at deliquification, for decreasing the wellhead pressure and increasing the gas velocity in the well. The process of choosing how to apply the compression and what is the proper equipment to achieve the desired pressures and rates is very important in optimizing the results.

Compression and reducing the surface pressure is usually the first tool used in the life of a gas well to keep it deliquified and it can also be used to increase the efficiency of other deliquification methods, including foams, gas lift, pump and velocity strings. There are many different types of compressors, with different operating ranges and efficiencies, but the GasJack 42

(GJ) compressor is typical for the deliquification applications. This is a small unit, it utilizes a separator and blow-case combination to separate the gas from the liquid and a bypass which can re-inject the gas into the compressor discharge. GasJack is a compact, yet powerful wellhead compressor and the most costeffective tool available for increasing production and profitability of marginal gas wells.

Skid mounted, the GasJack Compressor allows moving from wellhead to wellhead. Flexible hose connections make a simple installation, allowing the well to be put in production in a few hours, with possibility to increase the gas rate. This makes well testing easy and at low prices. Minimal or usually no site preparation is required for installation. Typical applications are the following: • Reduction of wellhead pressure to help the well unload liquid; • Reduction of casing head pressure for oil wells; • Recovery of free gas at low pressure, flare gas; • Gas gathering or gas recollection; • Reduction or increase of pressure in gas line; • Back side auto injection; • Combination with plunger lift and foaming agents; • Replacing the old compressor station. Solutions for gas wells deliquification, to low reservoir pressure Typically, once the reservoir is

depleted the steps include the wellhead compression to reduce the surface pressure as much as it is technically and economically possible. As mentioned, compression is usually determined as a field wide initiative. Assuming that compression was applied and the wells are not capable of lifting fluid using foam or plunger lift, the rod pump is proposed atypically to complete the deliquification. Rod pump Rod pump is atypically used in unloading liquid loaded gas wells. Particularly once the well has depleted and the pressure no longer exists to operate some of the less expensive forms of lift (plunger, capillary and gas lift) then rod pump becomes a very good way to complete the depletion of the well. Gas interference such as gas locking or fluid pound usually becomes an issue, but it is best addressed by sumping the pump below the perforations or by using separators. The use of pump off control also becomes very important to ensure that the system does not continue to pump once the fluid level has been pumped down, reducing the flowing bottom hole pressure as low as possible. Decision matrix diagram for selecting the optimal method for deliquification The matrix is the logical artificial lift application selection process for gas well deliquification. The selector/software helps the operators determine the optimal method for the liquid loading problem in gas wells and can save time and money for testing different solutions for deliquification. The developed decision tree allows to quickly subdivide from a large initial dataset into successively smaller sets after a series of decision rules. The rules are based on information available from database and literature. The technical evaluation matrix is developed for comparing each lifting option efficiency, taking into consideration the technical and economic factors that affect the selection of the optimal remedial option. energyindustryreview.com

OIL & GAS

Romania, dependent on Russian gas transit through Ukraine? BLACK SEA RESERVES, SAFEST ALLY

Adrian Stoica

energyindustryreview.com

OIL & GAS

Granting subsidies from the state budget to extend gas distribution networks and connect vulnerable consumers to them, extension of Rabla Plus Program including to compressed gas vehicles, reintroducing the environmental tax for polluting vehicles and supporting the petrochemical industry should be, in the following period, the main targets of the government policy to ensure a higher use of natural gas. These are the conclusions of the study ‘The perspective of natural gas in Romania and the modalities for their superior capitalization’, prepared by the members of think-tank Energy Policy Group - Vasile Iuga and Radu Dudau, with the Oil and Gas Employers’ Federation (FPPG) support. he report analyses the current T natural gas sector from the point of view of reserves, infrastructure and market setup. The report also addresses the prospects for the evolution of different segments of natural gas consumption by 2030 and provides appropriate policy and regulation recommendations which would lead to the value-added capitalization, on the Romanian market, of the expected Black Sea natural gas production but also of onshore deposit “Security of gas supply of our country depends, in the long run, on the development of domestic gas resources, onshore and offshore. Towards 2030, the biggest contribution to the security of supply can be brought by Black Sea fields,” the authors of the study show. “Romania’s particular vulnerability to gas transit through Ukraine and in the perspective of disrupting these flows by the Russian Federation starting with 2020 although probably not at once, given the contractual obligations of Gazprom to third states until after 2020 - highlights the importance of strategic planning and development at once of infrastructure projects and alternative solutions for gas supply,” the study points out. The authors rely their recommendations on the results of stress tests carried out in 2017 by ENTSO-G, the European Network of Transmission System Operators for Gas, which simulated 19 scenarios of gas infrastructure dysfunctionality or non-technical interruption of Russian

gas supplies through Ukraine. The conclusions don’t look very good for Romania, so that at the current infrastructure, consumption and interconnections, during days with peak consumption, in winter, Romania had to reduce 30% of consumption in the event of interruption of Russian gas supplies through Ukraine. For example, Scenario #1, named ‘Interruption of all gas supplies to the EU through Ukraine’ during 1 January - 28 February, indicates a severe vulnerability for Bulgaria, where gas consumption should be reduced by 71% during the crisis, respectively a moderate vulnerability for Romania (consumption reduced by 9% in February) and a low vulnerability for Greece (consumption reduced by 2% in February), due to infrastructure limitations: extraction from the underground storage facilities is at the maximum, capacities of gas transmission to Bulgaria are completely used in January and February, and the transmission capacity from Hungary to Romania is entirely used in February. For days with peak consumption, Romania’s vulnerability reaches 30%, that of Bulgaria – 79% and that of Greece – 17%, the quoted document mentions.

POTENTIAL CONSEQUENCES OF CEASING GAS SUPPLIES THROUGH UKRAINE On the other hand, even if projects of common interest in our area in the gas sector in which the final investment

decision was made are implemented, our country will still have a problem of energy security if Russian gas supplies to Ukraine are stopped. Although it has the fourth largest gas production in Europe, Romania would be forced to reduce its consumption by at least 20% in this case. The total number of gas transmission projects in the region is 131, of which only 20 are in the stage of final investment decision. 15 of these are pipeline projects, four are underground storage projects and one project is for LNG regasification capacity. ENTSO-G’s forecasts for 2030 show that implementation of all projects of common interest by 2030 is sufficient to eliminate any risk of reduction of supplies in the region of the Southern Corridor, with the notable exception of Romania. In the scenario in which the development of gas infrastructure limits to the completion of projects with final investment decision, the disruption level in Romania in 2020 is over 20% (the volume available for consumption falls by 20%) and in 2030 the disruption level climbs to over 30%, which singles out our country as the most exposed in the long run to a massive interruption of natural gas supply through Ukraine, the authors of the study also show.

EXTENDING ACCESS TO DISTRIBUTION NETWORKS The authors of the study recommend supporting access for a greater number of 45

Roadmap for the development of the natural gas sector in Romania Sectors of natural gas consumption Gas-based electricity production: • evaluating the opportunities for conversion of coal power plants to gas • adequate remuneration of the flexibility ensured by gas fired power plants Romanian Government, Ministry of Energy

Transport

Gas-based electricity production:

• reintroduction of an environment tax for vehicles registration

• public cofinancing of new investments based on EUA certificates

Ministry of Environment, Ministry of Finance

Romanian Government, Ministry of Energy

2018 Strategic capitalization of the National Investment Plan Support for the development of RES through the balancing provided by flexible gas power plants

Transport

Industrial Consumption

• accessing EU funds for CNG recharge points

Petrochemicals:

Public or private operators • including CNG vehicles in the Rabla Plus program Romanian Government, Ministry of Environment

• renewal of the chemical and petrochemical plants through economic & fiscal policy and state aid Private investors, Ministry of Environment, Ministry of Economy, Ministry of Regional Development

Strategic capitalization of the National Investment Program Support for the development of RES through balancing provided by flexible gas power plants

Reduction of GHG emissions and pollution in road transport The possibility of accessing EU funds, supported by the Alternative Fuels Directive. Renewal of the car fleet. A measure aligned with the Alternative Fuels Directive

• evaluating the opportunity to develop CNG distribution systems in areas where the extension of the gas distribution network is uneconomical

Household consumption • extension of the gas distribution network by accessing EU cohesion funds and possibly by covering the grid connection costs for some categories of consumers

Public or private operators

Distribution operators, Romanian Government, Local and county authorities

2021

2022

2023

Opportunity for value added use of natural gas nationally

Increasing the access to quality energy services for consumers

Increasing the population’s access to quality energy services Possibility of EU funding

2019

Reduction of transport pollution and renewal of the car fleet

Household consumption

Protection of vulnerable consumers and improving energy access Improving the definition and identification of vulnerable consumers Simplification of the excessive bureaucracy for vulnerable consumers’ access to social aid Ministry of Labour, Ministry of Energy, Ministry of Finance

2018 Efficiency and effectiveness of protecting vulnerable consumers

Transition from heating aid to aid for energy bills for vulnerable consumers

Using public funding to cover grid connection fees for vulnerable consumers

Extending the gas or CNG distribution networks to communities affected by energy poverty

Ministry of Labour, Ministry of Energy, Ministry of Finance, Local authorities

Public or private operators Ministry of Labour, Ministry of Finance, Ministry of Regional Development, County and local authorities

2019 Protection of the vulnerable consumers by increasing standards of living and energy efficiency

Facilitating the access to quality energy services for vulnerable consumers

2022 Ending, energy poverty through providing access to natural gas supply

European energy policy Compliance with EU climate change policies Transition to low-emissions electricity production Source: Energy Policy Group

Ministry of Energy, Ministry of Environment

2018 46

Reducing CO2 emissions and pollution in electricity production and meeting the EU emissions targets

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Romanian consumers to the gas network. “Natural gas will remain the preferred fuel for heating in the urban environment. In the absence of legislative constraints that limit the freedom of individual choice, most homes built until 2030 will probably adopt heating systems based on natural gas. Part of the current firewood consumption will be replaced by gas consumption, especially in the sub-urban and semi-urban environment. As a measure to fight energy poverty, subsidies granted by the state for expenses with connection to the gas distribution network of potential consumers with low income are opportune,” the mentioned analysis shows, in conditions in which the degree of connection of household consumers to the gas network is currently only 44.2%. “Measures to extend household gas consumption include expansion of distribution networks to new areas of concentration of population and economic activity, possibly with subsidies for connection to the distribution network of potential consumers in the urban and peri-urban environment, whose income is insufficient to cover this type of expenses. It is opportune for the state to take over in whole or in part or by fiscal credit expenses for vulnerable consumers’ access to the gas distribution network, as part of a necessary package of measures to fight energy poverty in Romania,” the authors of the study claim. On the other hand, expanding the systems for the distribution of compressed natural gas (CNG) cylinders is another option that the state should consider to increase access to natural gas in cases where expansion of the distribution network doesn’t prove to be an economically sustainable solution.

INCREASING SUBSIDIES FOR CLEAN MOBILITY In order to boost the use of natural gas in transport, the study proposes inclusion in Rabla Plus program of vehicles based on compressed natural gas, together with the electric and hybrid ones, as well as the introduction in the legislation on public procurement of the obligation of an acquisition rate for state institutions of means of transport based

on alternative fuels, including compressed natural gas, and in the future based on liquefied natural gas and hydrogen. “For this program Rabla Plus to have a visible impact, the annual budget allocated by the Environmental Fund Administration must increase significantly, from around EUR 10mln in 2017, and the level of subsidies allocated should be sized in a more realistic and efficient manner. Thus, currently, at the acquisition of an electric vehicle, a premium of EUR 10,000 is granted, plus RON 6,500 from the scrapping of a car older than eight years,” the study shows. The authors also propose the reintroduction of an environmental tax at the registration of motor vehicles, according to the model of EU Member States. “In conditions in which Romania had, in 2016, one of the oldest fleets in Europe, with an average age of over 12 years, suspending in 2017 the ‘stamp duty’ at the registration of motor vehicles opened the way for importing more than 500,000 secondhand motor vehicles, from the Western European countries, further increased the average age of the national car fleet. Moreover, such decisions directly undermine the public programs for the renewal of the car fleet and promotion of ‘clean’ mobility, such as Rabla and Rabla Plus, whose positive impact on the environment was fully neutralized,” the authors of the study warn.

GUARANTEED ELECTRICITY ACQUISITION PRICES The mechanism through which the state guarantees an electricity acquisition price during the operation of the units, which should be applied for the project of reactors 3 and 4 from the Cernavoda nuclear power plant, should be taken into account for other forms of production of low-emission electricity, such as natural gas-fired power plants, the document also shows.

PROTECTION OF THE PETROCHEMICAL INDUSTRY As far as the petrochemical industry is concerned, one of the largest consumers

of natural gas in the economy, the study proposes indirect support measures at European level, in conditions in which the EU legislation does not provide for state aid schemes dedicated to the petrochemical industry. “At the European Union level, it can be collectively decided to impose tariff and nontariff barriers, in conditions of compliance with the rules and standards of the World Trade Organization and with EU’s trade treaties, for the European petrochemical industry to be protected against international competitors, whose competitiveness is primarily based on subsidizing raw materials prices by the respective countries. Therefore, it is opportune for the Romanian state to include such a target for its economic diplomacy actions,” the authors of the study recommend. Moreover, it is necessary to have a better adaptation of the primary and secondary legislation to the specifics of the petrochemical activity. “For example, the (residual) obligation of plants producing chemical fertilizers to purchase greenhouse gas emission allowances applies to the entire amount of gas consumed by the facilities of the industry, although the volumes used as raw material and transformed by chemical processing in finished product do not lead to the release of CO2 into the atmosphere - otherwise than at the end of an organic biodegradation process or burning of plant matter that has absorbed chemical fertilizers,” the study shows. Such a legislative adjustment would be justified, according to the study, even more so as the chemical and petrochemical industry is included, under the Decision 2014/746/EU, on the list of sectors considered to be exposed to a significant risk of relocation of activity to third countries, where the industry is not subject to comparable carbon emissions restrictions. A more judicious distinction of the destination of the natural gas quantities consumed in the petrochemical industry - energy consumption, i.e. raw material - would allow an increase in the competitiveness of European chemical fertilizers production, the study concludes in terms of measures that should be taken to support this industrial sector. 47

OIL & GAS

KMGI involved in helping Romania to become an energy hub in the Black Sea region Daniel Lazar

Sauat Mynbayev, President of the Management Board at KazMunayGas (KMG) - the national oil and gas company of Kazakhstan, met in Bucharest with Energy Minister Anton Anton. During the meeting, the President of KMG - company which is the sole shareholder of KMG International (KMGI) - presented the financial performance of Rompetrol activity in Romania, obtained following the historical production records, and companyâ&#x20AC;&#x2122;s plans to strengthen its position both locally and regionally. 48

President of the Management Board of KMG and Romaniaâ&#x20AC;&#x2122;s Energy Minister meeting energyindustryreview.com

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he President of the Management T Board at KazMunayGas and Romania’s Energy Minister also discussed about ways to synchronize KMGI’s regional development efforts with Romania’s plans to become an energy hub in the Black Sea region. “Romania and Romanians are partners together with whom we have turned Petromidia into one of the most modern refineries in South-Eastern Europe and we will certainly not stop here. We will continue investing in the Romanian energy sector, we will continue to be one of the largest producers and exporters of the country, we will continue to work for the improvement of the most important social sectors of Romania and, also, to keep valuable people in the country. All these, because we want to look behind with pride and satisfaction. We have been building together for over 10 years and we look with responsibility and optimism towards our future together,” Sauat Mynbayev said.

