Energy Industry Review - September 2019 Edition

Content Energy and Climate

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OPINION Global warming, the most serious human threat on our Planet, is an approach tool that can be categorized as crucial in relation to existing energy sources and, in particular, their use.

US, Romania and Natural Gas

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UPRUC-CTR Committed to Efficiency and Quality

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OPINION In today’s world, access to and control over resources in various geographical areas, necessary for the various technologies in evolution, start occupying more and more boxes in Mendeleev’s table, being essential for development and to determine many of the social, political and military actions.

Destination Net Zero – Delivering a Sustainable Future

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OPINION How can the oil and gas sector react to the climate change emergency in a credible and impactful way?

Unfortunately, there are no easy answers.

INTERVIEW General Manager Horia Enciu discusses about company’s strategic development directions for the coming years.

Court of Auditors’ Harsh Report on the Gas Market

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OIL & GAS The report notes that the Ministry of Economy and the Ministry of Energy did not publish information and data regarding the achievement of the objectives set by the energy strategy.

4

Romgaz to plan Largest Investments of the Past 10 Years

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OIL & GAS Romgaz CEO Adrian Volintiru sheds light on the company’s investment projects for the upcoming period.

EUR 30 bln to Upgrade the Energy System

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POWER Upgrading the Romanian energy system involves investments of up to EUR 30 billion by 2030, according to the final form of the draft ‘Energy Strategy of Romania 2019-2030, with an Outlook to 2050’.

Overview of Energy Companies in H1/2019

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POWER

Revival of the Silk Road to Bring Billions of Dollars in Investment

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The financial results reported by the energy companies in the first 6 months of 2019 look much better than the general context of the Romanian economy. Or, better said, than most opinions of analysts who estimate an indefinite extension of the economic crisis in Romania.

Distance to Gothenburg ceilings for EU Member States in 2017 % 60

40

20

0

Financing for 30,000 Photovoltaic Installations

-20

-40

-60

OIL & GAS

-80

5

en

-1

om

EU

ed

gd

Sw

ed

Kin

kia

ain

nia

Sp

va

ve

Slo

Slo

s

al

ia

ug

an

rt

m Ro

ia

g*

nd

Po

an

ur

rla

hu

bo m

he

nit

SOx

NH3

Estonia and Malta have not signed the Gothenburg Protocol and therefore do not have ceilings. Austria, Greece, Ireland, Italy and Poland have a ceiling but have not yet ratified the protocol. For Spain, data for emission comparisons exclude emissions from the Canary Islands.

100

Netherlands and the United Kingdom. These countries may, instead, choose to use the total national emissions calculated on the basis of fuel used in the geographical area of the Party as a basis for comparing ceilings (UNECE, 2014a). For the EU-15, the comparison is based on fuel sold.

80

Under the Gothenburg Protocol, the EMEP Steering Body accepted inventory adjustment applications for emissions from Belgium, Denmark, Finland, France, Germany, Hungary, Luxembourg, Spain and the United Kingdom in 2014, 2015, 2016, 2017 and 2018. This figure takes these adjusted data into account. The EU‑15 did not apply for adjustments and thus data for the EU‑15 are unadjusted.

70

* Luxembourg has not reported adjustments in 2019.

90

60 50

European Union emission inventory report 1990-2017

40 30 20 10 0

Improving Environmental Monitoring in the Black Sea

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ENVIRONMENT Gabriela Stanciu - General Manager of Blumenfield, talks about environmental challenges, as well as about the existing solutions that can improve the quality of life and natural ecosystems.

RENEWABLES

The comparison with emission ceilings is based on reporting on the basis of fuel sold, except for Belgium, Lithuania, Luxembourg, the Share of EU emissions of the main pollutants, by sector group in 2017

%

(5)

NOx NMVOCs

SOx

NH3

PM2.5

PM10

74

U

NMVOCs

et

xe

Lu NOx Notes:

N

y

ia

ry

tv

Lit

an

ga

m

La

un H

k

ce

nd la

an

Fr

Fin

er G

s

hia

ar m

ec

Cz

en

D

ia

tia

ar

pr u

Cy

oa

lg

lg

Cr

Be

Revival of the Silk Road is a strategic objective certified by the European Union strategy adopted in October 2018, by connecting the Trans-European Transport Network (TEN-T) with Asian networks.

Bu

iu m

-100

BC

B(a)P

CO

Pb

Cd

Hg

PCDD/ Fs

Total PAHs

Energy production and distribution

Road transport

Energy use in industry

Agriculture

Non-road transport

Waste

Commercial, institutional and households

Industrial processes and product use

Other

HCB

PCBs

A key category-level assessment identifies those source categories that have a significant influence on a country's total inventory in terms of their absolute level of emissions. In this report, key categories refer to those that are collectively responsible for 80 % of the total emissions of a given pollutant (EMEP/EEA, 2016).

Impact of Increasing Emissions

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ENVIRONMENT

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On August 8, the Ministry of Environment confirmed the approval of adjustment of the Revenue and Expenditure Budget of the Environment Fund Administration (AFM) addressed to the program for the installation of photovoltaic systems.

Nord Stream: Mapping the Projected Benefits and Involved Actors

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ANALYSIS

Each Romanian is forced to inhale 13 kilograms of dust per year. We are talking about a cocktail of particulate matter that is slowly poisoning us every day.

5

The Nord Stream story goes back several years proving to be financially sustainable and all parties have strong, deep, interwoven interests in continuing.

HEADLINES

ESMERA FUNDS SMES DEVELOPING ROBOTICS SOLUTIONS

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he EU funded robotics project ESMERA (European SMEs Robotics Applications) has opened its second open call. Within that call, industrial end users have defined specific challenges that are to be solved by introducing a robotics solution. The challenges come from the areas of Manufacturing, Energy, Construction, Agriculture, Food Processing, Retail, Healthcare and Emergency Response. Until December 2nd, European SMEs can now apply to solve one or more of these challenges by developing a robotics application and receive funding of up to 200.000 Euros.

SMEs can propose a project, so called experiment, on their own or form a small consortium, teaming up with R&D organizations or other companies that can supplement their activities. ESMERA

asks for handing in proposals aiming to develop innovative robotic technologies.

Such technologies may involve but are not limited to, fully/nearly autonomous robots or human-robot collaboration applications and should be able to be demonstrated in real-world scenarios.

ESMERA offers direct financial support to the solution-providing SMEs, through a cascade funding mechanism. On top, the core ESMERA partners will provide the beneficiaries with an environment for developing, evaluating, testing and demonstrating novel robotic technologies, alongside with non-technical mentoring and support.

The solution design and evaluation will be carried out in two competitive phases. In phase I, the best experiments need to proof their concept. Phase II makes winners advance in Industrial Leadership

and Business Support. The ESMERA core partners will help the winners on their path from idea to a final product ready to go to market. Phase I offers funding of up to 75.000 Euros, Phase II another 125.000 Euros per experiment.

Within the European Commission’s Horizon 2020 Research and Innovation Programme, ESMERA aims to boost robotics innovation by European Small and Medium sized Enterprises (SMEs). In January 2018, the European Commission launched the ESMERA project to unlock the innovation potential of robotics SMEs. ESMERA promotes applied robotics technology developed for industrial challenges set by key European companies. Thereby the SMEs get a chance to implement, apply and prove new technologies that address real-life problems and thus already have a market.

NEW ROMPETROL FUEL STATION IN SUCEAVA COUNTY

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ompetrol Downstream has opened a new station under the Rompetrol Part­ ner franchise in Patrauti com­ mune, Suceava county. The station was built and is operated by Euro Vasilas.

“We continue to develop our network of fuel stations, and with our partners, success is guaranteed. The proof is the 20 stations taken under the franchise in the last three years. Through the Rompetrol Partner program, we are able to meet our customers with high quality products and services, anywhere in the country. The system we have implemented provides the partners with the know-how necessary

for the development, in an extremely competitive and exciting business,” says Serghei Sevcenco, General Manager of Rompetrol Downstream.

The fuel station in Patrauti, raised with an investment effort of about 1.5 million USD, offers customers, through three latest-generation pumps (one of which with an increased flow rate), access to the Efix and EfixS fuel ranges - the recognized products obtained at Petromidia Navodari Refinery - the largest refinery in Romania and one of the most modern in Southeast Europe. At the same time, those who will fuel at the Rompetrol Partner Patrauiti station will be able to benefit from all the 6

facilities found in the Rompetrol stations payment through the Fill&Go system and retail services at the brand standards.

The station also has an LPG supply point, an automated carwash for cars and trucks, a store and restaurant area, taking into account the station’s position, between Suceava and Radauti, on the European Express Road 85, the most important in the region of Moldova. Moreover, the station also benefits from a large parking area, specially designed for trucks that cross the area. The investment also has a social impact, by creating a number of 30 jobs, but also through the local taxes generated by the activity of the station.

VADU-T1 GAS PIPELINE GETTING STARTED

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Publisher: Lavinia Iancu Business Development Manager: Marius Vladareanu

T

ransgaz and Black Sea Oil & Gas on August 30 signed, in Corbu, Constanta County, the order for the commencement of works for the projects of the two companies for taking over production coming from the Midia Gas Development Project (MGD Project) into the National Transmission System (NTS).

Transgaz project NTS Expansion Vadu-T1 consists of building a pipeline with a diameter of Ø20” (Dn 500), designed to carry gas at a pressure of 55 bar, with a total length of approximately 24.37 km, which will connect the Black Sea Coast to the National Transmission System - T1 pipeline on the Black Sea Coast - Corbu - Sacele - Cogealac - Gradina direction. The project is estimated to be completed in 2021.

The MGD Project consists of drilling 5 platform wells (1 well at Doina field and 4 wells at Ana field), a subsea gas production system over the Doina well which will be connected through an 18 km pipeline with a new unmanned production platform located over Ana field. A submarine gas pipeline with a length of 121km will link the Ana platform to the shore, where an underground pipeline of 4.1km will be built to the new gas

treatment plant (GTP). The processed gas will be delivered through the gas metering station to be found within the GTP to the NTS operated by Transgaz. It is estimated that gas production will start in Q1/2021.

“The expansion works of the NTS will allow all local communities to be connected to the gas network, as well as through strategic projects, such as BRUA, which will bring significant economic benefits to Romania, allowing the potential of the country to be reached.

We can say with responsibility that energy represents the resource of the present and of the future, and the energy infrastructure represents the way in which this resource is transformed into concrete opportunities. Transgaz remains a serious partner for all investors interested in economic development,” Ion Sterian, General Manager of SNTGN Transgaz, said on the occasion of signing the order for the commencement of works.

“We are very pleased that we have reached a new stage in our pioneering project off the Black Sea, together with our partners from Transgaz. We thank General Manager Sterian and his team for the proactive and professional approach that made it possible to reach this point,” Black Sea Oil & Gas CEO Mark Beacom added.

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Scientific Board: President: Prof. Niculae Napoleon Antonescu PhD Members: Prof. Lazar Avram PhD; Assoc.

Prof. Marius Stan; Prof. Ionut Purica PhD; Alexandru Patruti PhD Journalists: Adrian Stoica, Daniel Lazar, Evgenios Zogopoulos, Dumitru Chisalita Digital Manager: Justin Iancu

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HEADLINES

CASTROL TO CLOSE CRITICAL SKILLS GAP WITH WIND ACADEMY

C

astrol, the leading provider of lubricants to the wind energy industry, has announced the launch of the Castrol Wind Academy to address critical skills shortage in wind energy. The academy is a multi-channel training programme designed to up-skill wind energy operations and maintenance (O&M) technician teams with the latest insights, technologies, processes and examples of how best practices in O&M can improve operational efficiency, equipment life and profitability.

Maintenance teams are increasingly faced with a confluence of challenges in the industry; the reduction of subsidies, the end of warranties, and the development of new technologies. It is more critical than ever for technicians to keep their skills up to date in order to preserve wind farm competitiveness and profitability. As it

stands, 78% of wind energy stake holders stated that finding suitably trained staff was either ‘difficult’ or ‘very difficult’.

With continuous pressure to reduce Levelized Cost of Energy (LCOE), operations technicians and site managers are expected to simultaneously improve efficiencies and maintain up-time in wind turbine operations. However, the rapid growth of the wind industry means there is a growing skills gap, with the need for technicians and site managers in wind operations set to triple in the next three to four years.

“Operations technicians and site managers are at the heart of the wind energy industry,” said S. Ramchander, Chief Marketing Officer and Global VP of Marketing at Castrol & BP Lubricants.

“It is important that they are up-skilled and trained to implement best practice operations on site as conditions in the

market are intensified over the coming years,” he added.

Aimed at technicians with 5 years’ experience or less, the Academy is a capability building programme for technicians and site managers. It is made up of online programmes, seminars, webinars and face to face training sessions.

The course consists of three stages, the first of which is an online training course to educate technicians on Wind O&M basics, from gearbox and drive train technologies to predictive maintenance.

The second stage sees advanced topics taught via a virtual class and the third, an in-person training session on site. Stage 1 and 2 can be completed at a time that suits the technician, to ensure a convenient learning experience. On completion of the course, technicians will be awarded a certification by the Castrol Wind Academy.

BP TO SELL ALASKA BUSINESS TO HILCORP

B

P announced that it has agreed to sell its entire business in Alaska to Hilcorp Alaska, based in Anchorage, Alaska. Under the terms of the agreement, Hilcorp will purchase all of BP’s interests in the state for a total consideration of USD 5.6 billion.

The sale will include BP’s entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc., that owns all of BP’s upstream oil and gas interests in Alaska, and BP Pipelines (Alaska) Inc.’s interest in the Trans Alaska Pipeline System (TAPS).

“Alaska has been instrumental in BP’s growth and success for well over half a century and our work there has helped shape the careers of many throughout the company. We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security,” Bob Dudley, BP group chief executive, said. “Alaska has been instrumental in BP’s growth and success for well over half a century and our work there has helped shape the careers of many throughout the 8

company. We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security,” he added.

Under the terms of the agreement, Hilcorp will pay BP a total consideration of USD 5.6 billion, comprising USD 4.0 billion payable near-term and USD 1.6 billion through an earnout thereafter.

Subject to state and federal regulatory approval, the transaction is expected to be completed in 2020.

HEADLINES

NEW LIGHT OIL DISCOVERY IN THE BARENTS SEA

E

quinor and partners OMV and Petoro have made an oil discovery in the Sputnik exploration well in the Barents Sea. Recoverable resources are preliminarily estimated at 20-65 million barrels of oil. The Sputnik well was drilled in licence PL855, approximately 30 kilometres North East of the Wisting discovery. The well encountered a 15-metre oil column in a Triassic sandstone reservoir. Fluid samples contain light oil and water.

“We are encouraged by this result as

it confirms the presence of oil north of the Wisting discovery, where Equinor has acquired a strong acreage position,” says Nick Ashton, Equinor’s senior vice president for exploration in Norway and the UK. “The geology in the Barents Sea is complex, and more work lies ahead to determine commerciality. But this discovery shows that persistence and our ability to learn from previous well results does pay off,” adds Nick Ashton.

“Detailed fluid analysis combined with geological and geophysical mapping

9

will be carried out to fully understand the commercial potential of the Sputnik discovery. If confirmed that the structure comprises volumes that can be recovered in a commercially viable way, the partnership will assess possible development solutions,” Nick Ashton says. The Sputnik well (7324/6-1) was drilled to a vertical depth of 1569 metres below the seabed by semi-submersible drilling rig West Hercules, which has now moved on to drill the Equinor operated Lanterna well in PL796 in the Norwegian Sea.

HEADLINES

VESTAS TO SELL MAJORITY STAKE IN 3 WIND POWER PLANTS IN ROMANIA

V

estas has entered into an agreement to sell 80 percent of its shares in the subsidiaries owning the Romanian wind power plants Pantelimon, Pegasus, and Apollo to a non-disclosed buyer for a selling price of EUR 136m. Closing of the transaction is expected to take place within eight to ten weeks. The transaction is subject to certain closing conditions, including approval by the Romanian Competition Council.

The sale of projects is expected to be recognised as revenue and earnings within the fiscal year of 2019. Vestas maintains its guidance for 2019. In the second quarter of 2019, Vestas generated revenue of EUR

2,121m – a decrease of 6 percent compared to the year-earlier period. EBIT before special items decreased by EUR 131m to EUR 128m. The EBIT margin was 6.0 percent compared to 11.5 percent in the second quarter of 2018 and free cash flow amounted to EUR (75)m compared to EUR (173)m in the second quarter of 2018.