ROMANIAN-KAZAKH INVESTMENT FUND WORTH USD 1BN During the discussion with the officials of the Ministry of Energy, KMG representatives have expressed their firm commitment to comply with all the obligations undertaken under the Memorandum of Understanding signed with the Romanian state. One of its most important provisions refers to the creation of the joint RomanianKazakh investment fund, which will have a duration of 7 years and an investment level estimated at approximately USD 1bn. 2,000 NEW JOBS IN FILLING STATIONS AND PETROMIDIA COGENERATION PLANT KMGI has already identified at least two major projects that can be developed in the following period and which will positively influence Romania’s economy by directly creating approximately 2,000 jobs. They refer to the expansion

of the network of filling stations in the domestic market and the construction of a cogeneration plant on Petromidia platform.

KMG FACTS AND FIGURES KazMunayGas is the unique shareholder of KMG International (former Rompetrol Group), an oil group that holds and carries out major operations in the refining, petrochemical, retail and trading fields, in 11 main markets. KMG’s investments in KMG International amount to over USD 4bn, which includes the value of full takeover of the share package. KMGI is one of the largest taxpayers to Romania’s state budget and one of the main exporters of the country, with over 5,000 employees domestically. The Group’s contribution to the state budget in 2017 amounted to over USD 1.37bn, while the total level for the period 20072017 stands at around USD 15bn. In 2017, KMGI processed over 6.2 million tons of raw material in its production units in Romania Petromidia Navodari and Vega Ploiesti refineries, the petrochemical division. Petromidia Navodari is the largest profile unit in Romania and one of the most modern in the region. The main shareholders of Rompetrol Rafinare (operator of Petromidia Navodari and Vega Ploiesti refineries, as well as of the petrochemical division) are KMG International (54.63% - directly and indirectly) and the Romanian state, through the Ministry of Energy (44.69%). At European level, KMG International owns over 1,100 fuel distribution units in Romania, France, Spain, the Republic of Moldova, Georgia, Bulgaria and Ukraine, which operate under Rompetrol and Dyneff brands. KMG preserves the main energy reserves of Romania by ensuring from Kazakhstan approximately 80% of its raw material imports, accounting for 40% of the crude supply demand of all refineries in Romania.

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OIL & GAS

TANAP inauguration Pipeline carrying gas from Azerbaijan to Europe went live On June 12, the key pipeline carrying natural gas from Azerbaijan’s gas fields to Turkish markets and eventually to Europe - the Trans-Anatolian Natural Gas Pipeline (TANAP), was inaugurated at the compressor-measuring station in Eskişehir, Turkey.

ANAP is part of a wider Southern Gas Corridor project that aims to diversify gas supplies and reduce countries’ dependence on Russia. This is also part of Turkey’s ambition of becoming a major energy hub. “We are taking a historic step,” Turkey’s President Recep Tayyip Erdoğan said at the opening ceremony in central Eskisehir province with Azerbaijan’s President Ilham Aliyev marking the delivery of the first gas. “We are inaugurating a project that is the ‘Silk Road’ of energy.” The pipeline will eventually be connected to the Trans Adriatic Pipeline (TAP), at the Turkey-Greece border, that could take place in June 2019. The aim of the TANAP Project is to bring natural gas produced from Azerbaijan’s Shah Deniz-2 gas field, and other areas of the Caspian Sea, primarily to Turkey, but also on to Europe. The TANAP Project, along with the South Caucasus Pipeline (SCP) and the Trans Adriatic Pipeline (TAP) form the elements of the Southern Gas Corridor. TANAP will run from the Turkish border with Georgia, beginning in the

Turkish village of Türkgözü in the Posof district of Ardahan, will run through 20 provinces including Kars, Erzurum, Erzincan, Bayburt, Gümüşhane, Giresun, Sivas, Yozgat, Kırşehir, Kırıkkale, Ankara, Eskişehir, Bilecik, Kütahya, Bursa, Balıkesir, Çanakkale, Tekirdağ and Edirne until it ends at the Greek border in the İpsala district of Edirne. From this point, the TAP Pipeline will connect to convey natural gas to European nations. Two offtake stations are located within Turkey for national natural gas transmission, one located in Eskişehir and the other in Thrace. With 19 km running under the Sea of Marmara, the main pipeline within Turkey reach a total of 1850 km, along with off-take stations and aboveground installations, with their numbers and properties detailed below: • 7 compressor stations; • 4 measuring stations; • 11 pigging stations; • 49 block valve stations and • 2 off-take stations to supply Turkey’s national natural gas network. In addition to the aboveground installations, temporary camps to accommodate workers, pipe storage areas

and access roads necessary during the construction phase will also be built. With the Trans-Anatolian Natural Gas Pipeline Project (TANAP), Turkey and Azerbaijan are extending the success of their previous projects in the energy sector. Building the bonds of brotherhood in the modern world with the promise of ‘One nation, two states’, and bonding the countries together with a mission of great importance, the huge TANAP Project will establish a voice in the world energy markets. Aimed to meet Europe’s and Turkey’s natural gas needs, as well offering diversity in gas products. Previous investments signed by the two brotherly countries in the energy field, including the Baku-Tbilisi-Ceyhan Oil Pipeline and the Baku-Tbilisi-Erzurum Natural Gas Pipeline Project, will accelerate strategic business units, while the TANAP project will continue to expand.

TANAP PROJECT HIGHLIGHTS • Will secure delivery of natural gas to European markets; • Will meet the growing demand in Turkey for natural gas, and will also energyindustryreview.com

OIL & GAS

High-level representatives attended the inauguration ceremony of TANAP. contribute to the socio-economic development of the country. On December 24, 2011, the Government of the Republic of Turkey and the Government of the Republic of Azerbaijan signed the Memorandum of Understanding between the State Oil Company of Azerbaijan Republic (SOCAR) within the framework of the TANAP Natural Gas Transmission Company. The TANAP Project was established and the design, construction and subsequent operation of the project was authorized. The ‘Intergovernmental Agreement concerning the Trans-Anatolian Natural Gas Pipeline System between the Government of the Republic of Turkey and the Government of the Republic of Azerbaijan’ and the ‘Host Government Agreement’ which constitute the legal basis of the project, were signed in Istanbul on June 26, 2012.

The Host Government Agreement was amended and signed on May 26, 2014. The revised agreement was ratified by the Grand National Assembly of Turkey on September 10, 2014.

ROMANIA, INVITED TO THE OPENING CEREMONY Iulian-Robert Tudorache, State Secretary within the Ministry of Energy, attended the inauguration of TANAP gas pipeline, together with other high official dignitaries and shareholders invited to the opening ceremony. TANAP-TAP pipeline aims to carry, in a first phase, 16bcm per year, of which 6bcm are bound for Turkey and the remaining of 10bcm will be transported, via Greece and Albania, to Italy. Potential gas volumes from Central Asia, Middle East, Mediterranean or Black Sea basins are also considered for the future

development phases of the Southern Gas Corridor, which is a priority for Azerbaijan. By attending this event, the Romanian side has concretely proven the clear interest in the opportunities offered by the Southern Gas Corridor and its ramifications, as well as the firm commitment to strengthening European energy security. Taking into account constant support that Romania gives to the development of the Southern Corridor project and its expansion plans, as well as the strategic dimension of this concept not only for the participating countries, but for the entire region, inviting Romania to attend the ceremony of inauguration of TANAP gas pipeline is an additional proof of appreciation of interest that our country grants to this important energy infrastructure project, which is the Southern Gas Corridor. 51

OIL & GAS

UZUC Ploiesti, the only European supplier qualified by GE for heat exchanger batteries Daniel Lazar ZUC Ploiesti has manufactured the fractionating columns for a refinery in Prahova County (Romania), being designed and executed in accordance with EN 13445 and PED 2014/68/EU. The project was developed over five months, during January July 2018. This equipment serves a fractionating unit of the refinery, within which a separation is achieved based on difference in the boiling temperatures of the components boiling in a certain temperature range, from a homogeneous liquid mixture. UZUC Ploiesti was established in 1904, being specialized in weapon production and railway wagons repair. Starting with 1953, the plant refocused its activity on Diesel engine repair and the repair of railroad containers for hazardous liquids, oil drilling equipment and other equipment for geological prospecting. In 1959, the plant changed its activity, focusing on the manufacturing of pressure vessels for the chemical, petrochemical, energy, steel industry etc. and started the construction of new sections: Heavy Boiler Section, completed in 1961, and Mechanical Forging Section, completed in 1966. From 1962, the company started being known as UZINA DE UTILAJ CHIMIC SI PETROLIER - Ploiesti (Chemical and Petroleum Equipment Plant). In the ‘70s, UZUC purchased equipment for the execution of

machinery for the pilot Heavy Water plant; it supplied to IRNE Pitesti (currently RENEL - I.C.N. Pitesti) ancillary equipment for the nuclear research reactor, under US license. UZUC was also the main supplier for the chemical and petroleum industry, producing machinery such as Strippers and Scrubbers for Urea plants (under STAMICARBON license), heat exchangers for ammonia plants (under KELLOG license), high and low pressure equipment for ethylene and polyethylene plants. In 1993, UZUC was the first company in Romania to obtain the ISO 9002 Quality System Certification awarded by Lloyd’s Register Quality Assurance. In 1999, through the strict implementation of quality assurance requirements for the design activity, UZUC was certified in accordance with International Standard ISO 9001:1994. UZUC production is mainly oriented towards the execution of pressure equipment for refineries, chemical, petrochemical and energy industries: heat exchangers - different types of construction and execution classes, defined by TEMA Standards; pressure vessels and columns; metallic structure for vertical pressure vessels executed at UZUC; autoclaves for the construction materials industry; skids for machinery executed at UZUC. For GE Oil & Gas, UZUC has accumulated an experience of over 14

years in the execution of heat exchanger batteries - Performance Heater type, remaining the only European supplier qualified by GE for this type of equipment. Currently, the entire activity of UZUC is covered by the Integrated Management System Manual (ISO 9001:2008 & ISO 14001:2004 & OHSAS 18001:2007) and ASME. In order to complete orders, UZUC has applied during the design and manufacturing activities, together with customer standards and technical specifications, its own standards. As a recognition of quality and timely delivery of equipment, UZUC was nominated, in 1998 and 1999, as ‘The best supplier for Central and Eastern Europe’ by GE Power Systems USA. Following several quality audits, UZUC was included in the List of Approved Suppliers by world-recognized companies such as Total, ExxonMobil, Shell, KOC, KNPC, Saudi Aramco, General Electric, Amec Foster Wheeler, Snamprogetti etc. “Our past urged us to always be a company with a future, always ready for improvement, all the time aware that a work is an activity carried out by someone for someone else’s benefit, especially through the ability to provide in advance what is mostly needed: quality, solutions and, above all, seriousness. We hope to gain an increasingly important role in the energy sector, which is rapidly growing in the global market,” company officials say. energyindustryreview.com

SILENCE PLUS The next generation of external gear pumps

With their SILENCE PLUS Rexroth introduces a new generation of external gear pumps whose noise level has been reduced by an average of 15 dB(A) compared with a conventional external gear pump. The new pump is also characterized by a subjectively much more pleasant, deeper sound. The SILENCE PLUS is of special interest for use in applications with electric motor drives – for example in fork lifts, lift platforms or industrial power units. Such drives then become significantly quieter in pressure ranges up to 280 bar. Advantages at a glance: • Average 15 db(A) less noise than standard external gear pumps; • Reduced noise exposure for machine operators and the surroundings; • Cost savings by eliminating secondary noise reduction measures; • Helps to meet legally prescribed noise limits; • High efficiency and long service life; • Compatible with all other Rexroth external gear pumps for ease of retrofit. The innovative technology of SILENCE PLUS Continuous tooth contact reduces operating noise A non-involute rounded tooth profile,

sizes 12 – 28 cm3/revolution. With dimensions identical to other series of Rexroth external gear pumps, the noisereduced SILENCE PLUS is simple to integrate into existing systems. This means: A simple replacement makes work machinery quieter with the same quality and efficiency.

Silence plus pump combined with helical cut teeth, forms the heart of the SILENCE PLUS. Thanks to permanent tooth contact the fluid is transported almost continuously and noiselessly. The possibility of noise from trapped oil between the tooth flanks is prevented in the first place. Hydrostatic bearing ensures long service life The high performance and long service life of the SILENCE PLUS is due to a Rexroth patented solution: Hydrostatic grooves provide wear-free compensation for the internal axial forces generated in the helical gear – even at pressures up to 280 bar! Compatible with Rexroth external gear pump series The AZPJ-2x series of the SILENCE PLUS family first includes the nominal

Rexroth places great emphasis on high efficiency and low noise emission. The latest measuring methodologies in a soundproof chamber per DIN and ISO standards guarantee optimum development results. A core competency of Rexroth is the manufacture of highprecision pump drives. The tolerance requirements for all components are in the micrometer range – and reliably so. With their quality management system Rexroth achieves consistently high quality that is the industry standard.

2 Aurel Vlaicu Street, 515400 Blaj Tel. +4 0258 807 872 info@boschrexroth.ro www.boschrexroth.ro

CONSTRUCTION

Photos: EFdeN

EFdeN Signature solar house will represent Romania in Dubai 54

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CONSTRUCTION

With a modern design, energy-efficient, smart and automated, the EFdeN Signature solar house - designed and executed by EFdeN organization, was inaugurated on 25 July, in Bucharest, in the presence of Romania’s President Klaus Iohannis, Deputy Chief of Mission with the US Embassy in Bucharest David Schlaefer and representatives of the academic and private environment.

he EFdeN Signature T house is developed by an interdisciplinary team consisting of 60 students from the Technical University of Civil Engineering Bucharest, the ‘Ion Mincu’ Architecture and Urban Planning University and three other universities, who designed and built a 100% electric and environmental friendly solar house, with a high degree of comfort, health and safety for the occupant. The house is temporarily installed in the Baneasa Shopping City commercial complex, Bucharest and is open for the general public until the beginning of September, when it will be transported to Dubai. There, it will represent Romania at the most important international competition for solar-powered houses Solar Decathlon Middle East 2018. In this competition there are 18 finalist teams from 13 countries, on 4 continents. All those who are directly interested in solar housing, energy efficient technologies and solutions, solar energy production and environmental impact reduction can visit the house from July 31 to August 31, Monday to Friday, between 18:00 and 21:00, and on weekends, between 12:00 and 21:00. Starting September 1, the house will be dismantled and transported by sea to Dubai to be reassembled in just 15 days by the student team on the site where the competition will take place. Designed to integrate both in the Dubai and the Romanian climate, the prototype provides a unique experience through the adaptation and personalization potential. “We hope that in the Year of the Centenary we will return victors from Dubai

and, moreover, happy and proud that we are Romanians,” the project’s general manager, Mihai Toader Pasti, said at the inauguration event.

WHY EFDEN? “EFdeN comes from the mathematical function f(n), because we design and construct according to nature. Over the past two years, an extraordinary young team has made some superhuman efforts to build the EFdeN Signature house. With this house, EFdeN will represent Romania at the most important international competition in the field - Solar Decathlon. This is the most difficult competition of its kind in the world, not everyone resists, it is an international Olympics of solar-powered houses,” Mihai Toader Pasti explained. The house has a usable area of 75 square meters and includes a dining room, a living room, a bedroom, a bathroom and a kitchen, being built in principle for two people. The home generates more energy per year than it consumes, but there are months when it cannot ensure its energy consumption. “From the point of view of cost optimization, it is better for the home to be connected to the network, so that it can use the network as a battery system. It is a 100% electric house, the energy being produced by means of photovoltaic panels, which are arranged on the roof of the house,” Mihai Toader Pasti mentioned. The house is equipped with an automated system, which controls various smart functions, from temperature and humidity to light and door systems. The price of the house amounts to EUR

300,000. “The initial investment is slightly higher than a conventional dwelling. The price of the prototype reaches EUR 300,000, the amount being also generated by the fact that it must be transported to Dubai and assembled in only 15 days. Approximately 90 companies have sponsored us with services, products and money, thus making the project possible,” the project manager mentioned.

THE SMALLEST HOUSING IN THE EU President Klaus Iohannis said innovation in the field of construction is of particular importance for Romania, in the context in which our country has the smallest housing in the European Union. “Innovation in the field of construction is particularly important for Romania. Unfortunately, the housing stock we currently have has a very low standard compared to European standards, we have by far the smallest housing in the EU, and most are not energy efficient at all,” the head of state said at the launch of the EFdeN Signature solar house prototype. Klaus Iohannis also mentioned he wanted an educational system with wellthought strategies, in the context in which it is currently outdated. “We need an educated Romania, a Romania where the number of children who perform grows, while the development of the education system is based on well-thought strategies. What I described is my desire. What we have is an outdated system, with a lot of incoherent ideas that, ironically, often become legislative initiatives or ordinances,” the president noted. 55

CONSTRUCTION

Vard Tulcea shipyard to build hulls for 3 Norwegian coast guard vessels Vard - a subsidiary of Fincantieri - recently announced a new contract for the construction of three coast guard vessels for the Norwegian Defence Materiel Agency (NDMA) in Norway. The value of the contract exceeds NOK 5 billion.

Adrian Stoica

he Norwegian Government T had originally announced plans for the construction of three new coast guard vessels in September 2016. Following review of offers from three competing yards, Vard Langsten was selected to continue negotiations in October 2017. The investments were approved by the Norwegian Parliament in the beginning of June 2018, and the final negotiations have been completed and finalized in the following weeks. The purpose of the new series of vessels is to replace the Nordkappclass coast guard vessels. The new tailor-made vessels are developed for worldwide operations in all weather and sea conditions, both inshore and 56

offshore. Specially designed to withstand operations in demanding arctic areas, the new coast guard vessels will have icestrengthened hull and ice-class notation, and will be built according to the latest requirements for such specialized vessels. With a length of 136 meters and a beam of 22 meters, the vessels feature strong ocean-going capacities for long-distance transits, search-and-rescue operations, surveillance, and oil recovery. Vard has based its offer on the reference design developed by LMG Marin on behalf of NDMA. Vard has, in cooperation with LMG Marin, further developed the concept design in order to ensure that all requirements and needs demanded by NDMA are solved with a

high focus on sustainability, life cycle cost and reliability. “Our longstanding experience in the design and shipbuilding of highly specialized vessels has been of vital importance in the competition and development of this project. Our strength lies in recognizing and understanding the customer’s and the market’s needs, and introducing innovative solutions based on the vessel’s objective, services, operative window and geographical scope. We have worked hard to achieve this contract and are excited to be awarded,” Roy Reite, CEO and Executive Director of Vard, stated. “Due to national security interests, the Norwegian Government decided that the competition should be restricted to energyindustryreview.com

CONSTRUCTION

Norwegian yards only. Vard Group with its Vard Langsten yard was the provider that overall satisfied the defined requirements for solution and the Navy and the Coast Guard’s needs in the best manner,” Mette Sørfonden, Director General of NDMA, explained. “It is a pleasure to cooperate with NDMA’s team again. We have previously built several unique and state-of-the-art vessels together, and we look forward to building the Norwegian Coast Guard’s new flagships,” Roy Reite added. Deliveries of the three vessels are scheduled from Vard Langsten in Norway in 1Q 2022, 1Q 2023 and 1Q 2024 respectively. The hulls will be built at Vard Tulcea in Romania. Norwegian Defence Materiel Agency (NDMA)/Forsvarsmateriell (FMA) is an agency directly subordinate to the

Royal Norwegian Ministry of Defence. The main task is to continuously develop and modernize the Norwegian Armed forces. Vard is one of the major global designers and shipbuilders of specialised vessels. Headquartered in Norway and with approximately 9,000 employees, it operates nine strategically located shipbuilding facilities, including five in Norway, two in Romania (Tulcea and Braila), one in Brazil and one in Vietnam. In April, Vard said that it would build the hull of a EUR 170 million cable laying vessel for Italy’s Prysmian Group in its Tulcea shipyard. Fincantieri is one of the world’s largest shipbuilding groups and number one by diversification and innovation. It is leader in cruise ship design and

construction and a reference player in all high-tech shipbuilding industry’s sectors, from naval to offshore vessels, from high-complexity special vessels and ferries to mega-yachts, ship repairs and conversions, systems and components production and after-sales services. Headquartered in Trieste (Italy), the Group has built more than 7,000 vessels in over 230 years of maritime history. With more than 19,500 employees, of whom more than 8,300 in Italy, 20 shipyards in 4 continents, today Fincantieri is the leading Western shipbuilder. It has among its clients the major cruise operators, the Italian and the U.S. Navy, in addition to several foreign navies, and it is partner of some of the main European defense companies within supranational programmes.

TURNKEY SOLUTION FOR YOUR PROJECT Complete and functional in the shortest delivery time • Fencing and security: mobile fences, guard houses, security hut, manned security 24/24, alarm system and video surveillance • Utilities: electric generators, fresh and sewage water supply, waste empty services, waste tanks • Communications: internet, data, phone, IT solutions • EHS solutions: fire extinguishers, smoke detectors, first aid kits, FPE kit, lighted signs, signs • Work spaces: offices, meeting rooms, lockers • Accommodations spaces: dormitories, canteens, laundries and dryer spaces • Sanitary spaces: sanitary units, eco toilets • Storage solutions: lighted storages, units with shelves and secure locks • Equipment: telehandler, crane, nacelle, light towers • Project management, maintenance / guarantee, delivery and installations services

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Depots: Bucharest, Constanta, Iasi No. 4 Bucharest Ring Road, Magurele, Ilfov County T: 021.457.44.55 F: 021.457.46.53

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Bucharest International Energy Charter Forum Combating energy poverty and providing access to affordable energy services for all 58

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The Bucharest International Energy Charter Forum, jointly organised by the International Energy Charter and the Government of Romania on June 6-7, brought together high-level politicians, officials and technical experts from Member and Observer countries of the International Energy Charter including Malta, Georgia, Azerbaijan, Mongolia, Turkmenistan, Pakistan, Jordan and China. elegates discussed ways in which D investment in energy efficiency could be ramped up and targeted towards addressing energy poverty. The Forum aimed to inspire action on sharing the best solutions concerning financing possibilities and the best practices used in the implementation of energy efficiency programs and projects, particularly in low income areas. The event was opened by the Energy Charter Secretary-General Dr Urban Rusnák alongside the Romanian Energy Minister Anton Anton and the State Secretary within the Ministry of Energy and Chairman of the Energy Charter Conference Iulian-Robert Tudorache. In his opening address, the Romanian Energy Minister made clear why targeting energy poverty is a priority for Romania. “The implementation of energy efficiency measures with substantial impact in energy poverty eradication stays as an energy policy objective for Romania because we consider that combating energy poverty, inadequate homes and climate change together will bring an added value to our economy and to our citizen,” he underlined. Romania pursues a multi-pronged strategy to tackle energy poverty. “To make homes part of the solution, there is a need for support of local community energy projects that reduce energy poverty on the ground, to protect citizens unable to pay their bills and ensure access to energy and also to prevent disconnections of low-income and vulnerable households and ensure a minimum quantity of energy to all the people,” the minister affirmed. In his turn, the State Secretary pointed out that a new approach and rethink is needed in order to step up energy

efficiency investments. “Efficiency is about us using limited resources more responsibly, and more economically. It is not just a different way of doing, it is a different way of thinking and of living,” he mentioned. At the same time, Iulian-Robert Tudorache said that such a new approach needs to be underpinned by robust policy and legal frameworks without taking shortcuts. “It is necessary to not underestimate the existing issue and to try to consistently approach it by proper policies, from both a conceptual and a legal perspective,” the official noted. Secretary-General Dr Rusnak encouraged countries to accelerate action in order to establish attractive investment conditions for energy efficiency. Without such conditions countries risk being locked into the vicious circle of inadequate cost recovery, under-investment and lack of public support. Energy efficiency can open up a virtuous circle whereby energy efficiency investment can alleviate energy poverty while delivering other co-benefits including lower system costs and prices, improved economic conditions and greater public support. Deputy Minister of Economy and Sustainable Development of Georgia Giorgi Chikovani shared his country’s experience in establishing favourable conditions for attracting private investment. “We embarked upon a painful but necessary journey to ensure consumers’ energy prices recover costs. Raising consumers’ awareness of the value of energy and what it takes to provide services, and how energy efficiency can reduce these costs, has been key to gaining public acceptance of higher prices,” he stated. Minister for Energy and Water Management of Malta Joseph Mizzi

stressed the necessity to be very practical and to put words into action. Malta has adopted a number of initiatives to help low income households improve energy efficiency. The afternoon session elaborated on the details of developing practical policies and programmes with contributions from Romania’s National Energy Regulatory Authority and Romanian Fund for Energy Efficiency as well as the European Commission, Habitat for Humanity International, the University of Oxford, EU-BAC/ Honeywell, UNECE and the Copenhagen Centre for Energy Efficiency. Many countries and international organisations such as the International Energy Forum and the Black Sea Cooperation Organisation stressed the need for greater and continued cooperation with the International Energy Charter and its Members and Observers on the issue of alleviating energy poverty. Several experts underlined the importance of robust, transparent and coherent multilayer governance arrangements to enable effective housing renovation on the ground. “I am convinced that the path to a better sustainable future for all of us – one with less poverty, better life prospects for all, and a healthier environment should be based on the cooperation of all actors involved, the private sector, local authorities, financial institutions, research sector, end users and at a larger scale of all countries. Last and not least I would like to reaffirm Romania’s steadfast commitment to continued co-operation with all Energy Charter members following the principles of the Energy Charter Treaty towards a sustainable energy environment,” the Romanian Energy Minister concluded. 59

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FIFTH CESEC MEETING

Fifth CESEC High Level Group Ministerial meeting | Image Â© European Commission

Next steps towards enhanced regional cooperation 60

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ommissioner for Climate C Action and Energy Miguel Arias Cañete and Energy Ministers and representatives from 9 EU Member States and 8 Energy Community Contracting Parties participated in the fifth CESEC High Level Group Ministerial in Sofia on 29 June, and discussed the next steps of their enhanced regional cooperation in all energy-related matters. Cooperation under the Commission Initiative on Central and South-Eastern European Energy Connectivity (CESEC), launched in 2015, aims to strengthen solidarity and enable a safer energy supply for citizens and businesses across the region in the field of gas, electricity, renewables and energy efficiency. The meeting witnessed the signature ceremony for the start of investment and works for the Greece-Bulgaria Interconnector. This infrastructure link, a CESEC priority project, will be an important contribution to a wellfunctioning gas market and will enhance security of gas supply in the entire region. When completed in 2020, it will bring additional sources of gas to the South-East European region, notably Caspian gas through the future TransAdriatic Pipeline and Liquefied Natural Gas from Greece. The Greece-Bulgaria Interconnector is a Project of Common Interest and has received EUR 85 million in EU funds to date. “The high level political commitment we have witnessed today, for instance with the signature launching the start of construction works on the Bulgaria-Greece gas Interconnector, shows that the EU is serious about completing the energy infrastructure the region needs. Today’s meeting shows that we can cooperate very closely on issues of strategic importance and help the region seize the opportunities of the ongoing energy transition. Tapping into the potential of renewables and energy efficiency will not only promote competition and lower prices, but also decarbonise the region’s economies,” Commissioner for Climate Action and Energy Miguel Arias Cañete stated.

SYMBOLIC CEREMONY FOR THE START OF CONSTRUCTION WORKS ON BRUA Participants also took part in a symbolic ceremony for the start of construction works on the Romanian section of the Bulgaria-RomaniaHungary-Austria (BRUA) transmission system project. During the meeting, Romania’s Energy Minister Anton Anton highlighted the need for each state involved in BRUA development to simultaneously carry out works for the creation of this gas infrastructure necessary for Central and South-Eastern Europe. “I believe it is imperative for each country that will be transited by BRUA to advance in parallel with the construction of this gas pipeline. I think it’s in no one’s interest for things not to happen this way. Romania will comply with deadlines for BRUA and we will end the project in time. It’s a project that Romania is preparing extremely seriously and which is necessary not only for Romania, but also for the neighbouring countries. BRUA will make the connection between gas reserves in the Black Sea and all the states neighbouring Romania and, with its commissioning , there is a chance for other industries to develop,” Anton Anton underlined. Also, Miguel Arias Cañete said BRUA represents the fundamental infrastructure for the interconnection of gas networks between the states participating in the project and reiterated support granted by the European Commission to the development of this gas pipeline. “I am happy to see the excellent progress that Romania makes for the development of this pipeline. I congratulate all those contributing to BRUA development. Completion of this project will have huge benefits for all countries transited by it and therefore the European Commission supports this project. With BRUA, the security of gas supply will become real in this region, because this pipeline will allow reverse gas flows. I hope problems with Hungary will be solved, because it’s essential to successfully complete this

project. I congratulate all those working at this project,” Commissioner Cañete mentioned.