The intake of firm and unconditional wind turbine orders amounted to 5,696 MW in the second quarter of 2019. The value of the wind turbine order backlog amounted to EUR 15.9bn as at 30 June 2019. In addition to the wind turbine order backlog, Vestas had service agreements with expected contractual future revenue of

EUR 15.6bn at the end of June 2019. Thus, the value of the combined backlog of wind turbine orders and service agreements stood at EUR 31.5bn – an increase of EUR 8.5bn compared to the year-earlier period.

Vestas narrows the 2019 guidance on revenue to range between EUR 11.0bn and 12.25bn (compared to previously EUR 10.75bn-12.25bn), and on EBIT margin before special items to 8-9 percent (compared to previously 8-10 percent).

Total investments are expected to amount to approx. EUR 800m (compared to previously approx. EUR 700m). The adjustments are based on performance and improved visibility for the remainder of the year.

BIRMINGHAM TECHNOLOGY COULD DEFEND AGAINST POWER BLACKOUTS

T

echnology developed at the University of Birmingham could protect the UK and other countries from national electricity blackouts.

Britain has high-voltage, directcurrent (HVDC) transmission links with neighbouring countries, including France, Ireland, Holland and Norway – an efficient way of transporting electricity, but vulnerable to alternating-current (AC) faults.

Scientists at Birmingham have developed a solution using controllable capacitors that will ensure the system would never have to be shut down – eliminating the risk of power blackouts.

“The electrical power superhighway is already happening and more HVDC transmission links are in the pipeline.

Existing solutions to the problem of AC vulnerability work in some situations, but not in others. Our approach is fundamentally different and solves the problem completely. It works whatever the situation, keeping HVDCs operational and bringing the system back to normal very quickly - it will always avoid having to shut down the system,” Xiao-Ping Zhang, Professor of Electrical Power Systems and Smart Grid Director of the Birmingham Energy Institute, says.

Birmingham’s proposed approach involves converting DC power into AC power, which would help to make the system more reliable, as unlike existing line commutated converter (LCC) HVDC technology, the proposed ‘Flexible LCC HVDC’ is not vulnerable to AC faults.

10

The technology was showcased at the recent Purple Mountain International Forum on Smart Grid Protection and Operation Control, in Nanjing, China.

Sponsored by the Chinese Society for Electrical Engineering, the Forum was organised by State Grid Electric Power Research Institute (NARI Group Co., Ltd) and National Key Lab for Smart Grid Protection and Operation Control.

The technology was showcased at the recent Purple Mountain International Forum on Smart Grid Protection and Operation Control, in Nanjing, China.

Chaired steered by Chinese Society for Electrical Engineering, the Forum was organised by State Grid Electric Power Research Institute (NARI Group Co., Ltd) and National Key Lab for Smart Grid Protection and Operation Control.

HEADLINES

PROMISING FUTURE FOR RESIDENTIAL ENERGY STORAGE

S

ince 2013, the global residential energy storage market has been dominated

by Germany, but the country may be dethroned soon as promising new residential energy storage markets gather momentum. Why has Germany been the champion so far? Since 2013, its market has been underpinned by Europe’s largest energy storage subsidy, which was made available by Kf W national bank for energy storage paired with solar systems.

The subsidy started out at 30% of the capex of the solar system and was gradually stepped down to 10% during

the final year of the program. By the time things ended on December 31, 2018, the market had grown from nothing to over 125,000 systems. However, as detailed in the new IDTechEx report ‘Batteries for Stationary Energy Storage 2019-2029’, consumers were gradually weaned off the subsidy thanks to falling battery prices and a less attractive handout after the stepdowns.

Indeed, while in 2015 roughly 55% of the market relied on Kf W’s subsidy, in 2018 this fraction was close to 4%, according to data from RWTH Aachen University.

Moving forward, feed-in-tariff (FiT) phaseouts will become the big new driver as consumers look to replace lost revenue streams from their solar systems.

Other countries are following in Germany’s footsteps. Australia has similar ingredients to Germany: a wave of local policy support and renewables/storage targets in five of the six Australian states, as well as expiring FiTs. The country emerged with promise in 2017 and cemented its position as a serious contender in 2018, although it is difficult to accurately predict deployment.

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HEADLINES

FIRST STEP TOWARDS A FUNCTIONAL AND COMPETITIVE GAS MARKET

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OPEPCA considers the proposal forwarded by the Industries and Services Committee within the Chamber of Deputies being beneficial and necessary, regarding the repeal of the articles referring to the energy field in the Government Emergency Ordinance no.

114/2018 and hopes that the same will happen in the rapporteur committees.

The provisions of the ordinance cap the price of gas for the producer and introduce a new contribution of 2%, having as negative consequences the artificial increase of the unregulated price and the reduction of investments. In addition, truly vulnerable consumers are not protected by these measures.

ROPEPCA has advocated for the

repeal of the provisions of the ordinance regarding the energy sector ever since its adoption, constantly demonstrating its negative consequences through expert opinions and an independent impact study. Although in effect for only a few months, the measures imposed

by Ordinance 114 have disrupted the functioning of the gas market, leading to an artificial increase in the unregulated price and affecting the economic viability of exploration and production projects.

The repeal of the provisions is an obvious and stringent necessity, representing a first step towards a return to normality and the rehabilitation of investor confidence in Romania as a destination for energy projects.

In order for the energy sector to

become truly competitive and diversified, functional market mechanisms and measures for the real protection of vulnerable consumers must be integrated.

It is also necessary to stimulate the production activity by updating the legislation for streamlining petroleum operations, removing bureaucratic barriers and modernizing the data regime.

“The proposal to repeal ordinance 114 is a positive signal. It is important that we return to the principles of legislation made with the participation of experts and consulting the business environment, which will stimulate the exploration and production activity in the long term and that will diversify the gas market,” says Saniya Melnicenco, President of ROPEPCA.

SUPER B LAUNCHES NOMIA 12V210AH LITHIUM BATTERY

S

uper B Lithium Power has launched its new Nomia 12V210Ah, the latest in Super B’s line of high-end lithium batteries.

The new Nomia 12V210Ah is the latest model in the Nomia series of Super B. The Nomia series, according to company representatives, can be characterized as safe, reliable and life independent. They belong to the best performing lithium batteries in the market.

“Super B’s latest addition to the LiFePO4 series, is a huge step forward for our company. The Nomia 12V210Ah not only offers a significant amount of capacity, it displays Super B capabilities when it comes to new and innovative product development in the world

of lithium batteries,” Peter Hulzebos, Business Development Manager at Super B Lithium Power B.V. states. At first sight the new lithium battery looks and operates just like its predecessors: the legendary SB12V160E-ZC (a 12V 160Ah LiFePO4 battery) and SB12V100E-ZC (a 12V 100Ah LiFePO4 battery), keeping the same dimensions, configuration and connectivity. “The main difference compared to its predecessors is in fact that the Nomia 12V210Ah offers an increased capacity in the same size as our customers are used to. This basically means that the energy-density is much higher; you get more energy than ever before and therefore customers can be off-grid for a longer period of time. In addition, the 12

battery only weighs 23kg (50.7lbs) and can be connected in parallel to get the power and capacity you need for your application,” he adds.

It shares the same advantages when choosing for a lithium battery to a conventional battery like an AGM, GEL or lead-acid. You get significantly more capacity, a much longer lifetime, your battery charges faster, is light weight and doesn’t require a full charge before you store or use it.

“This new lithium battery fits perfectly within the strategy of Super B. We will continue to develop high-end lithium batteries that solve energy challenges many of our customers face,” concludes Peter Hulzebos.

HEADLINES

FPPG CALLS FOR THE ABROGATION OF THE REGULATED PRICES

F

PPG welcomes the initiative of the Parliament of Romania to amend the GEO 114/2018 and calls for the abrogation by the Parliament of Romania, at the current extraordinary session, of the regulated prices for the natural gas producers and the elimination of the 2% tax which energy companies are obliged to pay it to the National Energy Regulatory Authority (ANRE). These measures provided for in the Ordinance led to the appearance

of errors that caused the distortion and stopping of the liberalization of the energy market.

“Ensuring sound and sustainable protection for vulnerable energy consumers is an essential element of liberalizing the retail market for domestic customers, which allows the entire population to meet their energy needs at an affordable cost,” Daniel Apostol Director of Foreign Relations within the FPPG, pointed out.

Despite substantial progress towards

the liberalization of the gas market in recent years and until the end of 2018, the evolution of Romania’s natural gas sector towards a mature and attractive market is hampered by major obstacles such as the reduced liquidity of the whole sale gas market; lack of transparency and predictability in terms of regulations and mechanisms operating in the market, limiting the attractiveness of the segment for potential new players in the market; lack of an efficient scheme to protect vulnerable energy consumers.

ENGINEERING EXCELLENCE Oil and Gas

Energy and Climate Protection Thermal power plants

Upstream facilities

Desalination plants

Pipeline systems

Renewable energy

Underground storage facilities

Climate protection

Tank farms and terminals

Power transmission and distribution systems

Refineries and petrochemical plants

Water and Environment

Transport and Structures Airports Hydropower plants

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Tunnels and caverns Alpine resorts

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Office Ploies‚ ti Romania ILF Consulting Engineers Romania 16 Negru Voda Str. RO-100149 Ploiesti ‚ Tel.: + 40 (344) 401-333 Fax: + 40 (344) 401-334 romania@ilf.com www.ilf.com

HEADLINES

WORLD’S LARGEST AND MOST ADVANCED RESEARCH AND EXPEDITION VESSEL BUILT IN ROMANIA

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EV Ocean announced the first water launch of the world’s largest and most advanced research and expedition vessel (REV Ocean). After an extensive and complicated build period over the past 18 months, the vessel was finally lowered into the water on August 24 at the VARD Tulcea shipyard in Romania.

“Today is an especially exciting day, our state-of-the-art research vessel has achieved a major milestone and we are now one step closer to realizing our vision of safeguarding the ocean. We look forward with great anticipation to REV Ocean’s journey to Norway and seeing the next stage of progress towards our ambitions of developing ocean solutions,” Nina Jensen, CEO of

REV Ocean, commented. “REV Ocean will strive to fill critical knowledge gaps, develop innovative solutions, and bridge science, business and policy sectors to achieve positive change. Taking on the role of ocean trailblazers the goal is to create positive, measurable impact; provide a pathway for others to follow and motivate the next generation of ocean leaders. Our vision of ensuring – One Healthy Ocean – forms the core mantra of the whole organization,” she added.

Over the coming weeks the vessel will be towed down the Danube River, into the Black Sea, out through the dramatic Bosporus Strait in Istanbul, traverse the Mediterranean, exit around the Strait of Gibraltar, and finally arrive at the VARD shipyard in Brattvag, Norway. The

journey is estimated to take 30 – 35 days depending on conditions en-route.

REV Ocean will be equipped for conducting missions that cover the entire marine ecosystem. It will be used by scientists and innovators for ‘solutions’oriented research that explore issues such as the impact CO2 emissions have on the ocean, plastic pollution, and unsustainable fishing. REV Ocean will be an inclusive global vehicle for testing and proliferating ocean solutions. The vessel is 182.9 meters long and will have the capacity of holding 55 scientists and 35 crew. Equipment onboard includes scientific trawls, sonar systems, laboratories, auditorium and classrooms, moonpool, AUV and submarine, an ROV with 6000 meters depth capacity, and advanced communication equipment.

NEW PROMAC™ SERIES TOOLS

P

robe, a leading supplier of cased-hole logging and advanced monitoring tech­ nology to the global oil and gas and geothermal industries, announced the launch of the ProMAC™, a new series of multi-arm caliper tools. Designed to increase measurement accuracy, reliability and maintainability, ProMAC series tools offer the most advanced measurements in the industry to provide an accurate profile of the internal surface of tubing, casing and completion assemblies.

It is the latest, and most tech­nolo­ gically-sophisticated, addition to Probe’s

growing range of well integrity solu­ tions that help operators identify mi­ neral deposition, corrosion, wear and mechanical deformation.

ProMAC series calipers deliver highly sensitive, accurate multi-arm caliper measurements over a wide range of casing and tubing diameters at an unmatched vertical resolution of 0.0001-inch, and excellent temperature stability.

The primary benefits of ProMAC tools lie in their unparalleled resolution and fast sampling rate. Transmission of high-density data is made possible by Probe’s digital (HD) telemetry resulting 14

in logs with excellent vertical resolution in keeping with the highest industry standards today.

“With ProMAC calipers sampling at 50 times per second, the operator can acquire precise log data with high vertical resolution,” said Federico Casavantes, CEO of Probe. “Engineering advances have reduced the time required to calibrate and characterize to just a half-day.

This is a very significant improvement.

Minimizing electronics and sensor exposure to elevated temperatures helps reduce premature failures, saving time and money.”

HEADLINES

REVOLUTIONARY SMART UNIVERSAL MARSHALLING SOLUTION

P

ower management company Eaton has launched its MTL SUM5 smart universal marshalling solution for process applications capable of reducing distributed control system (DCS) marshalling cabinet requirements by up to 50%. With six patents pending, MTL SUM5 combines five functions in one modular design enabling one standard cabinet to deliver the lowest lifetime costs and lowest installed cost while saving valuable space in a control room.

Process applications requiring intrinsic safety (IS) isolation, signal conditioning, relay interfaces, surge

protection and loop disconnect would typically require four different cabinet designs, with complex wiring between the marshalling components. Now, process and plant managers can benefit from a single cabinet design, with ‘plug and play’ configurable modules for the five key marshalling functions. This eliminates the need for intricate wiring to interconnect the components, ultimately improving uptime and reducing the cost of wiring, installation and maintenance.

“With MTL SUM5, we are revolutionising marshalling and leading the way with this first-to-market smart solution,” said Paul Hartley, MTL Global

15

Product Line Manager and Business Unit Leader at Eaton. “We have created a modular, universal, configurable product with excellent functionality, so process managers and engineers can streamline their operations and make significant cost savings. The most common reason for failure of existing marshalling systems is due to the wiring. Since MTL SUM5 removes the need for this wiring, it also eliminates this risk of failure, therefore providing a more robust and reliable solution for processing plants in the oil and gas, petrochemical, chemical, power, pharmaceutical and water and wastewater industries.”

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17

OPINION

Energy and Climate The Other Side of the Coin The proposed topic could be considered an analysis to support transition to renewable energy, without using banal simplifications or fanatical expressions. In fact, global warming, the most serious human threat on our Planet, is an approach tool that can be categorized as crucial in relation to existing energy sources and, in particular, their use.

G

Ioan-Corneliu Dinu Scientific Counsellor at Romanian National Committee of the World Energy Council

iven that in recent years continuous innovation has led to a reduction in the use of renewable sources, a simplification of costs, a thought-out or focused strategy would be required, better said to define the most important limits of the energy transition, but also the measures for defending/ saving the climate, its heating. Describing the past energy transitions, it would be necessary to list the substitution processes that were beneficial, but unfortunately, were very long. The time required for a new energy source to reach, for example, one fifth of the world consumption, is appreciated by industry experts at around 50 years. From 2008 to today, renewables have reached a share of only 1% of global penetration, 2015 bringing a maximum of 2.5%, although the initial calculations showed as many as 30 years. If generically speaking the implementation times are in the mentioned situation, we must expect that a true transition to renewables for 1/5 of the world consumption will occur 18

in the second half of our century. It is clear that the change of an economicproductive system is not a matter, for the moment, accompanied by consolidated interests and competent actors, but also by infrastructures, investments and projects that bring together important results in the idea of reducing the time for the long-awaited energy transition. The capital stock, whether physical, achievable or financial related to investments, is really quite large, considerable, but unfortunately it is related to the status quo inertia. The environmental implications of these factors will be added to the current human model, which will be transferred to the intrinsic requirements of the energy transition. In addition, it is the promoter of technological innovation that has guided the processes of replacing energy sources with the express intention of increasing revenues, increasing the intensity of supporting the implementation of this transition to ensure the success of the transition itself. It is known that renewable sources have low

OPINION

productivity compared to fossil sources, also having intermittencies that we know well, the sun and the wind rarely having constancy. The specialists of the sector appreciate that since 2000, investments in renewables have not been accompanied by important technological progress as they are supported by very large support schemes, aids that did not bring the expected gains. The electricity generated by the use of renewable sources has been and continues to be difficult to integrate in the networks of the energy systems due to the discontinuity, unpredictability of energy production.