BACKGROUND In 2014, the Commission’s ‘stress tests’ revealed a region extremely vulnerable to a cut in gas supply by its largest, and often sole, supplier. Moreover, consumers have historically paid significantly more for their gas in this region compared to Central Western Europe. To solve these problems, the Commission launched the CESEC Initiative in 2015, with the aim of guaranteeing that all countries in Central and South Eastern Europe (Austria, Bulgaria, Croatia, Greece, Hungary, Italy, Romania, Slovakia and Slovenia) have access to a more varied mix of energy sources, and are properly interconnected to the rest of Europe. CESEC has proven instrumental in the process of integrating the region’s gas markets and has thus become a central channel for further consolidation across the energy sector. The CESEC ongoing priority gas projects are: The Trans-Adriatic Pipeline (gas pipeline from Greece to Italy via Albania and the Adriatic Sea); the Interconnector between Greece and Bulgaria; the Interconnector between Bulgaria and Serbia; the reinforcement of the Bulgarian transmission system; the reinforcement of the Romanian transmission system (part of the BRUA corridor); the LNG terminal in Krk, Croatia; and the LNG evacuation system towards Hungary. Other possible projects include: a connection of offshore Romanian gas to the Romanian grid and enhancement of the national system; a new Greek LNG terminal; and the interconnection between Croatia and Serbia. In September 2017, meeting in Bucharest, Ministers signed a Memorandum of Understanding which extended CESEC cooperation to electricity markets, energy efficiency and renewable development. 61

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Nuclear LTO to help Europe meet its climate goals FORATOM, the voice of the European nuclear energy industry, called on the European Commission and other EU institutions to recognise and reward the long-term operation (LTO) of nuclear reactors given its role in meeting Europe’s long-term climate goals during a workshop held on June 19 in Brussels. urrently there are 126 C operational nuclear reactors in 14 Member States, providing more than a quarter of the overall electricity production in the EU. The European Commission in its Nuclear Illustrative Programme (PINC) published in 2017 stated that nuclear is expected to maintain its significant role in Europe’s future energy mix up to 2050. The objective will require investment in nuclear LTO of around EUR 4050 billion by 2050. According to the 62

“Nuclear LTO pays off for a number of reasons. It incurs low capital investment costs, requires a relatively short realization time for upgrade works and – most of all – it enables a reliable, low-carbon and affordable source of electricity to be retained in the mix at lowest cost. If the European Union wants to meet its climate goals, nuclear LTO will play an indispensable role in the EU’s future energy mix. Therefore, the EU institutions should recognise and reward it with incentives for the benefits it brings to the system”. Yves Desbazeille, FORATOM Director General.

Commission, there are currently up to 50 nuclear reactors at risk of early closure over the next 10 years, assuming their operators don’t pursue LTO licences. “The early closure of 50 reactors would translate into slowing down significantly the decarbonisation of Europe, maintaining CO2 emissions at the current level and losing the equivalent of around 7 years of renewable energy expansion,” adds Yves Desbazeille. “Take a look at Germany, which is set to miss its 2020 emission targets by a wide margin. If the country had decided in 2011 to phase out 20 GW of coal plant capacity instead of nuclear, it would have reached its emission targets and now it could be rightly recognised

as the European climate champion”. The workshop ‘Shaping Europe’s Energy Mix of the Future – A Role for Nuclear LTO’ gathered together stakeholders from various EU institutions, national regulators, and many representatives from the nuclear industry. Invited speakers discussed the current status of LTO and its role in Europe’s future energy mix, the industry’s needs and challenges, the contribution of LTO to securing energy supply in the EU and fighting climate change, its role in preserving nuclear expertise and maintaining highly-skilled jobs, and the impact of LTO on national economies. energyindustryreview.com

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Transelectrica has prepared its plan for NPS development New retrofitted energy groups will be commissioned in the following period, with a net available power of at least 5,100 MW, which will replace the thermal power groups decommissioned, according to forecasts of the Power Transmission Grid (PTG) Development Plan for 2018-2027, recently prepared by Transelectrica based on data sent by energy producers. The new power transmission grid development plan takes into account an increase in energy consumption by 7.9% by 2027 and an increase in the interconnection capacity from 7% of the production capacity currently installed to over 9% in 2020. Adrian Stoica

omania is part of the northR south electricity interconnection in Central and Southeast Europe (‘NSI East Electricity’). A chapter of the Plan is dedicated to Projects of Common Interest (PCI) approved at European level under Regulation of the European Commission, i.e.: The Project 138 ‘Black Sea Corridor’ and the Project 144 ‘Mid Continental East Corridor’. By implementing these projects, Romania’s interconnection capacity will increase from 7% of currently installed production capacity to more than 9% in 2020 and 15% in 2030, according to Transelectrica representatives. Note that the targets set 64

by the European Commission for the degree of interconnection to be achieved on the cross-border sections of the Member States are 10% by 2020 and 15% by 2030. At present, 80% of existing thermal power groups have exceeded their operational life span. Up to now, there have been some retrofitting and/or upgrades for thermal power groups in the national power system (NPS), but very few are equipped with emission reduction facilities to enable them to comply with EU rules, the cited document shows. Thus, for the period 2018-2027, the grid development

analysis took into account a Baseline Scenario for the evolution of generation capacities which includes a program of definitive operating withdrawals of the thermal power groups, when the lifespan is reached or due to failure to meet the requirements of the European Union on pollution, totalling 4,996 MW of available net power, of which 2,714 MW by 2022 inclusively. In some cases, the disposal of groups is associated with the intention to replace them with new, more performing groups. New capacities must have a high global efficiency, be flexible and ensure compliance with the conditions imposed under the network code and energyindustryreview.com

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the related regulations, at European level, Transelectrica shows in the forecast prepared. The company estimates that, in the following ten years, total capacities of over 2,800 MW will resume operation and new capacities with a power of 2,300 MW will appear, this without taking into account the potential new investments in the renewable sector. “According to this development scenario, in the same period four groups from Turceni, three groups from Rovinari, one group from Craiova and one nuclear power group from Cernavoda (stopped for retrofitting to extend the lifespan) will be recommissioned, totalling a net available power of 2,841 MW. As regards the intentions to install new groups, according to information sent by the existing producers, they total a net available power of around 2,306 MW, excluding projects based on renewable energy sources (RES),” Transelectrica shows. Excluding the new renewable energy capacities, Transelectrica lists as new capacities that will emerge in the following ten years the nuclear groups 3 and 4 from Cernavoda NPP, available towards 2027; new gas-fired groups (gas turbines or combined cycle, of condensation - Romgaz is carrying out an investment in a gas-fired power plant with combined cycle in Iernut, with a capacity of 400MW) or cogeneration (Bucharest) and the completion of hydropower plants in various stages of execution.

GREEN VERSION Transelectrica has also analysed for the new power grid development plan a scenario based on renewable energy: the installed capacity of wind and photovoltaic power plants for 2022 would be 5,000 MW, and by 2027 it would reach about 6,000 MW. This ‘green’ version is characterized by increasing power installed in power plants, as a result of economic and financial conditions conducive to the implementation of energy policies promoted at the EU level (integration of renewable sources, increasing energy efficiency, CO2 emissions reduction,

Estimated evolution of renewable capacities Commissioning of wind power plants with an aggregate installed power of: • 3,400 MW by 2022 and 3,600 MW by 2027 in the baseline scenario; • 3,500 MW by 2022 and 4,000 MW by 2027 in the green scenario; Commissioning of photovoltaic (solar) power plants with an aggregate installed power of: • 1,500 MW by 2022 and 1,600 MW by 2027 in the baseline scenario; • 1,500 MW by 2022 and 2,000 MW by 2027 in the green scenario.

development of smart grid solutions and energy storage capacities), in conjunction with the evolution of electricity consumption. An alternative scenario, considered favourable by Transelectrica representatives, foresees a cumulative increase in electricity consumption by about 9.75%, as follows: 5.08% in the medium term (2022) and other around 4.67% in the long term (2027).

NEW PROJECTS The new plan includes 77 investment projects, also provided in the plan approved in 2016, and nine new investment projects, according to the document presented by Transelectrica. Following analyses made by the Transmission and System Operator - TSO, it resulted that 24 investment projects, also provided in the plan approved in 2016, plus other 3 new investment projects are necessary to ensure supply safety, to integrate production of new power plants, including those using renewable energy sources and to increase the interconnection capacity. Also, from the category of projects whose target is to upgrade the grid, 52 investment projects resulted as being necessary

(also provided in the plan approved in 2016), plus six new investment projects. These analyses led to the identification of technical solutions for strengthening the PTG, i.e. investment projects necessary to eliminate congestions on the main directions of power flows between the production areas in the east of the country and consumption areas in the west, corresponding to the following power transmission corridors: the northsouth corridor linking Dobrogea and Moldavia; the east-west corridor linking Dobrogea and Bucharest (including the adjacent area); the east-west corridor linking Moldavia and the western part of the PTG, Transelectrica representatives mention.

OUTDATED GRID Currently, 80% of the existing thermal power groups have their lifespan exceeded, and almost 84% of overhead lines (OHL) have the commissioning year during 1960-1979, in conditions in which the estimated economic lifecycle of the lines is 48 years. Of the total installed power in transformers/self-transformers about 21% was commissioned between 1960 and 1979, 22% between 1980 and 1999, and 57% after 2000. 65

Egypt Megaproject completed in record time n collaboration with the I Egyptian Ministry of Electricity and Renewable Energy, Siemens and its consortium partners, Orascom Construction and Elsewedy Electric, announced the completion of the Egypt Megaproject in record time. The parties celebrated the combined cycle commissioning and the start of operations at the Beni Suef, Burullus and New Capital power plants. The stations will add a total of 14.4 gigawatts (GW) of power generation capacity to Egypt’s national grid, enough power to supply up to 40 million people with reliable electricity. With this milestone, Egypt and Siemens have set a new world record for execution of modern, fasttrack power projects, delivering 14.4 GW of power in only 27.5 months. A single combined cycle power plant block with a capacity of 1,200 megawatts typically takes approximately 30 months for construction. For the Egypt Megaproject Siemens in parallel built twelve of these blocks in record time and connected them to the grid. “The record-breaking completion of our 66

Megaproject in Egypt will not only transform the power landscape in Egypt, but will also serve as a blueprint for building up power infrastructure in the Middle East and all over the world,” said Joe Kaeser, President and CEO of Siemens AG. “This Megaproject is also setting the benchmark for trustful and reliable cooperation with our customer and our partners. The leadership of President al Sisi and his team in this project has been remarkable. We look forward to apply this unique performance model also to other countries in their efforts towards reliable, affordable and sustainable power systems.” According to Dr Mohamed Shaker, the Egyptian Minister of Electricity and Renewable Energy, “The completion of the power plants is a significant milestone in the government’s strategy to modernize energy infrastructure in Egypt to drive industrial growth and economic progress,”. “This is also why the plants were built in select locations across the country to serve the growing demand for electricity among households, businesses and industries. This new power infrastructure will serve as the backbone for economic prosperity in Egypt for years to come,” he underlined.

Each of the three power plants are powered by eight SGT5-8000 H-class gas turbines, 4 steam turbines, 12 generators, 8 Siemens heat recovery steam generators, 12 transformers as well as a 500-kilovolt gas-insulated switchgear. To improve the resilience of Egypt’s power grid, Siemens has successfully energized six substations that will transmit electricity generated by the new power plants. The company has also provided training to 600 Egyptian engineers and technicians, who will be responsible for operating and maintaining the plants, helping to expand skills and knowledge of the local workforce. “Today, we are proud that Siemens technology will generate power at the three combined cycle plants, reaching a total net efficiency of over 61 percent, ensuring the power generated is reliable and benefits millions of Egyptians. Our efficient H class gas turbine technology will also help the country save over USD 1 billion in annual fuel costs through better fuel utilization,” Karim Amin, Global Head of Sales, Power and Gas Division, Siemens AG, added. energyindustryreview.com

CBS Screw Blowers: Powerful Performance in a Compact Package Screw blowers deliver the most efficient performance for the low-pressure range. And the CBS from Kaeser now brings all the advantages of screw blower technology to lower flow rate applications. CBS BLOWER Rotary screw technology for blowers from Kaeser: the powerful CBS series delivers quiet operation and saves energy costs. For municipal or industrial wastewater treatment plants requiring compressed air with differential pressures up to 1100 mbar, the CBS screw blower is the perfect solution – with power from 7.5 to 22 kW and flow rates from 2.3 to 12.2 m³/ min. Thanks to its many advantages, the CBS also shines in applications such as production of aeration air in water treatment and for bioreactors, flotation and fluidisation. It’s up to 35 percent more efficient compared to conventional rotary blowers and even offers significant energy advantages in the two-digit range compared to other screw and turbo blowers on the market. One screw blower is so powerful that it efficiently covers

the control range of two or three rotary blowers. This impressive efficiency is achieved in part through the use of the highly successful Sigma Profile rotors known from the rotary screw compressor segment. Even at maximum speeds, these rotors ensure minimal transmission loss and lowest-possible energy costs. The energy efficiency of the CBS, its low maintenance requirement and the ability to set up CBS units directly adjacent to one another make this series especially advantageous for continuous operation. They come equipped with integrated frequency converter or star-delta starter, as desired. The screw blowers are delivered as connection-ready machines (with power electronics and the Sigma Control 2 controller) that can be put into operation immediately, without additional effort.

INTELLIGENT CONTROL The Sigma Control 2 blower controller, which is also integrated, ensures comprehensive monitoring and straightforward connection of each individual machine to operational communication networks along the principles of Industrie 4.0. This smart controller also makes it possible to rapidly integrate the blowers into the Sigma Network, unlocking the advantages of the Sigma Air Manager 4.0 for use in lowpressure blower stations as well. KAESER KOMPRESSOREN S.R.L. Address: 179 Ion Mihalache Blvd., 011181 - Bucharest Tel.: +40 21 224 56 81 Fax: +40 21 224 56 02 Web: www.kaeser.com Email: info.romania@kaeser.com 67

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Government boosts purchases of electric cars SUBSIDIES FOR THE EXPANSION OF THE E-CHARGE NETWORK Adrian Stoica 68

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The Environmental Fund Administration (AFM) has approved the Financing Guidelines for the ‘Program for the reduction of emissions of greenhouse gases in transport, by promoting the infrastructure for energy-efficient road transport vehicles: recharging stations for electric vehicles’. Through this program, the Government of Romania will subsidize with up to RON 190,000/unit the installation of charging stations for electric vehicles by the mayoralties of county capital cities and by Bucharest Municipality. he money to fund this ambitious T program comes from the sale of greenhouse gas emission allowances allocated to Romania by the European Union and will be managed by the AFM. “The maximum amount financed for installing a high-power recharge station is RON 190,000, which represents 90% of the total eligible expenditures,” the document substantiating the Financing Guidelines shows. The maximum amounts that can be granted to each applicant will be determined depending on the number of inhabitants, according to the data provided by the National Institute of Statistics at the launching of the project submission session.

WHAT EXPENSES ARE ELIGIBLE This program finances recharging stations consisting of at least three high power recharge points, fed by the same point of delivery from the public distribution network, two points of which enable DC charging, each at a power of ≥ 50 kW and one point that allows AC charging at a power> 22 kW of electric vehicles. “Subject to the cumulative fulfilment of the eligibility criteria, the administrative territorial units - county capitals and Bucharest

Municipality are eligible to participate in the program,” the guidelines show. According to it, eligible costs are those incurred for the purchase of recharging stations for electric vehicles, with construction works and assembly of recharging stations, those related to electrical installations, except the costs related to the installation of connection to the delimitation point, which will to be shown separately in the general estimate, the expenses incurred for the realization and installation of the information panel, VAT related to the project, if it was requested and it is not recoverable, repayable or compensated by any other means according to the legal provisions, the expenses with new intangible assets (patents, licenses, knowhow), various unforeseen expenses, as well as expenses for the feasibility study and the technical project, up to a maximum of 4% of the eligible value of the ‘basic investment’ chapter.

NEW STATIONS IN BUCHAREST Bucharest Municipal Energy Company (Romanian: Compania Municipala Energetica Bucuresti SA), established last year by the General Council of Bucharest Municipality (CGMB), contracted at the end of March an opportunity study on the

project of building a total of 40 charging stations for electric vehicles. Green vehicle sales rose 62.4 percent in the first three months of 2018, compared to the same period in the previous year, to 661 units, according to data from the Association of Automobile Manufacturers and Importers (APIA). According to official data, of this total 201 are 100% electric cars, which means a 400% increase over the first three months of 2017, and 460 units are hybrids (+25.7%). APIA statistics show that last year the share of electric and hybrid cars in the total sales of new units reached 2.2%, their number reaching 2,811 units, up 136.7% over the previous year.

MONEY FOR ECO PUBLIC TRANSPORT Also, for the expansion of clean urban mobility, the Executive has recently approved an emergency ordinance allocating around EUR 400 million from the European funds at its disposal for the purchase of trams, trolley buses or electric buses, including recharging points, and equipment for smart transport systems and the endowment of local authorities with Diesel Euro 6 school buses for the transport of students. 69

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Co-creating smart and sustainable cities in Europe FOCSANI IS ON THE IRIS LIST 70

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Across Europe, cities are accelerating their transformation towards cleaner, friendlier places able to respect and use resources more efficiently. IRIS - Integrated and Replicable solutions for co-creation in Sustainable cities - is at the forefront of this change and announces itself as the newest addition to the European Commission Smart Cities and Communities (SCC) lighthouse projects.

RIS is a HORIZON 2020 I EU funded project beginning October 2017 for a duration of five years. The project has been developed around three lighthouse cities - Utrecht (The Netherlands, coordinator), Nice (France), and Gothenburg (Sweden) who will work as collaborators and testbeds for follower cities Vaasa (Finland), Alexandroupolis (Greece), Santa Cruz de Tenerife (Spain) and Focsani (Romania). Each city will draw upon a mix of universities and research organisations, local authorities, innovation agencies and private expertise to accelerate entire communities to adopt ambitious energy, mobility and ICT initiatives. A fast-growing percentage (currently 75%) of the EU population lives in urban areas, using 70% of available energy resources. In the global competition for talent, growth and investments, quality of city life and the attractiveness of cities as environments for learning, innovation, doing business and job creation, are now the key parameters for success. Therefore, cities need to provide solutions to significantly increase their overall energy and resource efficiency through actions addressing the building stock, energy systems, mobility, and air quality. The European Energy Union of 2015 aims to ensure secure, affordable and climate-friendly energy for EU citizens and businesses among others, by bringing new technologies and

renewed infrastructure to cut household bills, create jobs and boost growth, for achieving a sustainable, low carbon and environmentally friendly economy, putting Europe at the forefront of renewable energy production and winning the fight against global warming. However, the retail market is not functioning properly. Many household consumers have too little choices of energy suppliers and too little control over their energy costs. An unacceptably high percentage of European households cannot afford to pay their energy bills. Energy infrastructure is ageing and is not adjusted to the increased production from renewables. As a consequence, there is still a need to attract investments, with the current market design and national policies not setting the right incentives and providing insufficient predictability for potential investors. With an increasing share of renewable energy sources in the coming decades, the generation of electricity/energy will change drastically from present-day centralized production by gigawatt fossilfuelled plants towards decentralized generation, in cities mostly by local household and district level RES (e.g PV, wind turbines) systems operating in the level of micro-grids. With the intermittent nature of renewable energy, grid stress is a challenge. Therefore, there is a need for more flexibility in the energy system. Technology can be of great help in linking resource efficiency and flexibility in energy supply and demand with innovative,

inclusive and more efficient services for citizens and businesses. To realize the European targets for further growth of renewable energy in the energy market, and to exploit both on a European and global level the expected technological opportunities in a sustainable manner, city planners, administrators, universities, entrepreneurs, citizens, and all other relevant stakeholders, need to work together and be the key moving wheel of future EU cities development. In the light of such a transiting environment, the need for strategies that help cities to smartly integrate technological solutions becomes more and more apparent. Given this condition and the fact that cities can act as largescale demonstrators of integrated solutions, and want to contribute to the socially inclusive energy and mobility transition, IRIS offers an excellent opportunity to demonstrate and replicate the citiesâ&#x20AC;&#x2122; great potential.

5 IRIS TRANSITION TRACKS The overall concept of IRIS is the Transition Strategy comprising five tracks that together provide a universal yet versatile framework to address both common and district specific challenges. Within these five tracks, IRIS envisions to demonstrate a set of integrated solutions built on top of both mature and innovative technologies. The integrated solutions are defined on the basis of a common-shared know-how interchange among the lighthouse and follower cities, 71

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and planning of replication from the early beginning of the project. Track #1: Smart renewables and closed-loop energy positive districts Integrating: • high share of locally produced and consumed renewable energy at district level; • energy savings at building level reducing the citizens’ energy bills; • energy savings at district level. Track #2: Smart energy management and storage for grid flexibility Integrating smart energy management and renewable energy storage for: • maximum profits of renewables power/heat/gas; • maximum self-consumption reducing grid stress and curtailment; • unlocking the financial value of grid flexibility. Track #3: Smart e-mobility sector Integrating electric vehicles and e-cars sharing systems in the urban mobility system offering: • local zero-emission mobility; • lower household mobility costs; • smart energy storage in V2G car batteries. Track #4: City Innovation Platform (CIP) Cutting edge information technology and data framework enabling: • the above-mentioned solutions maximizing cost-effectiveness of the integrated infrastructure. Next, the City Innovation Platform with open standards-based application program interfaces (APIs) provides meaningful data and information services for households, municipality and other stakeholders, allowing for a Data Market with new business models. Track #5: Citizen engagement and cocreation Design and demonstration of feedback mechanisms and inclusive services for citizens to achieve that they are intrinsically motivated to: • save energy; • shift their energy consumption 72

• •

to periods with redundant renewables; use electric vehicles; change the vehicle ownership culture towards a use or common mobility assets culture.

FOCSANI AT A GLANCE Focsani is a medium sized city - the capital of Vrancea County. Focsani city is situated at the border between Moldova and Muntenia historical regions of Romania. The city is committed to become a smart and sustainable urban centre, starting from efficiently tackling all local issues (economic, social, administrative, environmental etc.) through an integrated innovative approach. Together with its citizens, the key stakeholders and urban utilities’ providers, the municipality is focused on: increasing buildings’ energy efficiency and the living standards; mitigating CO2 footprint by reducing primary energy resources consumption and implementing adequate RES, in areas of interest with no DHS; developing an eco-smart public transport, efficiently managed and monitored; implementing an ICT decision-based management tool in order to develop a transparent and efficient public administration process; securing its citizens’ safety and enhancing their level of knowledge, awareness and engagement; maintaining a low unemployment rate by increasing the economic potential of the city (SME development; attracting foreign investment; tourism).The Municipality gained experience in running several investment project financed by Preaccession and Structural Funds, being prepared to submit new project proposals for the next period.

RELEVANT APPROVED PLANS The strategic objectives of Focsani SDS will be reached through concrete measures and actions in the following fields of energy with: 1. district heating system upgrading

and retrofitting ongoing program (two applications were already submitted within ESIF and a governmental program ‘District Heating 2015-2020 – Heat and comfort’); 2. an eco-efficient public lighting, including a tele-management system; 3. energy efficient buildings (public buildings, residential - singlefamily homes, condominiums). All the above will be connected with smart metering and a dispatching centre for field data collecting; electricity, heat, natural gas and water consumption, water – air – soil pollution. In transport sector: 1. a multi-modal transport infrastructure at metropolitan level; 2. an intelligent traffic management, including video surveillance; 3. an eco-smart public transport, including the acquisition of 20 electric busses (small and medium capacity) and the development of the charging infrastructure (20 stations); 4. green parking areas will be designed and constructed. In addition, a smart ICT decisionbased management tool will be implemented in order to develop a transparent and efficient public administration process, including nonbureaucratic proficient public services. The tool has to be designed: 1. to gather data collected in field, process them and draw reports/ assess KPIs, while ensuring a user interface at the general public level; 2. to ensure open access to different type of information, thus enhancing the level of citizens’ trust and understanding, challenging them to action and rational use of resources. Focsani is willing to become a smart and sustainable urban centre, focused on an integrated innovative approach of all local problems. Together with the energyindustryreview.com

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key municipal stakeholders and urban utilities’ providers, the municipality is committed to increase the buildings’ energy efficiency and the living standards, reducing CO2 emissions and securing its citizens’ safety.

A GOOD EXAMPLE OF ENERGY MANAGEMENT In IRIS Smart Cities flagship, Métropole Nice Côte d’A zur is proving essential to developing a string of near zero energy districts using the latest in smart grids, energy management and storage, data sensors and renewables – amongst other tech – generating a great deal of international interest from actors wishing to learn and replicate such initiatives around Europe and beyond.

Delegates of CLUSGRID project – members of the international cooperation and competitiveness hub European Cluster Collaboration Platform (ECCP) - from Poland, Bulgaria, Spain met in France on 7-8 June 2018. They met together with IRIS partners and learn about the urban transformation taking place first hand. It was also an excellent opportunity to discuss about industrial partnerships – whilst contributing somehow to identification potential replication sites for IRIS smart city solutions. Métropole Nice Côte d’A zur presented the overall goals and aims of IRIS, illustrated their global vision for digital services through a City Innovation Platform and put the longterm opportunities for the region into

perspective. The international group had some particularly interesting exchanges on digital acceptance across cultures for everyone to take away. CLUSGRID partners had a full-visit of the Smart City Innovation Center (SCIC), an open technological platform that gives real time data visualisations of air quality, noise, water and energy consumption and many more variables from across the entire city. The SCIC is a model for public-private collaboration; accessing over 3000 sensors used in the territory. The innovation data center is one of the many initiatives connecting sustainable development with green technologies and data to improve services and the environment in Métropole Nice Côte D’A zur.

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Biomass energy in Romania and the new target of 32% Although we are not yet in 2020, the magical trinity of the European legislative package 20-20-20 is already history. The European Commission established, in June, that 32% is the new god that the energy industry in the old continent should worship. In other words, 32% of energy consumed at the level of the Community bloc in 2030 will have to come from renewable sources. Justin Iancu

n view of the 20% target I established for 2020, Romania is doing very well, because it exceeded this target as early as 2016. But the new target is a greater challenge than the previous, because, for several years, the installation of new photovoltaic of wind power plants have stagnated and that’s because the often and not infrequently unfortunate (in the point of view of green energy producers) legislative changes. However, from the landscape of renewable energy sources, where the stars are wind and solar energy, one is missing that is found abundantly in Romania. Namely, biomass. Will biomass be able to contribute substantially to reaching the ambitious 32%? Probably many don’t know that there 74

is a so-called Master Plan regarding the use of biomass, which was prepared a few years ago by the Ministry of Economy of Romania, NL Agency from the Netherlands (a department of the Dutch Ministry of Economic Affairs that implements government policy for sustainability, innovation, and international business and cooperation) and by ENERO Romania (an independent non-profit technical consultancy and research centre in the field of energy, established in 1999). According to this plan, “Romania has a great renewable energy potential, especially hydro, wind and biomass. Biomass will play an important role in the National Action Plan for Renewable Energy, which must be developed within the framework established by the Directive on Renewable Energy”. Even if we are not yet in 2020,

a simple look at the website of Transelectrica, the operator of the national power system, makes us be sceptical about this potential of biomass. The several dozen MW (just over 30) installed in biomass power plants do not cover even 1% of national consumption. In other words, this resource too little capitalized on, about which the Ministry of Energy has often stated it has a real potential, basically doesn’t matter when we talk about Romania’s electricity and heat production and consumption.

BIOMASS, AN UNKNOWN, EVEN IF... We have to look at the facts and admit that currently Romania does not have clear policies or objectives for biomass. However, there is a possibility energyindustryreview.com

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for the national energy strategy, which will be completed this year, to provide for concrete objectives to tap this potential. The old energy strategy addressed the biomass subject in general terms. In fact, it did not even clearly specify what biomassâ&#x20AC;&#x2122; contribution should be in Romaniaâ&#x20AC;&#x2122;s final energy consumption. However, even if this may seem paradoxical, Romania has a great biomass potential, coming especially from agricultural (60%) and forest (20%) waste. But this biomass is used only for heating, which should be no surprise for anyone, given that of the almost 8.5 million homes in Romania

only one third have access to gas networks. The other two thirds use gas cylinders or wood for heating or cooking. In fact, precisely the poor penetration of gas in Romaniaâ&#x20AC;&#x2122;s homes should come as a surprise, given that Romania is one of the few European countries that benefit from its own gas resources and has one of the lowest degrees of dependence on imports. Currently, there are very few investors who have dared to invest in modern technologies based on sawdust to generate heat or in wood gasification technologies for cogeneration. An example is that of the thermal power

plant in Suceava, which operates on biomass and natural gas, in which Adrem Invest has invested over EUR 80 million; this being one of the most important investments in Romania that use biomass. Circumscribed to renewable energy, biomass could be used the best to produce thermal energy, which Romania is in great need of, and one of the most productive plants from which biomass could be obtained is corn. Moreover, over the past few years, bioenergy accounted for almost 70% of global consumption of energy from renewable sources and around 15% of total energy consumption.