This situation has led and leads to the imbalance of the systems, and for balancing the coal-fired power plants, hydro-power plants etc. had to be used, generally knowing the flexible nature of

electricity production. Let’s not forget that since 2000, the installed power of plants based on renewable sources has increased by more than ten times, using support schemes from the western states. After 2011, these aids fell sharply, especially as they were still on the bills paid by consumers. I would like to consider another limitation, of what has been called the geographical location of the installations consuming massively from the aids received as support, geography that has intervened ruthlessly, thus leading to the cessation of the explosion of the installation of photovoltaic panels, as well as of wind pallets. China has continued to increase the production of these panels, reaching 95% of the total produced worldwide, production supported by the country’s wealth of rare

materials - lithium, indium, gallium etc., indispensable materials for photovoltaic panels. Analysing the defining figures that indicate the real energy production globally, out of 100% total production, today the renewable energy does not exceed 5%. Most of the energy production worldwide is supported by coal (Germany covers its needs with a production of 7580% using this fossil resource, coal).

Therefore, without drawing any conclusions, we can say that it is still unknown how long fossil fuels will continue to be used for energy production. Some specialists talk more and more often, at the various events whose main theme is energy, about options, safe and more and more secure, about reanalysing the resumption of nuclear energy production strategies.

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OPINION

US, Romania and Natural Gas I

Prof. Ionut Purica PhD Energy Expert

n the 1960s there was a joke saying that in the Romania Libera newspaper, in the classifieds, there was an announcement offering flawless foreign policy against a more convenient geographical position.

In today’s world, access to and control over resources in various geographical areas, necessary for the various technologies in evolution, start occupying more and more boxes in Mendeleev’s table, being essential for development and to determine many of the social, political and military actions. As examples: Vietnam was access to Titan and Uranium deposits, Cuba - to Zinc, Kosovo to Chrome, Iraq - to oil and rare earths, soon Peru with Lithium. We thus get to natural gas.

The global situation has changed dramatically over the past 7-8 years, when the US became an exporter of liquefied natural gas (LNG). Obviously, LNG delivered by the US to the EU is also aimed at diminishing EU’s reliance on Russian gas, which comes bundled with political vulnerabilities.

As long as the gas surplus for export keeps the low level of the price for US gas, leading to the reindustrialization of their economy, two things are expected to happen: 1. A decrease in gas quantities from other sources in the EU representing competition for the US gas. So the US companies dropping the immediate capitalization on gas fields in the area, such as Chevron’s withdrawal from shale gas exploitation or a potential withdrawal of Exxon from Black Sea gas exploitation.

2. In the case of increased gas consumption in the EU, there is a 20

need to expand the network and supplement the US gas with gas from local sources. This avoid the increase in LNG exports from the US above the limit at which the domestic price increases by diminishing, due to exports, the quantities available for covering the domestic consumption.

At this point, there is a need to use local resources. Obviously everything happens amid competition with Russian gas and, soon, of Iranian gas through Turkish pipelines.

Another way of reducing gas consumption and the vulnerability related to imports is also the production of electricity in nuclear power plants, which have the advantage of insignificant CO2 emissions.

Thus, an intrinsic relation is created between energy security, nuclear energy, gas production from both import and domestic sources that must be supported by a dynamic legislation, adaptable to the presence below or above limit of the domestic price of US gas, determined by the size of US LNG export above the limit ensuring a coverage of domestic consumption.

The abovementioned represent a scenario which, as the Italians say, “se non é vero é ben trovato”. We hope that its presentation explains a number of recent evolutions and shows that the geographical position can be an advantage in attracting the interest of major investors. We are talking here about both corporate investors with money and geopolitical investors with military security, such as the NATO or the US. Thus, our foreign policy can become again ‘flawless’.

Kraftanlagen Romania S.R.L. was founded in 2007 as a subsidiary of the German company Kraftanlagen MĂźnchen GmbH and expanded its local services successfully in 2014 with KAROM Servicii Profesionale in Industrie S.R.L. and in 2016 with IPIP S.A. We engineer, design and build complex piping and plant systems for the chemical and petrochemical industry. Our technical competence covers also requirements for new plants and maintenance for refinery, extraction & production and industrial plants.

The range of our solutions: Feasibility, process studies Basic design and front end engineering design Multidisciplinary detailed engineering Technical documentation for authorities Project management Technical assistance for commission, start-up, test run, guarantee test Supply and installation of all pipelines and brackets Basic and precision installation of all components, such as devices, columns, pumps and compressors Steel construction Installation of cracking and reaction furnaces Tank farm construction System integration, operating checks and commissioning Plant revisions Pipeline and bracket corrosion protection Insulation Scaffolding

21

OPINION

Destination Net Zero Delivering a Sustainable Future Following the publication of the Committee on Climate Change (CCC) report in May 2019, the UK Parliament declared a ‘climate change emergency’. This was re-enforced by similar declarations from the Scottish and Welsh Governments and by many cities and towns across the UK. Although there is no single definition of what a climate change emergency actually means, it has become a catalyst for demanding immediate action and policy changes across the country to mitigate the causes of climate change. Governments responded by declaring targets to deliver ‘net zero’ greenhouse gases by 2050 (2045 in Scotland).

S

Professor Paul de Leeuw Director - Energy Transition Institute, Robert Gordon University

o how can the oil and gas sector react to this climate change emergency in a credible and impactful way? Unfortunately, there are no easy answers. According to UK government statistics, the consumption of hydrocarbons for transport, aviation, heating, power generation, industrial activities and other uses currently generates over 70% of all greenhouse gas emissions in the UK. The CCC report highlights that the offshore oil and gas sector currently represents c. 3% of all the greenhouse gas emissions in the UK. This figure reflects the emissions associated directly with offshore-related activities, such as oil and gas production, offshore power generation and the transportation of hydrocarbons from offshore to onshore, 22

but excludes the emissions associated with the consumption of oil and gas in the UK. The overall greenhouse gas emissions from the UK’s offshore operations are roughly half of those from the UK’s aviation sector and substantially less than the greenhouse gas emissions associated with the UK’s farming and agriculture sector (c. 11%). The CCC report also highlights that oil and gas will remain a critical part of the UK’s energy mix to the extent that by 2050, it will still contribute c. 37% of the UK’s primary energy needs.

Delivering the net zero target for the UK will inevitably mean a radical overhaul of the way we all live and work today. It will touch every part of our society and not just the oil and gas sector. For the oil and gas industry to keep its ‘social license to operate’ and to have a sustainable future

OPINION

here and across the world, it will need to be a major part of the solution. It will need to become a net zero greenhouse gas offshore basin in the UK and to be a key contributor in ensuring the country meets its net zero targets over the coming decades. The industry has already made progress. The OGUK Environment Report 2019 highlights that, despite production increasing by around 20% since 2014, the CO2 emissions per unit of production continue to decline.

Even though the UK currently only represents c. 1% of global CO2 emissions, around 1% of the world’s oil and gas production and roughly 1% of the world’s population, the UK and the UK’s oil and gas industry can play a leading role in the response to the climate change emergency. Combined with offshore electrification, carbon capture utilisation and storage and a leveraging of the potential benefits associated with hydrogen generation, the industry has a real opportunity of delivering a net zero basin by 2050 or earlier. This will enable the UK to continue to be a leading and cleaner oil and gas basin, whilst balancing any residual greenhouse gas emissions through offset mechanisms.

The UK’s oil and gas sector also has the skills, assets and capabilities, along with a proven track-record of developing, implementing and managing large and complex projects, to be a critical part of the solution. This expertise and capability can be readily applied to new projects, including industrial scale carbon capture utilisation and storage and hydrogen production. The UK’s CCC report identified the requirement to store potentially up to 175 million tonnes of CO2 annually by 2050 if we are to deliver the UK net zero agenda. The oil and gas industry, in collaboration with others, is uniquely positioned to leverage its expertise and the offshore asset base to contribute to this outcome.

A number of carbon capture and storage pilot projects are currently being progressed in the UK, including the Acorn carbon capture project off the north east coast of Scotland. The Acorn project is

designed to capture CO2 in the St Fergus area for subsequent transportation and injection into a depleted gas reservoir.

Subject to funding and consents, the Acorn pilot project will come on stream in the early part of the next decade and over time has the potential to store up to 3 million metric tonnes of CO2 per year.

With the UK currently emitting close to 450 million metric tonnes of greenhouse gasses annually and the UK’s offshore oil and gas sector representing around 3% of these emissions, the industry would probably need the equivalent of around five Acorn-look projects to become a net zero basin.

However, to deliver this outcome, it will need the support of governments, policy makers, regulators and others, to make the technologies and business models for carbon capture utilisation and storage economically viable.

Although there are increasingly loud and influential voices arguing that the best way to deliver the ‘net zero agenda’ is by shutting down the oil and gas industry with immediate effect, we must demand a more informed debate. It is becoming increasingly clear that there is a shared destination among the UK and devolved governments, policy makers, industry and many others in terms of delivering the net zero outcome.

At Offshore Europe in September 2019, OGUK will launch Roadmap 2035 together with its updated Economic Report. The roadmap will set out how the industry is and can contribute to the net zero agenda in the context of the requirement for energy security and energy sovereignty.

Roadmap 2035 will provide a constructive framework to facilitate discussion and sharing of best practices to deliver this shared destination. However, it will require the careful balancing of societal expectations with the UK’s ability to adjust to the far-reaching changes required to meet the net zero targets.

Societal acceptance of the rate of this change will be key to how fast the UK and the UK’s energy sector will have to move to deliver on net zero.

23

General Manager Horia Enciu talks about UPRUC-CTR Strategic Development Directions for the Coming Years 24

25

INTERVIEW

U

PRUC-CTR SA Fagaras, a privately held company, established in 1999, carries on the tradition of more than 40 years in the production of a wide range of welding steel fittings and pressure vessels.

The products are used in installations and equipment in industries such as: refining, chemical and petrochemical, power plants, transport and distribution of natural gas, hot and cold water distribution networks, food and shipbuilding.

Horia Enciu, UPRUC-CTR SA Fagaras General Manager, discusses future projects and plans, as well as the company’s strategic development directions for the coming years.

A former student of the German High School “Goethe” in Bucharest and a graduate of university education in Economics, Horia Enciu has an experience of over 20 years in sales in the field of equipment for oil and gas pipelines and installations.

UPRUC-CTR SA FAGARAS, DATA AND FIGURES Where does the name of the company come from and how was it born?

The parent company, ‘Uzina de Prototipuri Reparatii Utilaje pentru Industria Chimica’ (Plant for Prototypes, Repairs and Equipment for the Chemical Industry), abbreviated UPRUC, was established in 1977 to support the development of the chemical and power industries. Back then some other major projects were planned in the chemical in­ dustry, besides the project of the first nuclear reactor of the Cernavoda Nuclear Power Plant.

In 1999, the government decided to divide UPRUC into six companies, each preserving the know-how and personnel specific to one product type only. Thus, UPRUC-CTR SA was established, CTR coming from ‘Coturi, Teuri, Reductii’ (Elbows, Tees, Reducers).

In the 2000s, all the six companies were privatized; in the last six years I have purchased shares in the company from those who got them from the government.

26

INTERVIEW

What is the field of activity of the company you run and what are the targeted industries?

We have two main products: fittings and pressure vessels, all made of steel.

Since its establishment we have been producing steel fittings - elbows, tees, reducers and caps. We process carbon steel, alloy steel and stainless steel, for both activities. Our competencies are in the field of products for demanding installations, with high quality requirements and for which the origin of the product matters and indicates a high quality level. In thermal power plants, where the fluids circulate under pressure and at high temperatures, in refineries, where expectations are high, in gas compressor stations where a high pressure is involved. These are the areas we are trained for. The certifications we possess, the approvals of the final customers, who put us on their Approved Manufacturer List (AML), are proof that the products made in Fagaras meet the quality requirements of the demanding markets.

In 2006 the company started to produce welded constructions and pressure vessels made of carbon steel, alloy steel and stainless steel for the oil and gas industry, for the shipbuilding industry and for other applications. This activity has a long tradition on the UPRUC platform in Fagaras, but following the split in the 2000s, it was taken over by another part of UPRUC.

What dedicated products and solutions do you offer for the energy sector? What tests can be performed in your own laboratory?

Our products, which I mentioned above are installed worldwide - from Houston, China and Scandinavia to South America or Singapore. Through our commercial partners we deliver to refineries, thermal power plants, installations in the chemical industry, wherever the demands are high and quality is a must.

Our mechanical testing laboratory has recently been certified according to ISO 17025:2018. This demonstrates our belief that we have to deliver top quality in order to face the competition and develop ourselves 27

INTERVIEW

constantly for the next at least 42 years. This is what our customers expect and secures the jobs in Fagaras.

What are the figures for 2018 and what are the prospects for the next period?

We concluded 2018 with a turnover of about RON 43,000,000, 20% on top of 2017. On average we employ 285 colleagues who every day do their best to keep the tradition and know-how in Fagaras. Over the last three years we have seen signs of growth in the domestic market, after years when the EU sales, for both activities, accounted for about 80% of the turnover. While in 2016 the share of the EU sales was about 80%, in 2017 it decreased to approximately 73%, and in 2018 to 65%. In terms of procurement, we increased the share of domestic raw materials acquisitions, from 53% in 2016 to 60% in 2018. I see these figures as proof of recovery, after years of suffering, when the country lost a lot of know-how, industrial capacity, trust and knowledge. I was surprised a few years ago, during a meeting with companies which participated in the construction of the nuclear reactor No. 1 of the Cernavoda Nuclear Power Plant, to hear that Romanian companies met during trade fairs and exhibitions abroad and started to do business together, until then being only aware of the existence of the others on the principle “everything is in ruin�. Of course, a lot has been destroyed, many companies have imploded, but some have stubbornly fought back, developed and adapted to the 21st century and continued the tradition. After all, out of its 42 years of existence UPRUC-CTR SA was active only 12 in communism with the remaining 30 in capitalism...

PROJECTS AND PLANS FOR THE FUTURE What are the most important projects currently carried out by UPRUC CTR? What are your plans

28

INTERVIEW

for the future regarding the consolidation/ expansion of activity in the country and/or abroad?

Over the past few years we have delivered to all owners of refineries in Romania, for gas production, to transmission and distribution companies, as well as to other important projects abroad. We supplied fittings for the refurbishment of tanks, for furnaces, for coking, stripping, gas desulfurization and sulphur recovery, steam plants and many more. We supplied fittings for all the three compressor stations related to the BRUA project (Podisor, Bibesti and Jupa), pressure vessels for Jupa compressor station, and all fittings for the valve stations related to the BRUA pipeline.

On the global market, we supplied fittings to refineries and thermal power plants across the world, for technical gases installations, and for gas installations and stations.

We plan to increase production through better organization and simplification of processes. We need continuous increase in efficiency to improve our position in the global market.

Who are the UPRUC-CTR main business partners?

The main partners are our colleagues, the UPRUC-CTR SA employees. Without them and without their involvement, none of the things described above would be possible.

When it comes to the external partners of the organization, the main customers in the EU market are the companies which sell fittings, those that contract complete deliveries of pipes, fittings, flanges and place orders for fittings with us. In Romania, the main partners for fittings are the owners of installations and pipelines and the contractors who work for them. For pressure vessels and welded components, the main customers are the domestic and international companies and contractors who place orders for components or complete installations.

Our main export markets are Germany, The Netherlands, Austria and Poland. For the raw materials, our partners are domestic and international suppliers. As much as 99% of the raw materials are manufactured in the 29

INTERVIEW

EU. For services, consumables, repairs and equipment we work with domestic suppliers.

What share of the investment budget is allocated for the modernization process and what works do you plan for 2019?

In recent years we have focused on restoring the initial capacity and upgrading the existing equipment, on workovers and refurbishment operations. We have devised a comprehensive program for reviewing and extending the TDVs (tools, devices, verifiers).

For several years we have been planning maintenance in the summer months, usually at the end of July - the beginning of August.

Besides this, thanks to the efforts of our colleagues in the maintenance department and our contractors, we manage to make workovers on the essential machinery, to upgrade and to automate them and to prepare them for a new life cycle. At the same time, we are in a process of rethinking the manufacturing flow, which will lead us to an even better organization and an increase in efficiency.

The road from ideas to opportunities and success Which are the priority directions included in the company’s development strategy for the next period - market penetration, market development, product development, diversification, export?

Recently we have purchased a production hall and we want to double the surface area related to pressure vessels manufacturing.

We see a future and very good prospects for the development of these products. We are also in a continuous process of getting new approvals from end users, in order to allow our customers to keep in stock our goods for an even bigger number of end users.

What role does the team play in this regard?

Fortunately, the times when someone was doing and knew everything are gone!

Nothing can be done without a team and I 30

INTERVIEW

am constantly working on consolidating and increasing it. It is not easy, as it seems that the tradition of the Romanian industry is rather that of the providential man and less of the l team. The team, in the broad sense, must be the core of success and ensure consistency in the development of the organization.

Challenges?

YES! UPRUC-CTR SA is a member of The European committee of fittings manufacturers (in the EU), which is fighting for the preservation of this industry and to eliminate fraud.