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... ROMANIA HAS A SIGNIFICANT POTENTIAL FOR BIOMASS According to data from the European Commission on renewable energy sources used by the Member States, biomass ensures 18% of renewable energy consumption. The largest share is held by hydropower (46%), followed by wind energy (26%), biomass (18%), solar energy (9%) and geothermal energy (1%). In countries such as Estonia, Latvia, Finland and Sweden, bioenergy has an extremely high percentage of energy consumption, of over 25%. Biomass accounts for approximately 15% of primary energy sources used globally and does not contribute to increasing carbon dioxide concentrations in the atmosphere. However, it has an impact on the 76

reduction of emissions of greenhouse gases. Biomass can become a source of pollution when it is not used, as it degrades the land on which it is abandoned. Also, biomass becomes a source of pollution if it is used improperly (for example when it is burned in equipment with low efficiency and high emissions of pollutants). According to data from the Romanian Association of Biomass and Biogas (ARBIO), even if Romania produces 200 million tons of waste per year, biomass and biogas hold a share of only 0.62% of the total amount of energy produced in our country. Even if the production of energy based on biomass is extremely profitable, a big issue is represented by the high costs necessary to

install and commission a biomassfired cogeneration plant. The initial investment is high, in conditions in which biomass and biogas projects represent, specifically, a genuine factory, with many employees and non-stop production. Waste collection is, at the same time, a costly activity, and for raw material there are purchase or planting costs. In terms of energy potential of biomass, Romaniaâ&#x20AC;&#x2122;s territory was split into eight regions: Danube Delta (Biosphere Reserve), Dobrogea, Moldavia, Carpathian Mountains (Eastern, Southern, Apuseni), Transylvanian Plateau, Western Plain, Subcarpathians and South Plain. Therefore, we have potential. Letâ&#x20AC;&#x2122;s see how and if we know to tap on this potential. energyindustryreview.com

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How blockchain technology works in the energy sector Q&A WITH ARMAND DORU DOMUTA Armand Doru Domuta is the CEO of Restart Energy and President of the Romanian Blockchain Association (RBA) - an organization centred around raising awareness of the benefits of blockchain systems and promoting blockchain technologies in Romania and abroad, through various events and presentations. With over 10 years of experience in the European energy market and a deep knowledge of renewable energy solutions, Armand has developed over 500 renewable energy projects — from greenfield to operation — consistently taking Restart Energy to new heights, with exponential growth in deregulated EU environments and acquisition of new customers at an unprecedented rate. He explains clearly how blockchain technology works in the energy sector. 78

ou have recently been elected Y President of the Romanian Blockchain Association. What are the mission and goals of your association? The Romanian Blockchain Association is a non-profit organization that has been founded for educating the society and for the promotion of blockchain technology in the public and private sectors of Romania. Our mission is to create value by bringing together the worldwide blockchain community’s best practices for adoption by the Romanian society. Our vision is to help position Romania at the forefront of blockchain technology, by fostering a blockchain technology hub within the country. We are the Romanian advocates for blockchain technology and our role is to promote blockchain friendly regulation in Romania. While Blockchain has been around since 2009, last year marked energyindustryreview.com

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a turning point in global recognition for its potential applications. How are things going in Europe and in Romania? Blockchain is doing very well in Europe; even going so far as to have the full backing of the European Commission. The majority of countries within the EU have already signed the European Blockchain Partnership - a pan-European initiative that aims to promote the technology cross-border, as well as internally. Romania has recently joined the signing member states - therefore showing our national commitment to IT and blockchain in particular. It is the RBAâ&#x20AC;&#x2122;s aim to educate the public at large on the potential of this positive and disruptive technology. Please explain to us how blockchain technology works in the energy sector. In the energy sector, blockchain is especially noteworthy for its ability to cut administration costs, especially when it comes to the involvement of third parties, as well as improve prediction efficiency when coupled with specialized hardware such as smartmeters. Furthermore, a more efficient and localized energy economy can be fostered by integrating blockchain based smart contracts with IOT and prosumers; coalescing into a local smart energy grid that has the longterm potential of reducing - or even eliminating - dependence on fossil fuels, as well as increasing the independence of said local grid from outside energy sources. According to a recent report from GTM Research, the first blockchain in energy transaction took place in April 2016 in Brooklyn, New York. Today, there are 122 organizations involved in blockchain technology and 40 deployed projects. Between Q2 2017 and Q1 2018, over USD 300 million was invested in the blockchain in the energy industry

worldwide. How would you describe the status of this business in Europe and Romania? In one word - prospering. There is more government involvement, there is more European involvement, and the public at large is seeing the benefits of blockchain more and more - helped by organizations such as ours. There have been some companies that have attempted to merge energy and blockchain already. Some have successfully done so, within certain niche roles; however, most have had a narrow focus and havenâ&#x20AC;&#x2122;t offered the disruption that the technology itself could potentially provide. This was one of the founding principles of the Restart Energy Democracy project - the grand idea of democratizing the energy sector and bringing consumers and producers closer together than ever before, using peer-to-peer blockchain technology. How could energy companies using blockchain technology make existing processes more efficient? The answer is two-fold. On the macro scale, interfacing smart meters with blockchain-based smart contracts leads to better prediction of energy consumption patterns and therefore a more efficient system overall; reducing dependence on the spot market. Secondly, smart grids - blockchainpowered local grids that link prosumers in the same area - can increase energyefficiency by replacing traditional largescale power plants within their local area, thereby vastly reducing the energy loss that occurs over traditional longdistance energy transmissions, as well as the rather significant costs associated with the long-distance transmission network itself and its maintenance. How is the regulation impacting the take-up of blockchain in Romania? Are we expecting new legislation in this regard? As a member of the European Union, especially one that recently signed onto

the European Blockchain Partnership, Romania has shown its commitment to implementing and growing blockchain within its borders. Due to the strong national IT sector, one can accurately surmise that this will lead to a natural adoption of blockchain within the country. The Romanian Blockchain Association aims to help speed this process along. In terms of the energy industry, Romania has recently adopted into law a proposition from January this year, that effectively enables prosumers to exist within Romanian law. Anyone that produces under 100kW is now legally able to inject and sell this energy into the grid, without requiring further paperwork. This is quite different from the situation only a couple of months back, when prosumers had to register as producers with all the paperwork that entailed. This effectively enables local blockchain-powered smart-grids to exist within the country, as well as bolstering renewable energy production - with all the benefits that entails. What are the effects of the new technologies - especially blockchain on reducing energy poverty? Full-scale power plants are an expensive endeavour, especially for lowpopulation, disenfranchised areas. Such plants require specialized equipment and personnel to maintain, as well as a constant supply of specific fuel. These can be hard to come by in isolated areas. Smart-contract-powered blockchain technology, coupled with smart grid technology, can much more easily be adapted to such conditions, at a lower cost, as well as not needing the aforementioned specialized long-term workforce. Should governments see this potential and properly invest in it with the right programs, energy poverty can be greatly reduced, around the world. This approach also has the benefit of being a green, zero-carbon approach to the problem - benefiting everyone in the long run. 79

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First application of blockchain technology in the offshore drilling industry Diamond Offshore Drilling recently announced the launch of its Blockchain Drilling service, the first application of blockchain technology in the offshore drilling industry. This service drives efficiencies and enables oil and gas operators to reduce their total cost of ownership. he Company’s Blockchain T Drilling service provides an immutable platform for the optimization of well construction activities, including drilling related services, materiel and the supply chain, both shore-based and offshore. Users can access and analyze performance from any web accessible device for near real-time TCO management. The cloud-based Blockchain Drilling platform is scalable and the baseline system consists of five modules to drive efficiencies and eliminate waste: • Supply Chain & Logistics Manager - provides transparency, provenance and immutability across the entire supply chain • Well Planner - displays actual versus planned time-to-depth data with detailed events • Spend Monitor - aggregates total well construction costs versus budget • Dynamic Critical Path - shows 80

real-time bottlenecks as they develop • Performance Tracker - monitors operational key performance indicators (KPIs) Configurable modules can be adapted on the Blockchain Drilling platform for individual well or multi-well campaigns based on customer needs. The platform will be used in the procurement stage through the construction, completion and production phases. Tracking, planning, and optimizing the well(s) through each phase provides the ability to reduce spend, eliminate waste, improve processes, and better align all parties needed to deliver a well successfully. Developed in partnership with Data Gumbo Corporation, the Blockchain Drilling service will be implemented fleetwide on Diamond Offshore drilling rigs, creating the industry’s first Blockchain Ready Rig™ fleet. “Data Gumbo is excited to partner with Diamond Offshore, applying our industrial

Blockchain as a Service (BaaS) solution in support of this first-of-its-kind Blockchain Drilling platform,” said Andrew Bruce, President and CEO of Data Gumbo Corporation. “The Blockchain Drilling platform provides our customers with an economical, scalable foundation for building blockchain applications to optimize their projects while reducing TCO,” added Marc Edwards, President and CEO of Diamond Offshore. “With the implementation of this service, together with recently released innovations, Diamond is further demonstrating our thought leadership in the offshore drilling market.” Diamond Offshore is a leader in offshore drilling, providing contract drilling services to the energy industry around the globe. Data Gumbo provides a Blockchain as a Service (BaaS) to industry. Data Gumbo Corporation is headquartered in Houston, Texas with offices in Stavanger, Norway. energyindustryreview.com

TECH

World’s first hydrogen fuel cell passenger train lstom’s Coradia iLint, the world’s A first hydrogen fuel cell passenger train, has been granted approval by the German Railway Office (EBA) for passenger service in Germany. On 11 July, Gerald Hörster, President of EBA, presented Alstom with the certificate of homologation at the Federal Ministry of Transport and Infrastructure in Berlin. The ceremony was attended by Enak Ferlemann, Parliamentary State Secretary to the Federal Minister of Transport and Digital Infrastructure and member of the German Parliament. “A world premiere in Germany: With the approval of the German Railway Office (EBA), we are sending the first passenger train with fuel cell technology onto the tracks. This is a strong sign of the mobility of the future. Hydrogen is a true low-emission and efficient alternative to diesel. Especially on secondary lines, where overhead lines are uneconomic or not yet available, these trains are a clean and environmentally friendly option. That is why we support and promote the technology, in order to bring it to the surface,” said Enak Ferlemann, the German Federal

Government’s authorised delegate for rail transportation. “This approval is a major milestone for the Coradia iLint and a decisive step towards clean and future-oriented mobility. Alstom is immensely proud of this hydrogen-powered regional train, a breakthrough in emission-free mobility, and the fact that it will now go into regular passenger operation,” said Wolfram Schwab, Alstom Vice President of R&D and Innovation. In November 2017, Alstom and the local transport authority of Lower Saxony (LNVG) signed a contract for the delivery of 14 hydrogen fuel cell trains, along with 30 years of maintenance and energy supply. The 14 trains will be produced by Alstom for LNVG’s vehicle pool and will transport passengers between Cuxhaven, Bremerhaven, Bremervörde and Buxtehude from December 2021. Following this approval granted by EBA, the two Coradia iLint prototypes will enter pilot operation in the Elbe-Weser network. Passenger service is scheduled for late summer. Coradia iLint is the world’s first

passenger train powered by a hydrogen fuel cell, which produces electrical power for traction. This zero-emission train emits low levels of noise, with exhaust being only steam and condensed water. The Coradia iLint is special for its combination of different innovative elements: clean energy conversion, flexible energy storage in batteries, and smart management of traction power and available energy. Specifically designed for operation on non-electrified lines, it enables clean, sustainable train operation while ensuring high levels of performance. The Coradia iLint was designed by Alstom teams in Salzgitter (Germany), centre of excellence for regional trains, and in Tarbes (France), centre of excellence for traction systems. This project benefits from the support of the German ministry of economy and mobility. Alstom’s development of the Coradia iLint was funded with EUR 8 million from the German government as part of the National Innovation Program for Hydrogen and Fuel Cell Technology (NIP). 81

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New project of Atlas Copco Vacuum Technique SMART SPECS, BETTER SERVICE Augmented Reality provides a world of information to tell maintenance technicians exactly what they need to know about the job at hand. maintenance technician needs A to know about every possible variety of a product, from the earliest to the latest models, in all sizes and specifications. That is quite a challenge when you cover a big range. One solution is to keep a whole library of manuals in the truck. But there is another way. A new project of Atlas Copco Vacuum Technique means that maintenance engineers in the future will just take a pair of special Augmented Reality glasses with them when they go out to repair pumps.

ENHANCING REAL LIFE Augmented Reality (AR) works by providing additional information about what the user can see in real life. The user can look at a pump and see superimposed instructions as to which screws to undo to carry out a maintenance procedure. 82

Using AR glasses, technicians get instructions directly, rather than having to pick up a book, read it, turn to the pump, try the operation, get it wrong, go back to the book, put it down again and try once more. Once the unit is open, AR will show precisely which steps are needed to diagnose a problem, how to fix it and how to reassemble the unit. All that information is superimposed on the user’s view of the unit in 3D. In addition, the program allows the technician to create immediate reports using photos and audio. Checklists that appear within the AR ensure that procedures are completed according to best practice. “Our AR works mainly through animations,” Judith Gesing, Senior Product Manager, explains. “That means that it has no language barriers, which is important for a company working throughout the world.”

The project started in 2016 with oil and filter changes on the new DRYVAC from Leybold, a brand within the Atlas Copco Group, and has since then been extended to other models. The technician just loads the program for the relevant pump and the information is available immediately. “We have a wide range of pumps in the field,” Judith Gesing adds. “Some of them are very specialized, so it’s quite likely that you’ll have your training and not use your knowledge for a year. This way, you can be reminded directly of what you learned exactly when you need it.” For the future, it’s likely that the AR for certain routine procedures may be made available to end-customers. In any case, customers will certainly benefit from having better-trained technicians who will be able to repair even unusual pumps without having to go back to the truck to find the manual. energyindustryreview.com

TOOLS & MACHINES

Reducing lifting costs and accelerating the transition to highperformance rod-lift eatherford International plc announced the W commercial release of a new Rotaflex® longstroke pumping unit that improves artificiallift efficiency in challenging applications including deep, high-volume and high gas-to-liquids wells. The new Rotaflex design extends the functionality of a field-proven technology with more than 10,000 installations worldwide. The units apply long pump strokes — up to 36.5 feet — that allow more time for fluids to enter the pump intake before being lifted to surface. By delivering fewer strokes per barrel at a constant velocity, the Rotaflex design increases equipment run life, mitigates downhole failures and decreases deferred production. The latest version of the Rotaflex unit adds numerous features that improve lift efficiency, including a purpose-built 350-series gear reducer and enhanced top drum. The unit also includes numerous enhancements that improve reliability and maintainability, including a built-in rollback system, greater accessibility, an enhanced lubrication system and a revised ladder system. “For decades, our customers have relied on Rotaflex pumping units to quickly transition from short-term, early lift methods to high-performance rod-lift systems,” said Kyle Chapman, President of Production at Weatherford. “We have spent the past few years talking with users, learning how we can make our Rotaflex units even more effective for them — and we are very pleased to start putting our optimized Rotaflex units to work in the field.” 84

The new Rotaflex longstroke pumping unit leverages decades of field experience to provide operators with an easyto-maintain, highperformance option for producing challenging wells.

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TOOLS & MACHINES

Micropack launches FDS303 multispectrum infrared flame detector new multi-spectrum infrared A flame detector quickly detects all hydrocarbon fires over a long range, including those not detectable in the visible spectrum. The FDS303 has been developed by flame detection specialist Micropack for use in hazardous environments where fast fire detection is critical.In fact, the FDS303 has been independently tested by Factory Mutual to detect a hydrocarbon fuel pan fire at 60m. “The FDS303 provides excellent immunity to false alarms in hazardous areas. It is explosion-proof and responds to hydrocarbon liquid fuel and gas fires at long distances – up to a range of 60 metres – in less than five seconds,” Director of sales Eliot Sizeland said. The detector utilises a ‘no-mirror’ continuous optical check, which verifies operation, improves device up-time and needs less cleaning. That – and utilisation of the latest IR flame detection algorithms – ensures a minimum of false alarms and faults. With microprocessor-controlled heated optics, it’s operating temperature is -60°C to +85°C (-76°F to +185°F), so operation is maintained in harsh weather conditions producing snow, ice, heat or

The new FDS303 multi-spectrum infrared flame detector from Micropack quickly detects all hydrocarbon fires over a long range, including those not detectable in the visible spectrum.

condensation. The FDS303 comes with global hazardous area approvals FM, ATEX and IECEx and worldwide marine approvals. It has certified performance testing to multiple fuels: FM 3260 and EN 54-10. Adjustable sensitivity levels give application flexibility and ensure that multiple detectors do not cross-vote. External testing takes place with a longrange flame simulator that minimises the need for scaffolding. And integration is easy using industry standard outputs; the FDS303 is certified SIL 2 capable. For over 30 years, Micropack has been actively working with the oil & gas industry and are today recognised as specialists in Fire & Gas hazard detection technologies.