Unfortunately, in this industrial area, as in many others, there is the temptation of fraud made by changing the origin of the goods, declaring a different customs duty than the real one on border crossing to avoid the payment of customs or anti-dumping duties etc.

Thus, products with dubious origin reach the market, which to an informed person are distinguishable from those with controlled origin by quality documentation and by price.

A recent case has been reported in Italy, where a network was unveiled, and I have also heard about a similar case in Romania, a few years ago.

Another challenge is the workforce.

A few decades ago, there was a lot of discussion about the trades that would disappear, about the robots that would replace certain trades and here we are now unable to find the necessary skilled workforce.

All Europe suffers from the lack of skilled workforce, not just Romania.

I know about vocational schools in Romania which bring the students in their 9th grade from hundreds of kilometers away. Education is a main topic. I would like to see more efforts done in that area.

Process optimization is a huge challenge so we are focused on finding the proper solutions for our production, in terms of software and equipment.

31

OIL & GAS

Court of Auditors’ Harsh Report on the Gas Market Over the years, Romania has had several long-term energy strategies, but the inconsistency of the decision-makers and the lack of funding have often led to failure to implement them (in part or in total). The conclusion can be found in the latest audit report on the gas market, carried out by the Court of Auditors. The latest such energy strategy was approved by Government Decision No. 1069/05.09.2007 and provided for investments in the gas sector worth EUR 1.764bn. By the end of 2016, most of the projects had not been started.

Text by Adrian Stoica 32

OIL & GAS

T

he quoted report notes that the Ministry of Economy and the Ministry of Energy, which had attributions in the application of the energy strategy in the natural gas sector, did not publish information and data regarding the achievement of the objectives set by the energy strategy. Thus, much of the information provided to the audit team, regarding the fulfillment of the objectives set in the Energy Strategy of Romania for the years 2007-2020, was obtained during the audit by the Ministry of Energy following requests addressed to the economic operators in the natural gas sector.

Delayed rehabilitation works The Energy Strategy 2007-2020 provided for a number of objectives leading to the rehabilitation and modernization of the National Gas Transmission System. Analyzing the actions taken to reach these objectives it was noted that the targets set by the strategy have not been reached, the report of the Court of Auditors points out. Thus: • 1,343 km of gas transmission pipelines were rehabilitated by the end of 2016; • While by 2013 it was provided to replace 225 km of pipelines and rehabilitate 12 compressor stations, these works were not completed by the end of 2016; • 39 cathodic protection stations were rehabilitated by the end of 2016, representing about 4.55% of the target set in the Strategy until 2017 (857 stations); • 4 gas regulating and metering stations were rehabilitated by the end of 2016, representing about 1.59% of the target set in the Strategy until 2017 (252 stations); • 3 technological nodes for gas transmission were rehabilitated by the end of 2016, representing about 13.05% of the target set in the Strategy (23 technological nodes).

At the same time, regarding the preparation of a feasibility study on

building an LNG terminal at the Black Sea, Romania has been involved in the first project of liquefied natural gas (LNG) transport from the Black Sea, i.e. the AGRI project (AzerbaijanGeorgia-Romania Interconnector). The feasibility study of AGRI project was completed but, although a Memorandum of Understanding was concluded and adopted on cooperation in the field of LNG and its transport - between Romania’s Ministry of Economy, Trade and Business Environment, Azerbaijan’s Ministry of Industry and Energy and Georgia’s Ministry of Energy, signed in Bucharest on April 13, 2010 and approved

by Government Decision No. 822/2010 - the chances of materialization of this project depend on many factors. Thus, there is no real guarantee from Azerbaijan, which should be the main supplier of the gas volumes necessary.

Unspent money During 2012-2016, through the repair and rehabilitation programs, and through the NTS modernization and development programs, replacement/ upgrade and expansion works were executed, respectively transmission pipelines with a length of 589.23 km, 192 cathodic protection stations and 100 gas odorization stations were replaced/ rehabilitated/upgraded, and regarding the expansion of the transmission networks, transmission pipelines with a length of 387.94 km, 48 regulating and metering stations, 3 imported gas metering stations, 3 valve stations - technological nodes, 80 cathodic protection stations and 197 odorization stations were commissioned. In fact, in the audited period, the technical state of the facilities did not see significant improvements compared to 2007, when the technical state of the facilities was assessed in the Energy Strategy of Romania (approved by Government Decision No. 1069/05.09.2007), according to which about 69% of the total length of the National Gas Transmission System had the normal life 33

span exceeded, and of the total regulating and metering stations, approximately 27% have been operational for over 25 years, the report mentions. Although the natural gas transmission infrastructure is outdated (77.72% of the total number of transmission pipelines had a service life of more than 20 years), at 2014 level, pipelines with a length of 264.42 km were replaced/rehabilitated/modernized, in 2015 - only 71.08 km, while at the level of 2016 pipelines with a length of 21.11 km were replaced/rehabilitated/ modernized. The same situation was noticed in the case of the expansion of the transmission network infrastructure, the length of the expanded transmission pipelines decreasing by about 81%, from 107.5 km in 2012, to only 20.43 km in 2016. Regarding the rehabilitation and repair of the NTS components, a low degree of rehabilitation of NTS components was reported, in relation to the existing needs (2,218.06 km trunk pipelines and 63 stations), so that during 2012-2016 from the amount allocated for repair and rehabilitation (RON 462 million), only 46.64% was used for works (RON 215.50 million).

Transgaz’s investment plans not approved by ANRE Regarding the obligations established by the legislation in the field, the inspectors of the Court of Auditors noted that in the period 2012-2016 ANRE did not approve the investment plans of the transmission operator SNTGN Transgaz SA, did not monitor compliance with these plans nor did it provide through the Annual Activity Reports of ANRE information on the evaluation of these plans in terms of their consistency with the Communitywide network development plan provided for in Regulation (EC) No. 715/2009, as provided by Law no.

123/2012. According to Article 131 para. (1) letter b) of Law No. 123/2012, the owner of the transmission system finances the investments decided by the independent system operator and

OIL & GAS

Length of pipes rehabilitated and repaired between 2012-2016 751.31

800 700

565.9

600

483.95

km

500

366.18

400 300

246.42

194.42

200 100 0

50.72

71.08

38.22

2012

2013

2014

km scheduled to be rehabilitated / repaired

approved by ANRE or gives its consent that they be financed by any stakeholder, including by the independent system operator. In this context, the audit noted that on the date of approval of the Plan for the development of the national gas transmission system for the period 20142023 (PDSNT), NAMR - as concession provider/representative of the system owner, has not expressed its approval on financing.

The audit has also revealed that, although according to Law no. 123/2012 and Government Emergency Ordinance No. 33/2007, ANRE had attributions in monitoring the investment plans of the transmission operator, and in publishing this information in its Annual Activity Report, this fact has not been presented.

This is one of the main safety issues of the national gas transmission system.

On the one hand, it was noticed the lack of interest in the technical condition of the gas transmission infrastructure, in the level of (growing) losses and the problems identified, and on the other hand the lack of information of political factors and gas market participants on the technical conditions of these networks,

in the context in which the recipients of the Activity Report of the regulatory authority (ANRE) are the Parliament, the Government and the President of Romania, the Competition Council, the Agency for the Cooperation of Energy Regulators (ACER), the European Commission.

Ministry of Energy, no procedures A very serious thing found by the Court of Auditors was the fact that in the period 2012-2016, at the level of the Ministry of Energy there were no procedures regarding the verification of the way of calculating the royalty, respectively of the quantities of natural gas distributed, declared by the concessionaires. At the same time, at the date of the audit there is no centralized record of the amount of royalty due and paid by concessionaires nor of the quantity of natural gas distributed during 2012-2016, according to which the royalty owed was calculated.

Following the requests made during the audit engagement carried out by the representatives of the Ministry of 34

2015

21.11 2016

km rehabilitated and repaired

Energy to the concessionaire companies, information was communicated according to which the total value of the royalty due and paid in 2012-2016 was RON 436.57 million, of which: 2012 - RON 70.83 million; in 2013 - RON 86.37 million; in 2014 - RON 86.74 million; in 2015 - RON 95.27 million and in 2016 - RON 97.37 million.

Low degree of utilization and high costs With regard to the natural gas pipeline network, Romania ranks 11th in the European Union, with about 53,666 kilometres (the transmission network and the distribution networks), with this size being behind countries such as Belgium (74,795 km), Hungary (89,004 km) or the Czech Republic (76,910 km).

The National Gas Transmission System (NTS), operated by Transgaz, has a low degree of utilization, being sized in the 1960s for a triple consumption compared to the current one, generating high costs of using the infrastructure. This makes Romania the European country with the highest share of network tariffs in the final gas price, as evidenced by the draft Energy

OIL & GAS

Strategy of Romania for 2016-2030, towards 2050.

Worn-out system Following the assessment of the technical state of the networks in 2007, it was found that about 40% of the pipelines and connections had the normal life span exceeded (over 18 years). The way in which the investment programs were carried out appears from the data of the Court of Auditors’ report, which underlines that as of 31.12.2016, 12,243 km, representing about 57% of the total steel pipelines and connections, had the normal life span exceeded.

From the point of view of the service life of the main components of the NTS at the end of 2016, the report retains the following: • Out of the total length of 11,507 km of transmission pipelines, 6,242 km, representing 54.25%, had the service life exceeded (more than 40 years); • Of the total of the regulating and metering stations (1,244 pcs), 26.45% (329 pcs) were in operation for over 20 years, the same situation being noted in the case of 31.67% (19 pcs) from the total valve control stations (60 pcs); • The compression capacity was provided by three gas compressor stations, of which two compressor stations were over 30 years old, and the Silistea compressor station was equipped with equipment and installations made in the 1970s, being obsolete.

Other irregularities Following the audit, the inspectors of the Court of Auditors also found that there were differences (plus or minus) between the length and number of NTS components registered in the operating license and those communicated by Transgaz. Thus, 126 km of pipelines appeared in addition, but 874 cathodic protection stations, 73 regulating and metering stations, 176 odorization stations and 344 valve control stations were missing.

Also, during 2012-2016 there was no rigorous monitoring regarding the actual degree of connection to the gas network in relation to the investments made under the concession agreements in progress during this period.

Projects remaining on paper Although the natural gas transmission infrastructure was outdated (77.72% of the total number of transmission pipelines had a service life of more than 20 years), at 2014 level, pipelines with a length of 264.42 km were replaced/rehabilitated/ modernized, in 2015 - only 71.08 km, while at the level of 2016 pipelines with a length of 21.11 km were replaced/ rehabilitated/modernized. The same situation was noticed by the inspectors of the Court of Auditors and in the case of the extension of the transmission network infrastructure, the length of the extended transmission pipelines decreasing by about 81%, from 107.5 km in 2012, to only 20.43 km in 2016. Regarding the rehabilitation and repair of the NTS components, the report notes a low degree of fulfilment of these obligations in relation to the existing needs (2,218.06 km of trunk pipelines and a number of 63 stations). Of the amount allocated in the period 2012-2016 for repairs and rehabilitations (RON 462 million), only 46.64% was used for works (RON 215.50 million).

Low investments in the system, although funds were available During the period 2012-2016, through the investment programs for modernization and development, over RON 2 billion were allocated and RON 885.16 million were spent, representing 43.03%. At the same time, there was a year-on-year decrease in the amount of investments made in relation to the scheduled annual value. Thus, at the level of 2016, out of the total programmed amount of RON 721.90 million, only RON 119.82 million were spent, which represented 16.60%.

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INTERVIEW

Romgaz to Plan Largest Investments of the Past 10 Years 36

INTERVIEW

Romgaz is the main natural gas producer and supplier in Romania, having the Romanian State as main shareholder (70%). The remaining 30% stake is traded on the Bucharest Stock Exchange and the London Stock Exchange (LSE). In 2013, Romgaz expanded its main scope of activity by taking over Iernut power plant, thereby becoming an electricity producer and supplier. Currently, the company is implementing the largest investment made in the energy sector in the past 10 years. Adrian Volintiru, Romgaz CEO, gave us an interview where he discussed the company’s investment plans.

What investment projects does Romgaz perform currently?

We are in the process of completing a first investment in power plants, at Iernut, where the installed capacity will be 430 MW. For the second gas-fired power plant, at Mintia - Hunedoara County, the prefeasibility study is completed and the feasibility study is in progress. The new investment at Iernut is EUR 269 million, VAT excluded, being the most important investment made in the energy sector in the past 10 years.

When completed, Iernut and Mintia power plants shall increase Romgaz revenue by 8%, provided the current structure is maintained. Iernut power plant completion deadline is H1 2020 and the feasibility study for Mintia power plant will be completed in SeptemberOctober. The works procurement process will be initiated in Q1 2020.

Also, a market study assessing the potential of the Romanian chemical and petrochemical industry is close to completion, as we are also interested in this sector.

Are you interested in making procurements in the chemical and petrochemical sector?

We look for a value increase along the gas chain, because the content of methane in the Romanian gas is high and would rather suit the consumption of the chemical and petrochemical industry, which would increase the value of the molecule along the chain.

What investments are planned for the Black Sea?

As part of a big energy source diversification plan, Romgaz intends to bring to Romania Where possible, we have studied LNG from a terminal to be built in Greece.

the data bases and our geologists are identifying investment opportunities.

We discuss large investments, which we perform together with Lukoil.

Currently, the company’s degree of indebtedness is zero and we plan to select an international financial rating firm to rate our company, which would increase the possibility to attract favourable financing possibilities, including through issuance of corporate bonds. Also, the company rating is helpful for the collaborations we would like to conclude with large companies willing to invest.

It is required to implement investment projects whose value exceeds in the medium and long term the resources provided by our budget.

As such, for the future, the need arises to identify and access additional refundable external financing sources.

In this respect, the annual rating provided by reputable international rating agencies sets the premises for obtaining new financial resources in favourable conditions which can be maintained at the initial state until the full repayment.

Romgaz requires rating assessment and establishment services because it initiates and maintains a continuous dialogue with rating agencies, enabling Romgaz to understand how it relates in terms of aspects and risks considered when assessing the rating.

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We have been constantly preoccupied with the possibility to diversify sources and Alexandroupolis is a source diversification method. It is a project which creates a new entry gate for the liquefied natural gas to the European transmission system through Greece, respectively through Alexandroupolis, directly connected to the Southern Corridor. Romgaz is preoccupied with source diversification as a means to cover risk, to be increasingly competitive or to react in case of extreme situations and, in terms of import sources, we have always scouted for alternative import sources.

Furthermore, after the gas discoveries (in the Caspian Sea region) take effect as a source, we can use the transmission system to which the terminal has access as a possibility to bundle our gas with liquefied natural gas and to enter the markets of southern Europe. We see it as an opportunity and we are currently analysing, weighting the situation and making the most of this opportunity.

In September, Romgaz shareholders are convened to approve the purchase of 20% of the share capital in Gastrade, the Greek company developing the terminal near Alexandroupolis. The initial investment of SNG may be EUR 12.5 million. In addition, the investment that Romgaz has to make for the next two years, as long as the execution of the project lasts, amounts to an additional sum of EUR 12.5 million.

OIL & GAS

GSP Offshore to Take Over Activities from OMV Petrom The Competition Council has authorized the transaction through which OMV Petrom outsources to GSP Offshore certain maintenance operations, port operations and related services, together with the related assets and the employees of X-Petromar production area. Following a public procurement procedure, a Framework contract was concluded between OMV Petrom and GSP Offshore SRL, for transferring the activity in X-Petromar production area.

Text by Daniel Lazar

T

he Competition Council has analyzed this ope­ ration and found that it does not raise a significant obstacle to effective competition on the Romanian market or a substantial part thereof and there are no serious doubts on its compatibility with a normal competitive environment.

What does the contract provide GSP Offshore and OMV Petrom have executed the framework contract for integrated offshore services of the facilities and equipment of OMV Petrom’s Upstream Division in Asset X, the contract being awarded following a public procurement procedure in which three international and two local service providers have tendered for. As general

contractor, GSP will integrate a series of services that includes onshore and offshore operations and maintenance, as well as harbor operations, maritime transportation, aviation services and other support services.

“Over the past 15 years, GSP has been developing its expertise in providing integrated services for offshore oil & gas industry. We started in 2004, as a drilling contractor, and since then we have been continuously investing in expanding our range of services. Today, GSP has the capabilities to cover an extensive range of services, from drilling and Greenfield developments to asset management of brownfields. We are confident that we will successfully deliver a project of such complexity, as we rely on our specialists’ professionalism, as well as on our assets that comply with the most 38

exigent international standards,” Gabriel Comanescu, President of GSP, said.