In the early nineteen eighties Micropack was involved in offshore process control and safety systems. This encompassed development, commissioning and support services to major clients and installations such as the Chevron Ninian field. In the late nineteen eighties, Micropack pioneered the field in optical fire and gas detection technologies and as a result Micropack has been involved in the development of many of the leading detection technologies available on the market today. Micropack is also experienced in fire research work and the effects of offshore environmental conditions on optical detection methods. This work is what led to Micropack’s development of a range of fire and gas mapping tools to measure the performance of fire and gas detection systems. 85

ANALYSIS

Hub or bug

Justin Iancu

n 2019 we will celebrate ten years I since the territory of Romania increased by almost 10,000 square kilometers of continental shelf and exclusive economic zone, following the historical decision of 3 February 2009 of the International Court of Justice in The Hague. Romania needed half a century to get a favorable judgment in this dispute with the former USSR and, after the breakup of this union, with the neighboring state Ukraine. Since that moment, consistent deposits of natural gas and, probably, crude oil have been discovered in the new territory. The question everyone is asking is whether Romania has the capacity to use these resources in a smart way and to the benefit of its own budget and own citizens 86

and become, as several officials claim, a regional energy hub and a factor of energy stability and security. Helped by its topography, geography and a generous range of natural resources, Romania has been trying for years to position itself in the region as an energy leader. Romania has also had the opportunity to get a similar status in terms of agriculture or other fields, but these opportunities are either lost or so fragile that they become invisible. So all it has left is energy. While in the electricity sector Romania is already a net exporter in the region, in the gas sector things are slightly different. Although it is the fourth largest gas producer in Europe, after

Norway, the UK and the Netherlands, Romania cannot fully cover its own gas consumption. Thus, it annually resorts to imports, especially from the Russian Federation, via Ukraine. The beginning of 2009, a year that, as I have already mentioned, was historical for Romania, has also marked a reminder for what the power and importance of energy resources mean. A month before the delivery of the judgment of the International Court of Justice in The Hague, under which Romania took possession of 9,700 square kilometers of continental shelf in the Black Sea, the Russian Federation limited or even ceased gas exports to South-Eastern European states. energyindustryreview.com

ANALYSIS

Romania imports Russian natural gas through two points, Mediesu Aurit to the north and Isaccea to the south-east, both at the border with Ukraine. Unlike Bulgaria, for example, entirely dependent on import, Romania hasn’t suffered too much following Moscow’s decision in 2009, this thanks to the gas storage capacity of up to 3 billion cubic meters per year. As an aside, Romania and Russia had been discussing for years, at the time, about the involvement in a partnership to build an underground gas storage facility, in Roman-Margineni, Neamt County. The capacity of that facility would have been huge, of 2 billion cubic meters. But nothing has materialized from all those discussions and this subject isn’t even on the agenda of those responsible for the development of the Romanian energy system.

WE HAVE THE MEANS, BUT WHAT DO WE DO WITH WHAT WE HAVE? “We have our own natural resources, we have a strategic geographical position, we have energy transmission and storage capacities. We also have centralized trading platforms. What are we lacking? We lack an organizational structure. We don’t lack its components, but they must be protected and developed, as they are in various stages of development. We have absolutely all the conditions and I think we should take this step and become a regional energy hub,” the Energy Minister Anton Anton stated in late June. But the problem is more complicated. Yes, we can say Romania has resources. Apart for the probable and confirmed national hydrocarbon reserves, in the Black Sea alone there are, according to statements of National Agency for Mineral Resources officials made early this year, reserves of 180-200 billion cubic meters. In the meantime, it seems that Romania’s total reserves have recently increased by 40 billion cubic meters, according to information appeared from government sources claiming that OMV Petrom and Hunt Oil have discovered, in Padina, Buzau County, the largest onshore gas field in the last decades, of over 40

billion cubic meters. However, this figure hasn’t been confirmed by OMV Petrom or Hunt Oil. For now. If we also consider the Caragele field, discovered by the stateowned company Romgaz, of 27-30 billion cubic meters, some enthusiasts might consider the energy future of the country (and not only) assured. It’s true that Romania has a history of 160 years of oil industry and an experience of over 100 years in the natural gas industry. But let’s not forget that most hydrocarbon fields in Romania are mature, having a duration of exploitation of over 25-30 years. But these figures don’t matter much until the respective resources are extracted and used. Another important part of a regional gas hub is represented by infrastructure. While Romania has a gas storage capacity, although insufficient even under the current conditions of consumption, things are not great when it comes to gas transmission pipelines. According to data provided last year by Transgaz, operator of the national gas transmission system, of the 13,307 kilometers in operation, about 73% have an effective duration of operation higher than 20 years, close to their normal lifespan. In other words, these pipelines should be changed. But, when it comes to investments in upgrade and maintenance, Romanian energy companies are not doing very well, meaning that many of them, such as Transgaz, Transelectrica or Hidroelectrica, have delayed these investments for years. In turn, they reported huge profits.

A DREAM WITHIN A DREAM Thus, Romania’s dream to become a regional gas hub is getting close to reality, with several amendments... Romania has gas production, has a certain transmission and storage infrastructure. But what doesn’t it have? Some voices in the public space claim the lack of vision. The question “What will we do with the Black Sea gas?” is on the lips of many, but for now there is no clear answer. Last but not least, should the state get involved in how

Black Sea gas will be used or the market should be allowed to decide? Still, in terms of gas production one cannot say that Romania holds the control either, as the Black Sea fields cannot be exploited by companies owned by the Romanian state. Thus, the decision to start gas extraction belongs to the titleholders - ExxonMobil, OMV Petrom, Black Sea Oil and Gas, Lukoil. So does the modality of using these resources, at a rate of 50%. The offshore law recently adopted by the Parliament forces titleholders to deliver 50% of production, in a transparent and non-discriminatory manner, to the domestic market. Looking at the situation objectively, only the gas storage sector is truly controlled by the state, through Romgaz, the company that owns most gas storage facilities.

THIRD PARTY INCLUDED As the Romanian Energy Minister said, each country in the region wants to become a ‘small gas hub’. But this is not a novelty. Hungary has been working at this plan for a longer time and so does Bulgaria. Romania isn’t sitting aside either, but it seems that it has lost the start. In turn, Russia is in maximum rush with the construction of new interconnections with the allied states in the European Union, thus trying to strangle any competition in the region. As recently as June the CEO of Gazprom, Alexei Miller, said that gas to be supplied through the second line of Turkish Stream gas pipeline would reach the pipelines of Bulgaria, Serbia and Hungary in the first half of 2020, when the gas pipeline operates at the planned capacity. Turkish (Turk) Stream is the second pipeline that Gazprom is currently building to supply gas to Europe, bypassing Ukraine (and Romania, as transit to Southern Europe is done through the pipelines crossing Dobrogea, from north to south), together with Nord Stream 2. Estimated at EUR 7 billion, the TurkStream project provides for the 87

ANALYSIS

construction of two pipelines, each with a capacity of 15.75 billion cubic meters of gas per year. Shortly after the announcement of Gazprom head, Bulgaria announced that a branch of TurkStream would reach its territory. Moreover, in May, Energy ministers of Bulgaria and Serbia signed an agreement to implement the project of a gas interconnector between the two countries. The gas pipeline, the first to link the transmission systems of the two countries, will have a transfer capacity of up to 1.8 billion cubic meters of gas per year in Bulgaria-Serbia direction and only 0.15 billion cubic meters on the opposite direction, Serbia-Bulgaria. Serbia’s supply with Romanian gas has been discussed by government officials in Serbia and Romania, but it is unknown whether these discussions have advanced to a common denominator. Hungary has opted for a series of declarations considered at least informal. In an unusual visit to Bucharest, the CEO of FGSZ (Hungary’s gas transmission operator), Kristof Terhes, said Romania doesn’t have the capacity to use gas resources from the Black Sea, so the best solution is to export this gas to Hungary. These statements were doubled by others made in Washington by Hungarian Foreign Minister Peter Szijjarto, who accused Romania of violating the international commitments in terms of interconnection of gas pipelines and ensuring reverse gas flows. He also requested that pressure on Romania to start gas extraction in the Black Sea, as of 2022, be maintained.

THE TRUTH OF OTHERS AND OUR LACK OF VISION No matter how bothered the Romanian politicians are by the statements of Hungarian politicians, the truth is that the situation of the petrochemical industry in Romania is critical. Although OMV (in Austria) and MOL (in Hungary) - companies carrying out operations in our country have constantly developed this sector in 88

their countries, things aren’t the same in Romania... Except for KMG International, which has small petrochemical operations at its refinery in Navodari, the Romanian petrochemical industry is almost nonexistent. Another sad reality: of the 14,000 localities in Romania, only 2,400 are connected to the gas distribution network, i.e. less than 20%. In other words, there’s no one to consume so much gas as it is estimated to be extracted from the Black Sea. It is true that the Ministry of Energy has put pressure for the legislation to be amended so that municipalities can grant the concession of the gas supply service, but this process takes time. Probably years will have passed until we have 3,000 or 5,000 localities connected to the gas networks. This is the situation and the praise of the European Commissioner responsible for Climate Policies and Energy, Miguel Arias Cañete, who congratulated Romania for observing the deadlines in terms of BRUA construction and criticized Hungary for its statements regarding Romania, cannot delight anyone. This is because the other states in the region do not show a particular interest in BRUA. The proof is that neither Bulgaria nor Hungary have done anything for the construction of this interconnector. Last year, Hungary unilaterally decided to stop BRUA on its territory, to no longer invest for interconnection with Austria, as provided by the initial project, and redirect gas to other neighboring states. Hungary’s excuse is that it already has the necessary infrastructure, while Bulgaria’s objective is to strengthen its relations with Russia and Turkey. Moreover, the statements of Maroš Šefčovič, Vice-President of the European Commission responsible for the Energy Union, who made in early July a visit to Bucharest, that Romania now has a responsibility in terms of energy security for the whole Europe, cannot keep us warm enough. The EU representative reminded

that Romania can play a substantial role including due to Black Sea resources, and BRUA project is considered by the European Union a project of strategic importance, with a substantial financial support. “There is a new and promising prospect of Black Sea gas extraction and I am glad that you work closely with us to ensure that the BRUA project and other interconnection pipelines will be built, to provide new opportunities for strengthening the internal energy market, especially in this part of Europe that has greatly depended on Russian gas for a long period,” the European official mentioned. The authorities in Romania repeat at the same time that Black Sea gas must be used to a great extent in Romania, but this isn’t very clear. There are statements according to which this gas will be able to determine the apparition of thermal power plants replacing the old ones of Hunedoara Energy Complex or that Romgaz, which is currently a gas and electricity producer, could also enter the petrochemical segment by taking over a closed chemical plant from businessman Ioan Niculae. Beyond all these, the offshore law, without which titleholders of hydrocarbon fields in the Black Sea cannot start gas extraction, is still controversial and could suffer changes through Emergency Ordinance. It is yet uncertain what Romania will do with Black Sea gas and how it will use it to reach its objective to become a regional energy hub. The Energy Minister Anton Anton has even come up with the proposal that Romania, Bulgaria and Hungary create together a regional hub, but it is less likely that the two neighboring states would agree, given their plans in the energy sector. Maybe the future National Energy Strategy will bring at least partially an answer to this question. If not, we will include the chance for Romania to become a regional or even European energy force in the chapter of failures. Unfortunately, it wouldn’t be the first time. energyindustryreview.com

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EVENT

The Stockholm arbitrage case

The think tank Romania Energy Center (ROEC) together with the Ukrainian Embassy in Bucharest and the Bucharest University of Economic Studies organized a panel discussion dedicated to outcome of the Stockholm arbitrage case between Naftogaz and Gazprom. The event titled “UkrainianRussian gas relation: outcome of the Stockholm arbitrage case and what’s next?” took place on June 21, and was attended by Romanian authorities, foreign diplomats, energy professionals, think tank analysts, professors, companies and civil society representatives. E Oleksandr Bankov, Ukraine’s Ambassador to Bucharest, spoke about the history of the two contracts (one for supply of natural gas, the other for natural gas transit through Ukraine) that were signed in January 2009 after negotiations between Iulia Timoshenko and Vladimir Putin. He talked about the process of how Naftogaz and Gazprom ended up in front of the

Stockholm arbitrage court in a case where the total amount of claims and counterclaims for both contracts reached 125 billion USD, the biggest amount in the history of commercial arbitration. He outlined the main aspects of the court’s decision in the case of the supply contract: Gazprom’s claim for 56 billion USD under the ‘take-or-pay’ clause was rejected, the contract price was revised

according to market conditions, and the destination clause (the interdiction to reexport Russian gas) was removed. The court’s ruling in the case of the transit contract was also favourable to Ukraine in most key aspects and, as a result Gazprom has to pay Naftogaz 2.56 billion USD (the actual compensation of 4.63 billion USD minus what Naftogaz owes Gazprom for gas supplied in 2014 and 2015). energyindustryreview.com