The operations under the contract will be performed by GSP Offshore SRL and with support from GSP group companies – Grup Servicii Petroliere Logistic (GSP Logistics), Grup Servicii Petroliere Shipyard (GSP Shipyard), Grup Servicii Petroliere Catering (GSP Catering), Vega Offshore, acting as subcontractors. The project is scheduled to start in 2019 and has an estimated duration of 8 years.

New activities in the Black Sea Also, in the Black Sea, GSP Offshore signed at the end of last year a contract for integrated drilling services with Lukoil Overseas Atash BV. The project will be developed in Trident field, in the Romanian Black Sea sector, and marks a

OIL & GAS

new milestone for GSP, as the company accesses the deep-water drilling market.

The Trident field concession rights are owned by the Romanian branch of the Dutch subsidiary of Lukoil (87.8%) and Romgaz, the Romanian state-owned producer (12.2%). The gas deposit in the Trident field is estimated to 30 billion cubic meters and could be the second largest in Romania’s exclusive economic zone. GSP acts as main contractor, being responsible for the entire management of the drilling campaign.

The scope of work comprises drilling and well-related services, as well as logistics and aviation. The project involves the drilling of a new expiration well – Trinity-1X, for which Saipem’s Scarabeo 9 semisubmersible drilling rig will be mobilized. The Mobile Offshore Drilling Unit (MODU) is an ultra-deep-

water drilling unit, designed to operate in water depths up to 12,000 ft, and with a drilling depth capacity up to 50,000 ft below the rotary table, and has been chosen due to its ability to lower its tower in order to allow the crossing of the Bosporus Strait. The drilling activities under the project are expected to commence in the last quarter of this year.

GSP’s activities abroad The company is also active abroad, carrying out offshore activities within the North Marmara Natural Gas Storage Extension Project (Phase III), under a contract with Rönesans. The joint venture between Rönesans Endüstri Tesisleri İnşaatSanayi Ve Ticaret Anonim Şirketi and Renaissance Heavy Industries Joint Venture, both member companies

39

of the Rönesans Holding, has been awarded by Boru Hatlari İle Petrol Taşima A.Ş. (BOTAŞ) the tender for the third phase of the construction work for the North Marmara Natural Gas Storage Extension Project.

As main subcontractor of the offshore operations, GSP will supervise all the activities related to the construction of two fixed offshore rigs. GSP’s Bigfoot 1 Pipelay Barge and Neptun heavy lift crane and will perform installation of the rigs, installation of two 28” pipelines of 2.1 and 3.3 km, cable installation. GSP will also carry out the drilling of 20 wells at the two pre-installed offshore rigs, using GSP Saturn, a GSP Jupiter jackup rig, a GSP Well Servicer multi-role vessel, as well as platform supply vessels.

The project will be carried out in Silivri, Istanbul, over a period of three years.

OIL & GAS

Fuel Price Monitor 180,000 Searches on the Platform in the First 2 Weeks

On the ‘Fuel Price Monitor’ platform there were about 180,000 searches of the fuel assortments in the first days since launch. Thus, in the first two weeks, the most searched assortments were standard gasoline (59,930) and standard diesel (54,932), both representing 64% of the searches, and the rest of the assortments - premium gasoline (22,818), premium gasoline (20,656), LPG (13,290) and electric charge (8,206) - accounting for 36% of total searches.

Text by Daniel lazar

R

he 180,000 searches were generated following over 62,000 hits, a single user being interested in more than one assortment.

Most visits come from the website (over 29,600), and most visits through mobile apps come from devices running Android (around 27,000) and iOS (about 5,700).

Most searches in the application come from Romania, most from Bucharest and Timisoara, but searches came from other countries as well, such as Germany or the UK. Statistics show that most app downloads were made from Google Play

(around 20,000), compared to the App Store (over 1,800).

In terms of demographic data, they show that people aged 25-34 years old showed the most interest in the application, followed by people aged 3544.

The ‘Fuel Price Monitor’ platform is available both as a web application and as a mobile application (IOS and Android) downloadable from the App Store and Google Play, and displays prices for standard and premium fuels (gasoline and diesel) in stations of OMV Petrom, Mol, Rompetrol, Lukoil, Socar and Gazprom across the country, offering multiple search, sorting and 40

filtering facilities. The Fuel Prices Monitor currently displays the prices of fuels (gasoline, diesel and LPG) used by the largest filling stations, namely OMV, Petrom, Rompetrol, Mol, Lukoil, Socar and Gazprom, in the entire country.

Following the launch, some independent fuel distributors have expressed interest in joining the platform, and discussions are currently under way to introduce them into the database and display fuel prices on the platform.

The competition authority encourages users to send recommendations for improving the application, as well as any referrals or complaints, to monitorul_ preturilor@consiliulconcurentei.ro.

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• The large number of customers, proof of increased productivity, optimization of equipment maintenance and repair costs, contributing to obtaining competitive positions in their markets.

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• We are open to new challenges and potential projects, which we will approach with the particularly successful team of Flowserve SIHI. • Starting on 14th April 2017, the name of our company has changed from Sterling Fluid Systems (Romania) to Flowserve SIHI Romania - the only official entity of Flowserve SIHI Corporation for Romania and Moldova.

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41

OIL & GAS

The 2% Energy Contribution and the Cap on Natural Gas Prices Under Discussion The Committee for Industries of the Chamber of Deputies has taken the first step to amend GEO 114/2018, issuing a positive opinion for the elimination of provisions regarding the energy market. It’s about repealing articles of GEO No. 114/2018 capping the price of gas from domestic production for population and thermal power plants to RON 68/MWh, re-introducing regulated prices for electricity intended for household consumers customers of suppliers of last resort and increasing from 0.2% to 2% the contribution charged by ANRE to energy and gas operators.

If

the mentioned amendments are approved and published in the Official Journal, there will be a 90-day period until they come into force, period during which ANRE will have to prepare the implementing methodologies for the new provisions. Due to Ordinance 114, in March this year the European Commission triggered an infringement procedure against Romania for the incorrect application of EU Gas Directive.

“The monetary contribution charged from license holds in the field of electricity, electricity and heat in cogeneration for the electricity component, natural gas, is equal to 2% of the turnover achieved by them from the activities subject to licenses granted by ANRE, turnover calculated according to ANRE regulations approved by Order of

ANRE President with the endorsement of the National Commission for Strategy and Prognosis,” reads Article 78, para.

3(1) of GEO 114/2018.

In December 2018, when it adopted GEO 114, the Executive invoked the need to protect vulnerable consumers against price increases to motivate the introduction of the cap on gas prices and regulated electricity prices for household consumers. But this protection is ensured for all household consumers, in conditions in which Romania does not have a definition of vulnerable consumers yet. In May, a study conducted by the energy consulting company Emerton at the request of the Oil and Gas Employers’ Federation (FPPG), whose most important members are the major gas producers OMV Petrom and Romgaz, proposed the adoption of a definition of 42

the vulnerable gas household consumer that could cover 20% of Romania’s population and the introduction of a scheme under which vulnerable consumers would be subsidized for half of the costs of gas consumption bills, scheme which would be financed through a ‘social tax’ paid by the other end-customers, as well as through discounts granted by suppliers. Also, the study proposed the idea of establishing a fund for the protection of vulnerable consumers, amounting to about RON 970mln per year, of which each such consumer would receive an annual subsidy of RON 650, which would cover half of the costs of gas consumption bills, respectively 50% of the average price of RON 130/MWh paid last year by households, taking into account an average annual consumption of 10 MWh of gas per household.

Celebrate the future With KLM’s 100th birthday, we proudly look forward to a bright future, ready for the exciting challenges and opportunities ahead. klm.ro

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OIL & GAS

(L-R) Azerbaijani PM Novruz Mammadov, Iran’s VP Eshaq Jahangiri, Turkmen President Gurbanguly Berdimuhamedov, Russian PM Dmitry Medvedev and Kazakh PM Askar Mamin

Revival of the Silk Road to Bring Billions of Dollars in Investment Text by Daniel lazar 44

OIL & GAS

R

evival of the Silk Road, which used to link Europe and Asia, is a strategic objective certified by the European Union strategy adopted in October 2018, by connecting the Trans-European Transport Network (TEN-T) with Asian networks.

The issue was also dis­ cus­ sed in Bucha­ rest, during the quadripartite meeting of foreign ministers of Turkmenistan, Azer­bai­jan, Georgia and Romania, of March 4, 2019, when the creation of the international transport route ‘Caspian Sea - Black Sea’ was established. Moreover, a joint statement was adopted, on the diversification of transport and transit routes on East-West direction, covering the Caspian basin, Continental Eurasia with access to the Black Sea and the Baltic region, South and South-East Asia, the Middle East, countries of the Asia-Pacific.

The first edition of the Caspian Economic Forum Leaders of the five states bordering the Caspian Sea - Russia, Iran, Kazakhstan, Azerbaijan and Turkmenistan - have recently met in the coastal city of Avaza, in Turkmenistan, for the first Caspian Economic Forum, aimed at improving trade and investment between the states, especially relating to Caspian Sea projects. It is estimated that the Caspian Sea holds approximately 50 billion barrels of oil and 9 trillion cubic meters of gas. Properly exploited, these resources could be worth trillions of dollars. For this reason, the Caspian region has been declared a fast-growing geopolitical and economic center of Eurasia. This is the conclusion of the first edition of Caspian Economic Forum.

The forum, which together with the President of the host country Gurbanguly Berdimuhamedov - was also attended by Russia’s Prime Minister Dmitri Medvedev, Iran’s Vice-President Eshaq Jahangiri, Azerbaijan’s Prime Minister Nevruz Memmedov and Kazakhstan’s Prime minister Askar

Mamin, debated issues relating to the development of economic trade, cooperation in the field of transport, creating the conditions for major projects, the role of the economy of the Caspian region at global scale and attractiveness of investments in various sectors of the economy of the littoral Caspian states.

The Caspian Exhibition of Innovative Technologies was held simultaneously, where national stands from Azerbaijan, Russia, Kazakhstan, Iran and Turkmenistan were present, as well as companies from Turkey, Belarus, France, Japan, Germany, Uzbekistan, the Netherlands, United Arab Emirates, China and Finland.

The fourth largest global natural gas producer The oil and gas industry is the main branch of the national economy of Turkmenistan, which ranks fourth in the world in terms of gas reserves.

In accordance with the interstate agreements, the capacity of the Turkmenistan-Uzbekistan-KazakhstanChina gas pipeline increases gradually.

Since commissioning, in December 2009, until June 30, 2019, almost 280 billion cubic meters of natural gas were exported from Central Asia to China.

Over 80% of this volume referred to the pipeline from the Turkmen fields, mainly those operated by the national company Türkmengaz. Thus, new fields are gradually introduced on the contracted territory of Bagtyyarlyk, whose exploration and development are carried out by China National Petroleum and Gas Corporation (CNPC). The project for the construction of the fourth subsidiary (D) of the gas pipeline from Central Asia - China, which will follow the Turkmenistan-UzbekistanTajikistan-Kirgizstan route, entered the stage of practical implementation. After commissioning, the total quantity of the ‘highway’ will grow to 85 billion cubic meters and export of ‘blue fuel’ from Turkmenistan to RPC will reach up to 65 45

billion cubic meters.

Also, the Turkmenistan-AfghanistanPakistan-India (TAPI) gas pipeline has a major geopolitical and geo-economic importance, being conceived not only to provide long-term deliveries of Turkmen gas to the largest countries of South Asia, but also to become a strong incentive for the social and economic development of the entire region, consolidating peace, stability and security. Construction works for a gas pipeline project are underway in Afghanistan and Pakistan.

This project consists of two stages, of which the first will ensure a free gas flow in the pipeline of 5-6 billion cubic meters.

Then, after the construction of gas compressor stations, the annual capacity of TAPI will be increased to 33 billion cubic meters.

The largest gas field in the world One of the largest investment projects relating to the increase in the resource base of the industry is the industrial development of the largest gas field in the world, Galkynysh, whose reserves, together with Yashlar and Garakel fields, are estimated at 27 trillion cubic meters. Together with domestic enterprises, the largest companies at global level - Hyundai Engineering and LG International Corporation (the Republic of Korea), CNPC (China), Petrofac International and Gulf Oil & Gas International participated in the development of Galkynysh in various stages. Moreover, there is a framework agreement between the state-owned company Türkmengaz and a consortium of Itochu Corporation, JGC Corporation, Mitsubishi Corporation, Chiyoda Corporation, Sojitz Corporation (Japan), Çalik and Rönesans (Turkey) for the construction of facilities as part of the development of this field.

In the oil and gas sector, it is relied on attracting foreign partners, so that their interest is on the rise. For example, Dragon Oil (Turkmenistan) Ltd, a subsidiary of Dragon Oil (United Arab Emirates), develops the Jeytun and

OIL & GAS

Dzhigalybek fields, part of the Cheleken contract area. In total, over USD 6.6 billion have already been allocated for these purposes. There are production sharing agreements for several offshore units with Buried Hill (Cyprus), RWE and Wintershall (Germany), ARETI (based in Geneva, Switzerland), with the Italian company Eni (the Nebitdag contract area) and the Austrian company Mitro International (Khazar consortium), operating in the Caspian region for several years.

The main supplier of polymers in Russia A polymer plant was commissioned last year in the village of Kiyanly, being build, under the coordination of the state concern Türkmengaz, by LG International Corp and Hyundai Engineering (Korea), with the participation of TOYO Engineering Corporation (Japan). The production capacities of the company allow processing of 5 billion cubic meters of natural gas per year, 386 thousand tons of high-density polyethylene and 81 tons of polypropylene being produced here. Currently, according to the Federal Customs Service of the Russian Federation, Turkmenistan has become one of the largest suppliers of polymers of the Russian Federation.

The first plant in the world to produce synthetic gasoline Major Japanese companies have been operating for several years in Turkmenistan and commissioning in June this year, in the Akhal province, of the first plant in the world producing synthetic gasoline from natural gas is an example in this regard. This unique complex in the world was built, at the request of Türkmengaz, by a consortium of Kawasaki Heavy Industries Ltd. (Japan) and Rönesans (Turkey). The plant is designed to produce 600 thousand tons of ECO-93 eco-friendly gasoline, corresponding to EURO-5 standard.

Moreover, it produces, from associated products, 12 thousand tons of purified

diesel fuel and 115 thousand tons of liquefied gas per year. Several European countries have already expressed interest in these products.

The industrial complex is included in the Guinness Book of Records as the “first plant for the production of gasoline from natural gas” and is awarded with the innovative technology certificates of the Swiss Federal Institute of Technology and the Clean Ecological Fund of the Environmental Protection Fund (US).

TUIE, trade missions in China, the United Arab Emirates and Austria Turkmenistan Union of Industrialists and Entrepreneurs (TUIE) is a public organization whose activity is aimed at small and medium-sized enterprises in the country, assisting in the development of the private sector and encouraging it.

At this moment, this body includes over 23,000 private companies from different fields of activity, the members of the Union being involved in trade, public food, agriculture, food industry, in the manufacture of textiles and footwear, education, tourism, sports, culture etc.

The most representative buildings in the capital of Ashgabat and in the tourist region Avaza were built by them.

Abroad, the Union has opened trade missions in China, the United Arab Emirates and Austria. A strategic objective of TUIE is for its members to achieve, in 2020, 70% of Turkmenistan’s GDP (excluding the oil, gas and energy sector), compared to the current level of 68%. Currently, goods from domestic production are exported to more than 40 countries around the world, including Turkey, China, Russia, the United Arab Emirates, Iran, Germany, the US, the United Kingdom, Ukraine or Switzerland.

The main export items are mineral oil, cotton fiber, products made by the textile and chemical industry.

Avaza national tourist area, created from scratch in 10 years The national tourist area of Avaza, 46

which stretches along the Turkmen coast of the Caspian Sea, attracts the attention of countries and nations around the world. The act regarding the creation of this area was signed on July 21, 2007, and Avaza is not only the national tourist center, but also the central point of political and business consultations, as was the Caspian Economic Forum.

The construction of the national tourist area of Avaza provided adequate conditions for the creation of new road, rail, air and sea routes. As a result, opportunities for creating and improving the current Silk Road model have become possible. A new international airport was built in Turkmenbashi city, 16 kilometers away, which has the capacity to receive airplanes of any type, the airport and the resort being connected by motorway.

USD 1.5 billion investment in a port linking Asia to Europe In 2018, the project ‘Turkmenbashi International Seaport’ was completed, which includes the ship repair area, a ferry terminal and others for freight and polypropylene, with the aim of being a regional hub between Asia and Europe.

The construction, which cost USD 1.5 billion, lasted 4 years (2014-2018), has a total area of 1.36 million square meters and a sea opening of 3.16 kilometers.

The ship repair area has the capacity to process 12,000 tons of steel per year, and in the yard 4 new ships can be built and up to 20 ships can be repaired simultaneously. The total area of the container terminal is 249,000 square meters, being able to handle 400,000 containers of 20 cubic meters per year.

The general cargo terminal has a total handling capacity of 4,000,000 tons of general cargo per year, such as steel, wood, equipment, vehicles and heavy loads, while the bulk cargo terminal, with a total handling capacity of 3,000,000 tons of cargo per year, is built to load, unload and store bulk cargo, such as iron ore, cement, epoxide, coal, food, cereals, sugar, salt and others.

Products API and non-API downhole pumps Fiberglass Sucker Rods (FSR) and accessories Steel Sucker Rods (SSR) and accessories Plunger lift equipment and accessories

Product Services Downhole API pump repair service FSR/SSR technical service and installation Rod string design and optimization Rod pump failure analysis Customized services and solutions

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49

ENVIRONMENT

Interview with Gabriela Stanciu

Blumenfield Solutions to Protect Biodiversity Improving Environmental Monitoring in the Black Sea

Blumenfield is a Romanian business which, in the 10 years of activity, has constantly improved its performance and quality of services, closely related to environmental protection. It is the only environmental consulting company in Constanta that has its own environmental protection research laboratory and offers consulting services in areas such as mineral and petroleum resources exploitation, waste management, monitoring of environmental factors, physical-chemical, biological and microbiological analyses.

General Manager Gabriela Stanciu talks about environmental challenges, as well as about the existing solutions that can improve the quality of life and natural ecosystems.

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ENVIRONMENT

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Concerns on environmental health and quality of life are increasingly on the agenda of the authorities, but solutions to environmental problems are still awaited. How does the company you manage answer to such challenges?

It is true that lately there is a constant concern of authorities to protect the environment and the quality of life. If we were to relate only to the last two years, changes occurred in the environmental legislation have brought changes both in regulations on waste and packaging management and in the environmental impact assessment procedure, providing for more generous terms for public access

to environmental information.

Also, the civil society and general public have become more and more active in participation in the decision-making process on the regulation of projects with environmental impact.

I am convinced that there are adequate solutions for each challenge, be it of environmental nature. But, in some situations, implementing such solutions requires investment, maybe even consistent if it’s about an activity with significant potential environmental impact.

In a market economy that is in a constant change, in which the issue of fiscal stability is increasingly often raised, 52

budgets for environmental investments will always be the figures suffering the most drastic adjustments. However, the obligations of the environmental legislation must be observed and implemented in economic projects and activities.

Experience accumulated over time in this dynamic field helps us have answers for the challenges faced by our clients. We come up with cost optimization solutions from the project planning phase, so that, in the operational stage, implementing the environmental requirements established by the regulatory acts of environmental authorities will follow the model of efficiency in results and costs.

ENVIRONMENT

and aquatic and terrestrial biological determinations.

Thus, the activity of Blumenfield promptly and professionally provides integrated services in the field of environmental protection for companies operating in a wide range of industries.

To whom exactly are Blumenfield services addressed?

The main beneficiaries of our services are companies from various industries.

Blumenfield services are accessed by companies in the petroleum industry (offshore and onshore), but also by companies in the extractive industry, energy industry, infrastructure development etc.

We can add here the companies carrying out activities in the hotel industry, real estate development and port operators.

It is well known that on September 25 the International Day of the Marine Environment is celebrated, an event that draws attention to underwater pollution worldwide. In the context in which the Black Sea represents an area of strategic importance for Romania both economically and geopolitically, how can the marine environment be protected, amid the increasing interest in Black Sea resources?

When was Blumenfield set up and what are the main areas on which the company’s activity is focused?

There are 10 years already since Blumenfield has been activating in the environmental consulting market.

Blumenfield’s expertise covers both consulting services and the preparation of various environmental studies. The scientific division of Blumenfield provides methodical support in the environmental impact assessment, as well as in the monitoring of environmental factors, through the 6 laboratories of Blumenfield Science, which carry out physicochemical, microbiological analyses

The Black Sea presents a complex and unique ecosystem due to its physicochemical and biological characteristics.

However, in the environmental studies that we have carried out for Black Sea projects, we have noticed an alteration of the quality of the coastal waters compared to the high seas. Also, the fact that there is a year-on-year decrease in the quantity of fish species caught, which obviously has consequences in the trophic network of the marine ecosystem, is gradually leading to the decline of marine biodiversity.

To protect, one must first of all know what the initial ecological status is in the area of interest of the respective project.

53

Of course, speaking of the aquatic environment, things are radically different from terrestrial ecosystems.

Although, on both sides, there is a permanent, evolutionary dynamic, the ecological state of the environment in marine waters will take into account the structure, function and processes of the ecosystems that make up the marine environment. All these, together with natural physiographic, biological, geological, climatic factors, are correlated with the physical, chemical conditions and acoustic pressures that result from the anthropic activities carried out in the area.

Thus, diminishing the impact on the marine environment through appropriate measures of protection and prevention of water pollution, together with the implementation of a program for the close monitoring of the quality indicators of the environmental components (water, air, sediments, biodiversity) leads to the ecological sustainability of the economic activities related to the marine environment.

How can Blumenfield contribute to protecting the Black Sea’s biodiversity?

I would say that anything big starts with a small step.

There is a lot of talk about ‘sustainable development’, but how many understand this concept? Moreover, how many routinely apply it? To achieve a sufficient level of education and understanding of the consequences of our actions today on the balance between socio-economic, ecological and natural capital elements, a change is needed, starting with each of us.

Blumenfield contributes to this change through the technical capability due to the high-performance laboratory equipment, to identify the sensitive aspects in the projects in which the company is involved, from the design stage, but especially by designing and implementing monitoring programs appropriate to the specific activities of the projects carried out in the Black Sea.

ENVIRONMENT

KMG International 2018 Sustainability Report Inspired by Nature

KMG International published its 2018 Sustainability Report – Inspired by nature, developed according to latest international standards – GRI Sustainability Reporting Standards, marking the fifth consecutive year of non-financial reporting for the Group. The report represents an overview of the Group’s economic, social, environmental and marketplace evolution in 2018, as part of the company’s commitment to transparency and continuous improvement.

“2018 was our best year yet in terms of key production indicators. Nevertheless, we always try to have a holistic view on our activities and in doing so, we have successfully improved in all aspects our operations across the Group. We drove our environmental commitments further than ever before, recording the lowest technological loss and lowest energy consumption, and decrease of CO2 emissions for the fourth consecutive year. We are proud of the progress made in driving our company’s growth, considering the challenging business environment, and excited to continue

building a sustainable enterprise that makes a positive difference for our stakeholders and the world around us,” Zhanat Tussupbekov, Group CEO said.

The Sustainability Report acts as KMG International’s 2018 Annual Communication of Progress under the United Nations Global Compact (UNGC) and shows the company’s role and impact in the Romanian economy, but also in other countries with significant operations (Bulgaria, Georgia, Republic of Moldova). The report is a detailed analysis on the company’s corporate governance, human resources 54

(education and development, safety, diversity, human rights), environmental management (emissions reduction, water consumption, biodiversity conservation activities), local community investment projects, marketplace performance.

Sustainability highlights for KMG International throughout 2018: • 4 million USD invested in environment protection activities; • 89.6% waste recovery rate for Petromidia Refinery; • 1 million USD investment in community projects in Romania only; • Promoter of diversity: 5,000

ENVIRONMENT

PETROMIDIA ENERGY EFFICIENCY INDEX (GJ/T) PETROMIDIA ENERGY INTENSITY INDEX (GJ/GDP) PETROMIDIA ENERGY BASKET (GJ/T)

2017

2018

Fuel gas Power Coke on catalyst, PSA off‑gases Steam

1.72 0.58 0.57 0.17

1.74 0.56 0.58 0.10

Total energy used

3.04

2.98 2017

2018

PETROCHEMICAL ENERGY EFFICIENCY INDEX (GJ/T) PETROCHEMICAL ENERGY BASKET (GJ/T)

Steam Power (onsite) Power (offsite) Total energy used

2017

2018

10.34 10.56 6.02 5.40 2.35 2.23 2.65

2.40 2017

2018

VEGA ENERGY EFFICIENCY INDEX (GJ/T) VEGA ENERGY BASKET (GJ/T)

2017

2018

Fuel gas Power

2.41 0.24

2.17 0.23

Total energy used

2.65

2.40 2017

headcount, 17 different nationalities.

Petromidia Refinery, KMG International Group’s main asset in Romania recorded its lowest technological loss in history, along with its lowest energy intensity index96.1% and highest energy efficiency - 2.97 GJ/mt. Vega Refinery, despite operational peaks, managed to reach its lowest technological loss – 0.93% wt and its lowest energy consumption ever recorded - 2.43 GJ/mt. On a correspondingly positive note, the Group’s Petrochemical Division also improved its energy consumption, recording an energy efficiency index of 18.1 GJ/mt, down by 0.6 GJ/ mt compared to 2017, as well as technological losses of 2.2% wt in 2018, 0.5% lower than the previous year.

Companies in the Group’s Retail and Trading business units followed the same trend in terms of environmental

efficiency. Rompetrol Downstream, KMG International’s retail division that includes the Group’s network of gas stations and warehouses, exceeded its 1% targets for water and energy usage by 1.95% and 2.90% respectively.

No accidental spills or grievances were recorded in 2018, and the CO2 emissions for the Refining Business Unit (Petromidia and Vega platforms, along with the Petrochemical Division) decreased by 1.4% compared to the previous year. In terms of safety, due to the 100% Safety program and over 30,000 hours of health & safety training carried out (6.84 average training hours per employee), the absenteeism rate dropped from 2.54% to 1.97%.

A rigorous and comprehensive assessment of the 2018 KMG International Sustainability Report was performed by the Association for Community Relations, which was 55

2018

included in the Independent Opinion section. The report was prepared in accordance with the Comprehensive option of the Global Reporting Initiative (GRI) Standards and the GRI G4 Oil and Gas Sector Supplement.

Material topics In 2018, the broad range of sustainability-related topics included greenhouse gas emissions, occupational health and safety, environmental and socioeconomic compliance, fair labour practices or customer health and safety, to name only a few. They were evaluated for their relative significance and the ability to positively influence the value chain which in turn made up the basis for a materiality assessment and prioritization of the Group’s focus towards sustainable approach and development.

ENVIRONMENT

Impact of Increasing Emissions 13 Kg of Dust/Capita Per Year in Romania Each Romanian is forced to inhale 13 kilograms of dust per year. We are talking about a cocktail of particulate matter that is slowly poisoning us every day. Despite doctors’ warnings, the doses of dust administered to Romanians have increased in recent years. Between 2000 and 2017, PM10 airborne particles decreased in the European Union by 27%, while PM 2.5 emissions fell by 28%, notes a recent report by the European Environment Agency. However, the European trend is not found in Romania, in our case European statistics indicating an increase in emissions.

Text by Adrian Stoica

T

he report highlights the growing impact of the residential sector in the increase in pollution, mainly due to the fuels used for heating. This source contributes significantly to total emissions, contributing, for example, with 51% to particulate matter pollution (PM2.5) emitted directly into the air in 2017.

Moreover, 42% of total carbon monoxide, 42% of polycyclic aromatic hydrocarbons, 24% of dioxin and furan compounds and 16% of heavy metal cadmium were released from this single source. At EU level, the cleanest countries in terms of PM10 emissions in 2017 were Malta, with 0.2 kilotons, Cyprus and Luxembourg with 1.3 kilotons each.

PM10 emissions have increased At the level of 2000, PM10 emissions

in Romania amounted to 135 kilotons.

With this quantity, our country ranked after France (438 kilotons), Germany (294 kilotons), Poland (274 kilotons), Spain (237 kilotons) and the United Kingdom (236 kilotons). In 2017, emissions in our country had increased to 143 kilotons, in conditions in which all EU countries had reduced their emissions. An exception was Bulgaria, but unlike our country, this country managed to keep its emissions at 47 kilotons.

France, the largest polluter with PM10, has managed to reduce its emissions to 254 kilotons and Germany to 206.

PM2.5 pollution is growing In terms of PM2.5 emissions Romania is not doing any better, our country recording an increase in the period 2000-2017, against the European trend.

Thus, in 2000 in Romania the emissions 56

amounted to 103 kilotons, reaching 112 kilotons in 2017. At EU level we were outpaced only by Italy, with 165 kilotons, France with 164 and Poland with 147, but all these states managed to reduce their particulate matter pollution during this time.

Soot emissions, at the same level as those in Germany Between 1990 and 2017, Black Carbon (BC) emissions, better known as soot, decreased by 42% in the EU. Between 2016 and 2017, emissions fell by only 1.8%, mainly due to the reduction of emissions in France, Germany, Greece and Belgium. In Romania, however, they increased from 13 kilotons to 14 kilotons, after in 2000 they amounted to 11.4 kilotons. In a ranking of the most polluted countries with carbon emissions, Romania was placed after the UK, where

ENVIRONMENT

PM2.5 emissions in Romania (kilotons/year) 2000 103

2005 84

2010 87

2011 114

2012 122

2013 114

2014 115

2015 110

2016 110

2017 112

2012 158

2013 149

2014 150

2015 145

2016 144

2017 143

Soot emissions in Romania (kilotons/year) 2000 2005 2010 2011 2012 11,4 14 15 14 14

2013 13

2014 13

2015 13

2016 13

2017 14

PM10 emissions in Romania (kilotons/year) 2000 135

2005 116

2010 119

2011 154

the emissions rose in 2017 to 19 kilotons, Poland with 24 and Spain with 22. For example, in Germany, which is the EU’s largest economy, soot emissions were only 13 kilotons, after in 2000 they amounted to 36 kilotons, given that Germany is the country that holds one third of the coalfired energy production in the EU. For us, an example of good practice could be Portugal, which in 2000 had emissions almost at the same level as us - 10.6 kilotons, but in 2017 they reached 6.4 kilotons.

Fine particulate matter (PM2.5) emission trends Between 2000 and 2017, PM2.5 emissions dropped by 29% in the EU. Between 2016 and 2017, there was an increase of 0.3 %, mainly because emissions rose in Italy, Poland, Spain and Romania (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10 %) to PM2.5 emissions were Italy, France and Poland (countries ranked according to the percentage of their share in the EU total).

Particulate matter (PM10) emission trends Between 2000 and 2017, PM10

emissions decreased by 27% in the EU. Between 2016 and 2017, the increase was very low, just 0.4% mainly because emissions rose slightly in Italy, Poland, Germany and Estonia (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10 %) to PM10 emissions were France, Poland and Germany (countries ranked according to the percentage of their share in the EU total).

Black carbon (BC) emission trends Between 1990 and 2017, BC emissions dropped by 42% in the EU. Between 2016 and 2017, emissions fell by 1.8%, mainly because of slightly fewer emissions from France, Germany, Greece (gap-filled data) and Belgium (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to BC emissions were France, Poland, Italy and Spain (countries ranked according to the percentage of their share in the EU total).

Nitrogen oxide (NOx) emission trends Between 1990 and 2017, NOx emissions dropped by 58% in the EU. Between 2016 and 2017, the decrease 57

was 1.8%, mainly because Italy, Bulgaria, Germany, the United Kingdom and France (countries ranked according to the size of their contribution to the absolute change) reported reductions. The Member States that contributed most (i.e. more than 10%) to NOx emissions in 2017 were Germany, the United Kingdom, France and Poland (countries ranked according to the percentage of their share in the EU total).

Non methane volatile organic compound (NMVOCs) emission trends Between 1990 and 2017, NMVOC emissions dropped by 61% in the EU. Between 2016 and 2017, Member States reported an increase of 1.3% due to slightly higher emissions in Italy, Germany, Poland and Spain (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to NMVOC emissions were Germany, Italy and the United Kingdom (countries ranked according to the percentage of their share in the EU total).

Sulphur oxide (SOx) emission trends and key categories Between 1990 and 2017, SOx emissions dropped by 91% in the EU. Between 2016 and 2017, emissions decreased by 1.3%, mainly due to reduced emissions in Poland, Czechia, Finland and Germany (countries ranked according to the size of their contribution to the absolute change). The Member States contributing most (i.e. more than 10%) to SOx emissions in 2017 were Poland (25.1% of EU 28) and Germany (13.6% of EU 28).