EVENT

“According to the provisions of the bilateral contract on gas transit through Ukraine, the decision of the Stockholm Arbitrage Court is mandatory for both parties,” said the ambassador, while pointing to the fact that in spite of these provisions, Gazprom refuses to resume natural gas supply to Naftogaz and is actively seeking to annul the decision. “Unfortunately, the Russian company is acting in bad-faith, does not implement nor the arbitrage ruling, nor the decisions of the European courts from other jurisdictions” which forced Naftogaz to initiate enforcement of the Arbitration Award. Several jurisdictions (Sweden, Netherlands, and UK) have already issued orders for the arrest of assets belonging to Gazprom affiliates in this regard. The ruling of the Stockholm arbitrage court showed that “there are real and legal mechanisms to influence Gazprom to comply with existing norms on the European energy market,” concluded the Ambassador who re-confirmed Ukraine’s interest for imports of Romanian natural gas and said that “relations between Ukraine and Romania have entered an active phase of mutually advantageous development”. Professor Armand Gosu offered a historical insight into the UkrainianRussian relations going back to the early ‘90s and spoke about the deeper roots of the current political tensions. According to him, at the level of Russian public opinion (especially the perception in elite intellectual and university circles), Ukraine was blamed for the demise of USSR, more so since the decision to dismantle the Soviet Union was possible only after December 1, 1991 (the moment of the referendum in Ukraine when the majority of Ukrainians voted for an independent Ukrainian state). Between 1992 and the first gas crisis, there were five big dossiers that dominated the Ukrainian-Russian gas relations: the issue of territorial integrity (recognition and setting of borders between the two states); military problems (Ukraine’s denuclearization and the difficult negotiations regarding the division of the soviet Black Sea fleet); economic problems (Ukraine’s difficult

exit from the ruble zone and energy issues such as the gas price and transit); and Ukraine’s integration in as well as attitude towards the Community of Independent States (CIS). Professor Gosu outlined the conceptual political framework which greatly shaped and influenced the economic ties: “Ukraine is perceived in Moscow as the centrepiece of the future common economic space, the state on which hinges the entire economic integration of the former soviet space. Just as in the 1990s, the fate of the Soviet Union depended on Ukraine, so does now the fate of the economic integration of the former soviet space depends on Ukraine (…) Russia has an exclusively territorial vision on problems - it has to control a space - and Ukraine is the most important piece of the former soviet space”. ROEC director Eugenia Gusilov focused her presentation on current energy issues by putting the UkrainianRussian gas relation in the broader context of natural gas developments (at global, European and regional market levels). While globally demand for LNG remains strong (driven by record demand in China), the European market remains dominated by pipeline gas (Russian gas). ROEC’s director outlined that after several years of decline (2010-2014), European gas demand recovered in 20152017. On the other hand, domestic gas production in Europe has been declining, especially in the Netherlands (where production caps were introduced for the Groningen field in 2014). This allowed Gazprom to grow its market share on the European gas market to 179 Bcm (in 2016) and 194 Bcm (in 2017). Furthermore, Eugenia’s presentation framed the discussion against the background of the recently closed (May 2018) DG competition investigation into Gazprom’s commercial practices in Europe. According to the Romanian expert, the most important aspect of the final Gazprom Commitments is the uniform understanding on what ‘fair pricing’ is to be considered going forward. Thus, a fair price is clearly defined from

now on as “the average weighted import border prices in Germany, France, Italy, or the prices at the accepted liquid gas hubs in Continental Europe (TTF or NCG)”. This is in line with the Stockholm arbitrage case ruling (in Ukraine’s gas supply contract) which also mandated the adjustment of the contractual price according to the levels on the NetConnect Germany (NCG) exchange, which underscores a broader move on the European gas market away from oil-price indexation and towards more hub-based pricing. Borys Patrash, economic expert at the Ukrainian Embassy in Bucharest, spoke about the huge potential in cooperation with Romania (one of the top 5 countries for Ukraine in terms of growth dynamic). He mentioned the sweeping reform taking place in Ukraine’s energy sector, the new legal framework (transposing the EU Third Energy Package) and the unbundling of Naftogaz. Among the possible opportunities in energy, he mentioned the ones offered by the largest gas transmission system (GTS) in the word (for instance, the potential use of Ukrainian GTS to export Romanian gas to the European market), the Ukrainian underground gas storage facilities which could be used during winter for storage of Romanian natural gas and the direct import of Romanian gas for Ukrainian consumers. The Ukrainian expert praised the increased cooperation as of 2014 between Transgaz and Ukrtransgaz, and stressed the importance of meeting the necessary technical requirements first, given the different GTS design in the two countries (Romania has predominantly an internal gas transportation system while Ukraine has mostly a gas transit one). While enforcement of the Stockholm arbitrage decision will remain a key issue to watch for in the next period, the main takeaway is that the Stockholm arbitration decision further complicated the post-2019 arrangements for the transit of Russian gas through Ukraine, but, at the same time, created new windows of opportunities for redesigning regional natural gas flows. 91

EVENT

Innovative solutions to combat energy poverty Ashoka Romania and Enel Romania organized on June 22 the ‘Social Innovation to Tackle Fuel Poverty: What Works in Romania?’ event. The founders of four social innovations to combat energy poverty from UK, Belgium, Germany and Spain presented their solutions for energy optimization - from web applications to rental systems and budgeting counselling - to a Romanian public willing to adapt them to democratize access to energy. “In Europe, Ashoka has been pioneering for nearly three years with an unprecedented approach to energy poverty - lack of access to modern forms of energy or inability to provide a minimum level of thermal comfort in the household at acceptable costs. Together with the Schneider Electric and Enel Foundation (since 2017), we co-created a pan-European competition in this area: Social Innovation to Tackle Fuel Poverty. We are glad to be able to bring to Romania some of the winners of the previous editions to build a community willing to try different approaches to combat this extremely relevant issue for our country,” Corina Murafa, Executive Director of Ashoka Romania stated.

a higher energy class and therefore capable of generating energy savings. This innovative solution provides access to efficient home appliances for people who cannot normally afford such devices.

The four solutions are: 1. Samenlevingsopbouw (Belgium) is a system for renting and acquisitions, under special financing conditions, of electro-household appliances having

3. ‘Nordrhein-Westfalen Against Fuel Poverty’ is a project of the Verbraucherzentrale NRW (Germany), which provides free budget, legal advice and advice on ways to reduce

2. ECODES (Spain) runs the project ‘No House Without Energy’, which offers a technological solution to the issue of energy poverty. With a questionnaire, data on family and home status and data on utility contracts from vulnerable people are collected. Based on these, the application provides a report with tips for reducing power consumption.

energy consumption for households affected by energy poverty. The initiative aims to prevent disconnections and to ensure permanent access to energy for affected households. 4. Plymouth Energy Community (United Kingdom) helps locals and local organizations transform the way they buy, use and produce energy in the city. PEC activity focuses on three major objectives: reducing energy bills and energy poverty, improving energy efficiency, and generating a green local energy flow to the city. There are between 50 and 125 million people in Europe who struggle daily to ensure their thermal comfort and electricity supply at an affordable price. In Romania, it is estimated that nearly 20% of citizens live in energy poverty, while about 460,000 of households have no formal access to energy. energyindustryreview.com

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EVENT

Gastech, the leading global exhibition and conference for the international gas, LNG and energy industries, will arrive in Barcelona this September, 17-20 for its 30th edition. For more than 45 years the world-renowned event has been regarded as the most significant meeting place for upstream, midstream and downstream gas and LNG professionals to convene, learn and do business. This year’s event has received significant support including the Presidency of Honour from His Majesty King Felipe VI of Spain, as well as an official endorsement from the Spanish Secretary of State for Energy, Daniel Navia Simon. The official support stands as testament to the value of Gastech to the energy community. Over 3,500 delegates and 1,200 Ministers, government officials, presidents, managing directors, CEOs and chairmen will hear from 350 senior speakers from across all sectors of the industry. Gastech 2018 will explore many topics including the new demand centres for gas focus and the challenges in the gas sector in Spain and beyond. New for 2018, Gastech will collaborate with the European Association of Geoscientists and Engineers (EAGE), running an upstream/E&P zone in the exhibition as well as contributing to the technical conference stream. Standing at the forefront of its industry, the event is set to span across 50,000sqm of exhibition space, showcasing over 700 international, regional and local exhibitors whilst gathering over 30,000 international professionals from across the global gas, LNG and energy industries. The show has attracted in excess of 1,000 extremely high-quality abstracts in its recent call for papers campaign, to which 200 have been shortlisted by the Governing Body at the latest meeting held in Barcelona for presentation at this year show later in the year. Coinciding with the Governing Body meeting was the second edition of the Gastech Roadshow at which market diversification, monetisation and growth potentials were discussed. The programme was also developed in consultation with the Gastech Governing 94

Body – a senior, select group of around 70 industry professionals, representing the full global gas & LNG supply chains and features almost 100 original and insightful sessions tailored to both the strategic and technical communities. “Conversations from the Gastech roadshow and Governing Body meeting have placed strong emphasis on the need for industry collaboration, new strategies and technological advancements,” the Director of the Gastech Governing Body, Gavin Sutcliffe, commented. “From these conversations and the abstracts selected for the Gastech 2018 conference, we are seeing strong developments across the upstream industry especially in leading innovation and efficiency as the energy industry moves to lower carbon strategies,” he added. As well as this year’s show discussing the new demand centres for gas focus and the challenges in the gas sector worldwide, many other issues will be very topical including the burgeoning trading sector, project financing, the interplay between gas and renewable energy in power generation, project development, managing emissions and project financial risk management. “This year’s Gastech is one of the strongest and most informative programmes to date. Speaking at the event will be some of the industry’s leading influencers and CEOs including Saad Sherida al-Kaabi, CEO, Qatar Petroleum, Luca de Meo, president, SEAT, Maarten Wetselaar, integrated gas and new energies director and member of the executive committee, Royal Dutch Shell, Alexander Medvedev, Deputy Chairman of the Management Committee, Gazprom, Lazlo Varro, Chief Economist, International Energy Agency and Steven L Edwards, Chairman & Chief Executive Officer, Black & Veatch,” Gastech conference director

Jenny Kelly affirmed. Opened by senior representatives from the host consortia, through an Opening Plenary, which includes keynote addresses from industry thought leaders and strategic influencers, ministerial sessions as well as global business leaders and CEO sessions, the conference then splits into a strategic and technical stream, and various specialist events. Throughout the four days, attendees will be able to hear some of the most exciting new developments, projects, strategies and technological innovations the industry’s best have to offer. The multi streamed programme features ministerial and global business dialogue sessions and strategic panel sessions alongside 28 strategic sessions. The newly expanded technical conference, which includes 82 technical sessions, will address the complete value chain from exploration and production through to distribution. It will also highlight new technologies and industry developments. The global professional organisation for geoscientists and engineers will share key insights into various topics including ‘reservoir surveillance technologies applied to gas field production, CO2 sequestration and underground gas storage’, ‘acoustic measurements and laboratory experiments’ and the ‘role of gas in the current energy transition and future energy landscape’. Gastech will also feature extended ministerial and global business leader dialogue, the Diversity in Energy programme, Young Gastech, Asia LNG Market Development Forum and the closed-door VIP Programme and LNG Procurement & Trading Forum. For more information and to book your space please go to www.gastechevent.com/ energyindustryreview.com

AUGUST’S READING

Moving the needle on Carbon Capture and Storage What can the upstream oil and gas sector do to help achieve the ambitious targets of the Paris Agreement? To meet the Paris Climate Targets agreed by world leaders in 2015, the Global CCS (Carbon Capture and Storage) Institute estimates that 14% of emissions reductions must be met by CCS. Unfortunately, current CCS capacity represents only 1% of the 3,750 Mtpa of CCS required by 2040 to align with the Paris Climate Targets. How can the industry ramp up to meet these targets? What potential carbon price might incentivise the industry into large scale development of CCS? And, crucially, are there enough viable projects to meet this target? A recent study entitled ‘Moving the needle on Carbon Capture and Storage’ by Wood Mackenzie explains the role of CCS in reaching the Paris targets.

THE SITUATION AS IT STANDS Globally, 22 operational and under construction CCS projects will be able to capture only 40 million tonnes of CO2 per 96

year. Most of these projects are focused on separation of CO2 from natural gas rather than post-combustion, driven largely by the fact that these represent some of the lowest cost opportunities for CCS. Achieving the Paris targets will require the development of cost-effective postcombustion solutions. And while there are plans for a further 15 facilities with a possible capacity of 25 Mtpa, evidently there remains a huge gap between shortterm capacity and the agreed targets. So, what potential CCS opportunities are there in the upstream natural gas processing sector? Wood Mackenzie estimates outside the US there are almost 60 different upstream developments where CO2 is separated (or will be). These provide opportunities for CCS at the lower end of the cost curve. For example, the PM3 CAA block in Malaysia, Ichthys LNG project in Australia and the Vorwata field in Indonesia. While these projects won’t provide the critical mass needed to reach the ambitious targets set in Paris, they would represent double the current CCS capacity.

WHAT LEVEL OF CARBON PRICING CAN DRIVE THE GROWTH OF CCS? Despite CO2 already being separated as part of the upstream development

process, significant additional capital cost is required by developers to re-inject and store the CO2 removed from the feedgas. How can developers be motivated to foot the bill? Many believe carbon pricing is the way forward. In Norway the current carbon tax is around USD 60/tonne of CO2, but analyses of some project costs suggest a carbon price of around USD 100/tonne is necessary, especially for more complex or retrofitted solutions. And in some areas where there is no carbon price, withholding approval for new developments until provision for CO2 sequestration is in place has been a successful strategy (as seen with Chevron’s Gorgon LNG project in Australia). Having reviewed the price (implied price) of carbon, it’s clear that, while carbon pricing may be part of the solution to incentivise CCS development, other solutions will undoubtedly be required to stimulate the massive growth required over the next 22 years and commercial incentivisation alone will be extremely challenging. See the report here: www.woodmac.com/news/ editorial/moving-the-needle-oncarbon-capture-and-storage/ energyindustryreview.com

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End Comment The Offshore Law Do we want only money or we want a real energy strategy? Sorin Dimitriu - President of the Bucharest Chamber of Commerce and Industry

he law on offshore resources T exploitation has caused, since its adoption, controversies, focused mainly on taxation issues. Personally, I believe the form in which the law was voted reflects the special attention paid to this aspect of taxation, but it would be wrong for the debate to be held only around how the state taxes revenues from the exploitation of these resources. Thus, the taxation mechanism is overall adequate, although there will probably be changes. But a comprehensive approach of taxation will also have to put into discussion the model of exploiting these resources. Changing the current exploitation model involves a modification of the paradigm in which the Romanian state relates to its mineral resources. Namely: exploitation should be rational, and not one based on a strictly fiscal philosophy. Romania does not have enough resources to become a large player - on the oil market or on the gas market. The volume of resources in the Black Sea, as it is appreciated by officials, would amount to 200 billion cubic meters. Certain reserves, as they resulted following prospecting carried out by investors that are titleholders in the Black Sea, amount to approximately 100 billion cubic meters (84bcm in the block where Exxon and OMV are titleholders and 20bcm in the 98

block operated by Black Sea Oil and Gas), exploitable for approximately 20-25 years. Subject to discovery of new resources in the meantime, Romania will remain, at the end of two decades and a half, without gas from offshore fields. Meaning, in fact, reliance once again on imports. In itself, it wouldn’t be dramatic, if the revenues achieved during this window of opportunity were used rationally, covering needs that the budget can only accommodate over a very long period (road, railway, medical infrastructure, and these are only a few examples). A second observation, which concerns especially the ideas underlying the concession and exploitation of Romania’s resources, is that the state could maximize its profit exploiting its own resources directly, as part of a joint venture or through public-private partnerships. It is the view of Norwegians, for example. But unlike them, we don’t own an integrated oil and gas company, as Norway has Statoil, we don’t know exactly what we grant in concession, as we do not conduct detailed prospecting before starting the concession process and we do not contribute to project development, after granting the concessions, based on a partnership with the investor. Thus, with well-planned investments, Romania could ensure important revenues from the exploitation of offshore

resources, which, as any exhaustible resource, of strategic nature, can and should be sold at very high prices. So, we shouldn’t fall into the trap of discussions focused only on taxation. The challenge is much bigger and we should answer the question: Does Romania want (only) money or does it want a smart and sustainable energy strategy? Moreover, Romania should even want an industrial strategy, by attracting investors that would contribute to the achievement of consistent benefits for the economy, to Romania’s positioning among countries with industrial potential, to the stabilization of qualified labour force and involvement of Romanian industries in the realization of industrial projects. As the Romanian economy provides solutions for processing, it is possible to extend the exploitation areas. And another question: what does pressure us now to sell everything we have or suspect we have, without any strategy and thinking about the planning and distribution of our energy resources? After we will have filled the treasury for a while, what will we leave for the future? The Offshore Law must be designed in such a way that it is in line with global evolutions and with a forward-looking thinking on how Romania should manage its resources - the most important weapon in this globalized world. energyindustryreview.com