Ammonia (NH3) emission trends Between 1990 and 2017, NH3 emissions dropped by 24% in the EU. However, between 2016 and 2017, emissions rose by 0.4% because of increases in Spain, Poland, the

ENVIRONMENT

Share of EU emissions of the main pollutants, by sector group in 2017 % 100 90 80 70 60 50 40 30 20 10 0

(5)

NOx NMVOCs

SOx

NH3

PM2.5

PM10

BC

B(a)P

CO

Pb

Cd

Hg

PCDD/ Fs

Total PAHs

Energy production and distribution

Road transport

Energy use in industry

Agriculture

Non-road transport

Waste

Commercial, institutional and households

Industrial processes and product use

Other

HCB

PCBs

A key category-level assessment identifies those source categories that have a significant influence on a country's total inventory in terms of their absolute level of emissions. In this report, key categories refer to those that are collectively responsible for 80Â % of the total emissions of a given pollutant (EMEP/EEA, 2016).

Netherlands and Ireland (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to NH3 emissions were Germany, France and Spain (countries ranked according to the percentage of their share in the EU total).

Carbon monoxide (CO) emission trends and key categories Between 1990 and 2017, CO emissions fell by 69% in the EU. Between 2016 and 2017, the increase was 0.2%, mainly because emissions ascended in Poland, Italy, Germany and Greece (gapfilled data) (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to CO emissions were Germany, France, Poland and Italy (countries ranked according to the percentage of their share in the EU total). Belgium explained that the peak of CO emissions in 2013 was because one of its plants produced lime

without oxygen.

Lead (Pb) emission trends Between 1990 and 2017, Pb emissions dropped by 93% in the EU. Between 2016 and 2017, emissions increased by 1.6 %, mainly in Poland, Bulgaria, Italy and Germany (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to Pb emissions were Poland, Italy) and Germany (countries ranked according to the percentage of their share in the EU total). Austria stated that the significant reduction in Pb emissions from 1990 to 1995 was linked to the ban on lead in gasoline, abatement techniques and product substitutions.

Cadmium (Cd) emission trends Between 1990 and 2017, Cd emissions fell by 64% in the EU. However, between 2016 and 2017, they increased by 1.1%, mainly due to a slight increase in Portugal, 58

Poland, the United Kingdom and Germany (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to Cd emissions were Germany and Poland (countries ranked according to the percentage of their share in the EU total).

Mercury (Hg) emission trends Between 1990 and 2017, Hg emissions dropped by 72% in the EU. Between 2016 and 2017, the decrease was 1%, mainly because of fewer emissions in Belgium, Germany, Greece and the Netherlands (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to Hg emissions were Poland, Germany and Italy (countries ranked according to the percentage of their share in the EU total).

Arsenic (As) emission trends Between 1990 and 2017, As emissions

ENVIRONMENT

(a) EU emission trends and (b) indexed emissions for PM and BC a)

Gg

350

100

300 250

80

200

60

150

40

PM10

TSPs

20

0

0

20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17

50

20 17

20 14

20 11

20 08

20 05

20 02

19 99

19 96

100

19 93

19 90 Notes:

120

400

PM2.5

b)

Index (2000 = 100)

9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0

BC

PM2.5

PM10

TSPs

BC

The right-hand axis shows values for BC emissions. Not all Member States reported data for BC. The LRTAP Convention formally requests Parties to report emissions of PM for 2000 and thereafter. Thus, emission trends can be shown for these years only.

The indexed emissions are based on emissions in 2000 (=Â 100Â %).

dropped by 69% in the EU. Between 2016 and 2017, emissions ascended by 4.8%, mainly because emissions increased in Italy (countries ranked according to the size of their contribution to the absolute change). The Member States that contributed most (i.e. more than 10%) to As emissions in 2017 were Italy, Slovakia and Poland (countries ranked according to the percentage of their share in the EU total).

Chromium (Cr) emission trends Between 1990 and 2017, Cr emissions dropped by 71% in the EU. Between 2016 and 2017, emissions rose by 1.6%, mainly because of increases in Hungary, Poland, Sweden and the United Kingdom (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to Cr emissions were Germany, Poland, Italy and the United Kingdom (countries ranked according to the percentage of their share in the EU total).

Copper (Cu) emission trends Between 1990 and 2017, Cu emissions in the EU increased by 10%. Between 2016 and 2017, they rose by 1.2%, mainly

because of increases in Germany, Poland, the Netherlands and Spain (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member State contributing most (i.e. more than 10%) to Cu emissions was Germany (62.7% of EU 28).

Nickel (Ni) emission trends Between 1990 and 2017, Ni emissions dropped by 73% in the EU. Between 2016 and 2017, they increased by 0.6%, mainly because the United Kingdom, Spain, Germany and Romania (countries ranked according to the size of their contribution to the absolute change) reported increases. In 2017, the Member States contributing most (i.e. more than 10%) to Ni emissions were Germany, the United Kingdom and Poland (countries ranked according to the percentage of their share in the EU total).

Selenium (Se) emission trends Between 1990 and 2017, Se emissions dropped by 39% in the EU. However, between 2016 and 2017, they rose by 1%, mainly because of slight increases in the United Kingdom, France, Bulgaria and Portugal (countries ranked according 59

to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to Se emissions were Portugal, Bulgaria and Czechia (countries ranked according to the percentage of their share in the EU total).

Zinc (Zn) emission trends Between 1990 and 2017, Zn emissions dropped by 38% in the EU. However, between 2016 and 2017, they increased by 1.8%, mainly because Italy, Poland, Germany and the United Kingdom (countries ranked according to the size of their contribution to the absolute change) reported higher emissions. In 2017, the Member States contributing most (i.e. more than 10%) to Zn emissions were Germany, Italy and Poland (countries ranked according to the percentage of their share in the EU total).

Dioxin and furan (PCDD/F) emission trends Between 1990 and 2017, PCDD/F emissions dropped by 67% in the EU. However, between 2016 and 2017, the increase was 4.2%, mainly because Greece, Romania, Slovakia and Italy (countries ranked according to the size of their contribution to the absolute change)

ENVIRONMENT

Distance to Gothenburg ceilings for EU Member States in 2017 % 60

40

20

0

-20

-40

-60

-80

Notes:

NH3

-1

5

m

EU

do

te

d

Ki

ng

en

n

ed

ia

ai Sp

en

ia

ov

ak

Sl

ia

ov Sl

al

an

Ro

m

ug

Po

rt

nd

s

g*

rla

et N

Sw ni

SOx

U

NMVOCs

he

a

bo m

xe

Lu NOx

ur

ni

ia

ua

tv

th Li

ry ga

un H

La

y an

ce

m

G

er

an

d an nl

Fr

k ar

Fi

a D

en

m

hi

s

ec

Cz

pr u

tia

Cy

oa

ia

Cr

ar lg

Bu

Be

lg

iu m

-100

Estonia and Malta have not signed the Gothenburg Protocol and therefore do not have ceilings. Austria, Greece, Ireland, Italy and Poland have a ceiling but have not yet ratified the protocol. For Spain, data for emission comparisons exclude emissions from the Canary Islands.

The comparison with emission ceilings is based on reporting on the basis of fuel sold, except for Belgium, Lithuania, Luxembourg, the Netherlands and the United Kingdom. These countries may, instead, choose to use the total national emissions calculated on the basis of fuel used in the geographical area of the Party as a basis for comparing ceilings (UNECE, 2014a). For the EU-15, the comparison is However, between 2016 and 2017, they higher emissions. based on fuel sold. In 2017, the

Hexachlorobenzene (HCB) emission trends reported rose by 1.4%, mainly from because Portugal, Member State contributing most (i.e.

1990 andinventory 2017,adjustment HCB applications Under the Gothenburg Protocol, the EMEP Between Steering Body accepted for emissions Belgium, France, Germany, Hungary, Luxembourg, Spain the United KingdomItaly, in 2014, 2015, 2016, and 2018.

This Bulgaria and2017 Czechia (countries more thanDenmark, 10%) toFinland, PCDD/F emissions emissions fell by 96% in and the EU. However, these adjusted data into account. The EU‑15 did not apply for adjustments and thus data for the EU‑15 are unadjusted. was Greecefigure withtakes a contribution of 40.2% between 2016 and 2017, they increased ranked according to the size of their * Luxembourg has not reported adjustments in 2019. of EU-28 emissions. by 6.6%, mainly in Belgium, Portugal, the contribution to the absolute change) United Kingdom and Slovakia (countries reported slightly higher emissions. In according to the size of their 2017, the Member States contributing Indeno[1,2,3-cd]pyrene (IP) emission trends ranked contribution to the absolute change). In most (i.e. more than 10%) to total PAH European Union emission inventory reportGermany 1990-2017 emissions were Portugal, and States contributing Between 1990 and 2017, IP emissions 2017, the Member fell by 66% in the EU. Between 2016 and most (i.e. more than 10%) to HCB Poland (countries ranked according to the 2017, they decreased by 1.8%, mainly emissions were Portugal, Austria, the percentage of their share in the EU total). because Greece and Poland (countries United Kingdom, Belgium and Finland ranked according to the size of their (countries ranked according to the Benzo(a)pyrene (B(a)P) emission trends contribution to the absolute change) percentage of their share in the EU total). reported lower emissions. In 2017, the Between 1990 and 2017, B(a)P Member States contributing most (i.e. emissions fell by 47% in the EU. Between Total polycyclic aromatic hydrocarbon (PAH) 2016 and 2017, they decreased by more than 10%) to IP emissions were Poland, Greece and Portugal (countries emission trends 0.4%, mainly because emissions fell in ranked according to the percentage of Between 1990 and 2017, total PAH Bulgaria, Greece, Romania and Germany their share in the EU total). emissions dropped by 78% in the EU. (countries ranked according to the size of 60

13

ENVIRONMENT

their contribution to the absolute change).

In 2017, the Member State contributing most (i.e. more than 10%) to B(a)P emissions were Portugal and Bulgaria.

Benzo(b)fluoranthene (B(b)F) emission trends Between 1990 and 2017, B(b)F emissions fell by 76% in the EU. Between 2016 and 2017, they dropped by 2.4%, mainly because of a slight decrease in Greece, Romania, Poland and Ireland (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to B(b)F emissions were Greece, Portugal

and Poland (countries ranked according to the percentage of their share in the EU total).

Benzo(k)fluoranthene (B(k)F) emission trends Between 1990 and 2017, B(k)F emissions in the EU decreased by 78%.

Between 2016 and 2017, they fell by 2.2%, mainly in Greece, Romania, Ireland and Poland (countries ranked according to the size of their contribution to the absolute change). In 2017, the Member States contributing most (i.e. more than 10%) to B(k)F emissions were Greece, Portugal and Poland (countries ranked according to the percentage of their share

in the EU total).

Polychlorinated biphenyl (PCB) emission trends Between 1990 and 2017, PCB emissions dropped by 83% in the EU. Between 2016 and 2017, they fell by 0.4%, mainly because of reductions reported by the United Kingdom, Croatia, Slovenia and Belgium (countries ranked according to the size of their contribution to the absolute change. In 2017, the Member States contributing most (i.e. more than 10%) to PCB emissions were Poland, the United Kingdom and Croatia (countries ranked according to the percentage of their share in the EU total).

E.C.P.M.C. - CONSULT & LEARNING Providing safety and security E.C.P.M.C. - Consult & Learning services •

•

In addition to the aforementioned, E.C.P.M.C. executes projects relating to the protection of objects, goods and valuables against any unlawful actions infringing upon the right to property, their material existence, and the protection of individuals against any hostile acts.

In accordance with NEx 01-06 requirements for installations and equipment operating in potentially explosive atmospheres - related documentation for submission to INSEMEX Petrosani and onsite examination of technical installations, aiming at the prevention of explosions; Design of signalling, alarm and fire alarm systems and installations; - Design of systems and installations for limiting and extinguishing fires; - Design of ventilation systems and installations for the disposal of smoke and hot gases, except those of natural-organized type, according to the authorizations: Series A No.: 7261, 7262,7263 of 31.07.2017, for an unlimited period, issued by IGSU - the National Centre for Fire Safety and Civil Protection, according to the legislation in force.

E.C.P.M.C. - Consult & Learning is recommended by INSEMEX Petrosani - the national authority in the field. Together with its experts is certified by INSEMEX with the Certificate no.

GANEx.Q.2016. (01). 12.0026 and NVIV 01-06/2007, according to the Amendment no. 1/8947/22.09.2017.

E.C.P.M.C. holds the economic operator code (NCAGE: 1GYEL) in accordance with the procedures of the NATO Coding System No. 2124 based on Government Decision no. 4445/2003 for the approval of ‘Rules on the organization and conduct of coding activity for defence equipment items.’

Keep your business safe from fire with ECPMC Consult & Learning E.C.P.M.C. - Consult & Learning S.R.L. A: 46 Fabricii St. | 6th District - Bucharest A: 1 22 Decembrie St. | Petrosani - Hunedoara T: 0728010140 E: ecpmc.petrosani@gmail.com W: www.ecpmc.ro

61

POWER

EUR 30 bln to Upgrade the Energy System Upgrading the Romanian energy system involves investments of up to EUR 30 billion by 2030, and of this amount almost half - about EUR 14 billion - are necessary for the electricity sector, while other EUR 4.1 billion would finance thermal energy, according to the final form of the draft ‘Energy Strategy of Romania 2019-2030, with an Outlook to 2050’.

Text by Adrian Stoica “The strategy identifies substantial investments necessary for the upgrade and retrofitting of the Romanian energy system over the next 15 years. The analysis of alternative development scenarios estimates total investments in the energy sector (exclusively what is related to energy consumption) between EUR 15 billion and 30 billion for the period 2018-2030, with a central estimate of approximately EUR 20 billion,” the document published by the Ministry of Energy mentions.

The funding sources identified by the ministry are private and state capital, European funds, investment banks, public-private partnerships, as well as the amounts obtained by the state from the sale of emission allowances.

Priority projects for the energy system The most important investment objectives in the electricity production and transmission sector are:

• • • •

•

•

• •

Completion of groups 3 and 4 at Cernavoda NPP; Building a new energy group of 600 MW at Rovinari; Building the Pumped Storage Hydropower Plant Tarnita Lapustesti; New energy group of 400 MW ultra-supercritical parameters in Turnu-Magurele; Turnu-Magurele - Nicopole Hydropower Plant, 500 MW; New energy group 200 MW CCGTCraiova II, based on gas, with flexible operation, including the storage of the energy resource in the Ghercesti underground storage facility; New energy group 400 MW CCGT based on gas with flexible operation Mintia; Rastolita Hydropower Plant 35 MW; Hydropower plants on Jiu river - 90 MW; Hydropower plants on Olt river (gorge) - 145 MW; 62

Development of offshore gas fields In order to avoid a significant increase in dependence on imports, even if they will be available from alternative sources and routes, it is necessary to develop the offshore fields discovered over the past few years in the Black Sea. This is a sinequa-non condition to be able to rely on natural gas in the electricity mix, the draft shows. According to the document, additional gas resources from onshore and offshore fields are provided for in the energy mix of Romania in all scenarios, except the unlikely scenario of long-term maintenance of low prices, which do not justify further investments. Exploitation of Black Sea hydrocarbon resources will have a major contribution to Romania’s energy security. The total quantitative levels from conventional onshore and offshore production have the potential to be in surplus compared to the level currently estimated demand in the domestic market, relatively linear. Thus, the draft mentions, Romania aims to increase gas

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consumption in domestic industry and export finished products using natural gas as raw material. The strategy also shows that, in the short and medium term, in order to increase oil and gas reserves, Romania must assume as priority investments in technologies leading to an increase in the degree of recovery in the existing fields, and in the long term in the development of deep exploration projects (over 3,000 m), of onshore fields with complicated geology and offshore fields in the Black Sea. According to the document, gas production will drop, after reaching a new peak of 132TWh in 2025, as a result of production in the Black Sea, to 96TWh in 2030 and 65TWh in 2050.

Interconnection of the power grid Costs for power grids include projects for grid interconnection and development provided for in Transelectrica’s Development Plan for 2016-2025 and continuing it until 2030, as well as the estimated level of investments in distribution networks. Investments include equipment and technologies that make the transition to ‘smart grids’ with bidirectional communication, with efficient management and a higher flexibility in operation. In order to increase the participation of Romanian energy producers in European regional markets, it is provided that, by 2025, the closure of the main transmission ring must be achieved, through lines of 400kW, as well as by developing new interconnection points with grids in the adjacent area of Romania. Transelectrica’s development strategy foresees, besides a number of other projects, the implementation of the new 400 kV OHL between Gadalin and Suceava substations. It has a major impact on safety in operation, the capacity of interconnection, and it also contributes to strengthening the connection between the two network areas located in the northern part of the country, the document shows.

The investments also concern the closure of the 400 kV ring of the Bucharest City, on the east side, by the construction of a 400 kV electric line from the Bucuresti

Sud transmission substation to the Brazi Vest substation, including the creation of a new transmission substation in the NE area of the Capital (Bucharest City and Ilfov County reach up to 15% of the national electricity consumption).

Thermal power plants require investment According to the strategy, the level of investment in the thermal energy distribution networks is estimated between EUR 1.3 billion and EUR 2.6 billion. “In parallel, it is necessary to replace the old thermal power plants in cogeneration, which are close to the end of the lifespan, with necessary investments estimated between EUR 1 billion and EUR 1.5 billion,” the document also shows.

Romania has a net installed capacity in gas-fired power plants of around 3,650 MW, of which 1,750 MW in cogeneration - combined heat and power. 450 MW are idle, and another 1,150 MW are near the end of the standard life and will be retired by 2023. For now, only one capacity, of 400 MW, is in progress, being located in Iernut. Also, Romania currently holds 3,300 MW of net installed and available capacity (including those reserved for system services) in thermal power plants based on lignite and hard coal, other capacities undergoing technological refurbishment. All lignite groups were commissioned during 1970-1990, and the older ones are approaching the end of their service life, being necessary either to make investments in retrofitting in order to extend the service life of the existing equipment, or to replace them with new groups, through larger investments. Coal competitiveness in the electricity mix will depend on the yield of each group, quite low for the existing capacities, on the cost of lignite supplied to the power plant, at a relatively high level, and, last but not least, the price of EU ETS allowances.

Capacity installed in hydropower plants rising by 750 MW Through the gradual application of policies provided for in the strategy, by 63

2030, the installed capacity in hydropower plants in Romania will grow, compared to 2018, by around 750 MW. The power plants that will ensure this increase in the installed capacity will ensure an additional energy production of around 1.8 TWh/ year. Investments necessary to complete by 2030 the hydropower developments with complex use, optimized according to the current requirements, amount to about EUR 2.5 billion, which will be covered both by Hidroelectrica and other companies and authorities beneficiary of such complex uses.

Hydropower production will remain constant Although there will be an increase in the installed capacity by 2030, total energy production to be recorded in hydropower plants in Romania will remain at values close to those in 2018, i.e. about 17.6 TWh/year, as all the rules included in the European policies on environmental protection will be implemented. Compared to the regulated situation in 2018, the decrease in useful water stocks that can be turbined, as a result of increasing the compensation/ environmental flows, will correspond in 2030 to an unrealized production of around 2 TWh/year.

Natural gas, preferred to urban heating Natural gas will remain the preferred fuel for heating in the urban environment in Romania, at least until 2030, when, according to forecasts, almost 3.2 million households will use mainly this energy resource for heating. In the last 20 years independent gas boilers witnessed an increased popularity, being preferred by households remaining without district heating, either due to the bankruptcy of district heating systems to which they were connected, or due to voluntary disconnection. Also, a significant part of the new dwellings, both houses and apartment buildings, choose gas boilers.

Currently, in Romania there are more than 2.2 million households with independent gas boilers, most of them in the urban

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environment. Although this type of boilers can ensure without problems the thermal comfort of the entire home in the cold season, some of the households choose partial heating, due to economic reasons - especially those with individual dwellings, where heating costs are higher.

Households using gas for heating, but which do not own individual boilers, have either convectors based on natural gas or traditional terracotta stoves. In the urban and semi-urban environment, a usual practice is to use in parallel gas and firewood in terracotta stoves. Over 250,000 households use such heating facilities, the draft strategy shows. It highlights that most new homes, which will be built by 2030, will adopt natural gas for heating, to the detriment of district heating systems, biomass and electricity (heat pumps). Moreover, some of the existing homes will switch from district heating systems or heating based on firewood to heating based on natural gas. The transition is expected to take place especially in the urban and semiurban areas, with access to the natural gas distribution network, even if the network expansion will continue in the rural area as well. The total consumption of natural gas for direct heating of houses is expected to increase slightly in the following years, influenced by the following factors: the increase in the number of houses that mainly use natural gas for heating with 700,000; increasing the thermal comfort in the homes heated by natural gas, at the same time with the increase in the standard of living; decrease in consumption by increasing the energy efficiency of houses, determined including by gas price liberalization and by the gradual increase in prices on the international markets. At the same time, the price of natural gas for households is expected to increase from EUR 42/ MWh at present to EUR 55/MWh in 2030. Modeling foresees an increase in the standard of living of households, at a rate at least equal to that of the increase in prices, so that the general level of energy poverty will not increase because of gas prices, it is specified in the draft strategy.

Bonuses for wind power Important investment must also be made in the field of wind and solar energy, context in which the state will have to grant, after 2025, tax incentives. Most of the photovoltaic parks or wind farms in Romania were built and commissioned during 2010-2016. Because the lifespan of the main equipment in such power plants is 20-30 years, starting with 2030 part of them will be subject to replacement. For this reason, between 2025 and 2030 it will be necessary to promote energy policies allowing operators holding and operating such power plants to make the necessary replacements. After 2025, an obligation will be established, through a complex of policies including bonuses of fiscal nature within the support schemes benefiting operators, for them to provide the financial resources necessary to prepare the power plants for a new life cycle, the strategy shows.

Renewable energy to gain ground In the wind power sector, in 2030 there will be capacities with a total installed power of around 4,300 MW ensuring a production of about 11 TWh. The new wind parks will be built inside areas of energy development to be declared.

The photovoltaic capacities are to be developed both in the form of mediumsized solar parks, built on degraded or poorly productive lands, as well as in the form of small dispersed capacities realized by the energy consumers that can make the transition to prosumer. By 2030, photovoltaic systems will reach a total installed power of about 3,100 MWp (a production of about 5 TWh/year).

In 2030, of the total installed power of photovoltaic systems, 750MW will be in the form of distributed capacities held by energy prosumers.

In order to achieve in 2030 the degree of development to capitalize on these renewable energy resources, it is essential to promote policies aimed at: achieving the energy storage capacities and developing the transmission network; declaring energy development 64

areas using renewable sources, for large projects and ensuring the connection to the grid with the help of Transelectrica; ensuring the conditions that allow the replacement of capacities at the end of the life cycle; developing small, distributed capacities and encouraging prosumers.

As the degree of maturity of other energy conversion and storage technologies will allow their commercial use, after 2025 it will be possible to analyze the possibility of a higher share of the capacities from renewable sources at a level corresponding to the implementation of storage solutions based on these technologies. As the current estimates regarding the development of these technologies indicate that they will be able to be implemented in the form of distributed storage capacities and having a small volume, after 2025 it is envisaged to establish the obligation for the dispatchable energy producers from wind and photovoltaic sources to compensate for their imbalances.

Storage capacities and the development of the transmission network The increase of the participation of renewable sources up to the level expected to be reached in 2030 will be possible only under the conditions in which solutions of energy storage will be developed simultaneously in the national energy system to ensure loading/unloading cycles longer than 6-8 hours and a total power of 1,000 MW. For this, taking into account the technological realities of the year 2018, the strategy foresees that the Pumped-Storage Hydropower Plant Tarnita - Lapustesti be assumed as a strategic investment of national interest.

Declining biomass consumption Total electricity production obtained by capitalizing on biomass is estimated in 2030 at around 2 TWh. Total investment to be recorded by 2030 for the realization of new plants or the adaptation of the existing ones are around EUR 280 million. These investments will be

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Rail transport (including metro and urban passenger transport by tram) is more energy efficient and less polluting than road transport, being encouraged both at European level and in Romania’s sustainable development strategies, the draft strategy shows.

Around 2030, through substantial works of modernization of the railway infrastructure, it is expected that the distance traveled (the number of wagonkm) on the railway will increase by about 50%. Thus, while the mobility of travelers in road transport is estimated to increase by 35%, that in rail transport will increase by 40%. The volume of freight transported on the roads will increase by 60%, while the rail freight transport will increase by 65% (ton-km indicator). The 65

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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

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Taking into account the high potential of the geothermal resource in areas where it has been identified, a higher capitalization will be achieved by 2030 especially to ensure heating, to prepare domestic hot water and for recreational or spa activities. Only a small part of drilling executed before 1990 for geological research in which the geothermal resource was identified is used to capitalize on this resource. By 2020, programs will be initiated to assess the technical state of such drilling so as to determine whether they can be used in

Rail transport: Energy demand will increase by 70%

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Promises for geothermal energy

By 2030, the strategy estimates the slight increase in the bus and minibuses park, to 24,000 and respectively 33,000 units. A small part of the minibuses will have either hybrid or electric propulsion.

A rapid increase is expected for the fleet of freight vehicles, by 45%, up to 1.12 million, of which 560,000 of high tonnage. In 2030, 30% of the low tonnage utility vehicle fleet (under 3.5 tons) will have hybrid technology engines, which reduce pollution at low speeds, especially in urban areas. Another 10% of low-tonnage utility vehicles would be battery-powered hybrids, fully electric or hydrogen- or LPG-powered. Of the heavy freight vehicles, about 50,000 could have hybrid engines, and 25,000 would use compressed natural gas (CNG). The unseen costs of air pollution associated with the high tonnage road transport will be halved, to EUR 95 million in 2030.

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By 2030, the consumption of biofuels will increase to the value of 4.1 TWh/ year, value sufficient to reach the national target for 2020, of 10% RES share in the transport sector. Biogas will register a rapid growth, to a production of 3,500 GWh in 2030, amid the development of the agricultural sector and, to a lesser extent, the upgrade of wastewater treatment plants.

Car fleets will become more and more environmentally friendly

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The share of biofuels will rise

order to capitalize on geothermal energy.

Also, by 2020, the regulatory framework will be updated, so that such drilling can be exploited by investors.

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ensured by operators willing to capitalize on this relatively cheap energy resource in new projects or by holders of thermal power capacities that want to diminish their costs by using this resource. By 2030, firewood consumption will register a decrease by around 20% compared to 2018. As firewood has the highest share in biomass, following the reduction of firewood consumption, in 2030 total consumption of energy resources coming from biomass will drop to the value of 39 TWh. By 2030 small power plants powered exclusively with biomass, bioliquids, biogas, waste and sludge fermentation gases will be developed, until such plants will have a total installed power of 139 MW. The boilers of some of the current thermal power plants will be adapted to allow the burning of biomass.

In total, in 2030, burning biomass will ensure an electricity production of 0.9 TWh.

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result is a slight increase in the share of rail transport in total mobility: from 5 to 6% in passenger mobility and from 39 to 40% in the volume of freight transported. Almost the entire growth of activity in the railway sector will be taken over by electric locomotives, the demand for diesel will remain almost constant, at about 120,000 toe, with a 10% increase in the share of biodiesel. The demand for electricity in rail transport will increase from 1,080 GWh in 2015 to 1,860 GWh in 2030.

Air transport: Demand for kerosene will increase by 70% Air transport with origin or destination in Romania is going to register a high growth rate during the analyzed period, compared to the present level, much lower than in the western states. Thus, at least a doubling of air traffic is expected by 2030, an increase in the energy efficiency of the new generation of aircraft and a 70% increase in the demand for kerosene, to over 400,000 toe. The increase is estimated at about 60% for short distances (under 500 km), 70% for medium distances (between 500 and 2,500 km) and 75% for long distances (over 2,500 km).

But the significant penetration of alternative fuels in air transport before 2030 is less likely, the cited document estimates. Thus, the increase in CO2 emissions caused by air traffic is also estimated at 70%, to a level of 1.2 million tons of CO2 in 2030. The emissions of Romania’s internal flights account for only about 10% of the total. Emissions from international air and maritime traffic are accounted for separately, at European and global level. The impact of air pollution through air traffic is especially associated with NOx emissions, which will increase by about 40% - less than the increase in fuel demand. The share of NOx emissions caused by air transport in total NOx emissions in the transport sector will increase from 7% in 2015 to 16% in 2030. The unseen costs of air pollution caused by air transport will increase, in turn, from EUR 80 million to

EUR 110 million in 2030.

River transport: Energy demand to increase by 40% River transport in Romania corresponds almost entirely to the transport on the Danube and on the Danube - Black Sea channel. The river passenger transport is limited to the Danube Delta, to the river crossing by ferry and to cruise ships. More developed is the river freight transport. The results of modeling estimate an increase by 35% in the volume of freight transported on the Danube, with an increase related to the energy demand estimated at 40%, which can be justified by an increase in exports and intensification of upstream traffic. Diesel consumption for freight traffic on the Danube would increase from 37,000 toe to 45,000 toe, as the optimal scenario foresees a share of 9% in the total consumption for natural gas, respectively an increase to 10% in the share of biodiesel in the diesel mix. The policies of the European Commission aim to reduce the polluting emissions related to river traffic in Europe by introducing alternative fuels, LNG being the most advantageous solution.

The energy mix in transport The economic growth and an increase in the standard of living, in parallel with the increase in the quality of the transport infrastructure, lead to a rapid growth rate of mobility in Romania, by approximately one third for passenger transport and two thirds for freight by 2030. The total energy consumption in transport will increase by 16%, from 5.55 million toe, to 6.45 million toe, limited by the increased energy efficiency of vehicles and aircraft. Energy demand will increase by 10% in passenger transport (from 4.1 to 4.5 million toe) and by 40% in freight transport (from 1.4 to 1.9 million toe).

73% of the total increase in fuel demand is associated with road traffic, which will consume 5.7 million toe in 2030, with 18% of the increase associated with 66

air traffic. The biggest increase in fuel demand will come from trucks - 460,000 toe, just over half of the total increase in demand in the transport sector. Regarding the demand for energy in transports by fuel types until 2030, modeling indicates a decrease in gasoline demand by 20%, from 1.44 to 1.14 million toe, while diesel consumption will increase by 13%, from 3.5 to 4 million toe. Total gasoline and diesel consumption would increase by up to 4%. The total increase in demand for petroleum fuels, including kerosene and LPG, would be 7%. In total, the share of petroleum fuels in the total energy demand in transport would decrease from 94.6% in 2015 to 87.2% in 2030 - the sum of weights for diesel (62%), gasoline (18%), kerosene (6%) and LPG (1%).

The share of alternative fuels in the total energy demand for transport will increase from 5.4% in 2015 to 12.8% in 2030. The 12.8% demand, the energy equivalent of 9,600 GWh, represents the sum of the weights of 8.1% for biofuels, 3.1% for electricity, 1.5% for natural gas and 0.1% for hydrogen. Thus, a 2.5-fold increase in the demand for biofuels is expected, to 520,000 toe; a 2.2-fold increase in electricity demand, to almost 2,400 GWh; and an almost as large increase in the demand for natural gas, up to 1,100 GWh.

Increased CO2 emissions CO2 emissions related to the transport sector are expected to reach almost 17.4 million tons of CO2 by 2030, an increase by 9% compared to 2015. However, air pollution and other greenhouse gas emissions will decrease considerably: by 25% those of particulate matter, 37% those of NOx, 40% those of CO and 45% those of sulfur oxides. The PRIMES model calculates a reduction by one third of the unseen costs associated with air pollution caused by transport, to EUR 780 million in 2030. The downward trend will also be maintained between 2030 and 2050, so that the cost will reach EUR 410 million in 2050, one third of the one recorded in 2015.

SECOTEC TG: Compact giants With the new TG series, KAESER extends its range of energy-saving SECOTEC refrigeration dryers to accommodate flow rates up to 98 m³/min and offers models with a choice of air- or water-cooling.

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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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Overview of Energy Companies in H1/2019 The financial results reported by oil, gas and energy companies in the first 6 months of 2019 look much better than the general context of the Romanian economy. Or, better said, than most opinions of analysts who estimate an indefinite extension of the economic crisis in Romania.

Thus, too much pessimism hurts, proof in this regard being the following results.

Text by Daniel Lazar 68

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The best performing company listed on BSE in the energy sector

Transgaz, results influenced by the lower transmission tariffs

Nuclearelectrica seems to be the best performing company listed on the Bucharest Stock Exchange in the energy sector in terms of results in the first half of 2019, with a 59% higher profit and a turnover of RON 1.2 billion. The company controlled by the Romanian state through the Ministry of Energy posted a net profit of RON 291 million, up 59% compared to the similar period of last year, while the operating income increased by 20%, reaching RON 1.2 billion.

The dynamics of financial indicators was determined by the increase in the average sales price of electricity. The company increased the amount of electricity sold on the bilateral contracts segment by 9%, to a total share in sales of 86.1%, benefiting from an increase in the average sales price on this market by 18%, while the electricity amount sold on DAM fell by 35%.

National gas transmission operator Transgaz ended the first half of 2019 with operating revenues of RON 774.9mln, by 4.2% lower year-on-year, while the net profit plunged by 30.1%, to RON 195 million, according to the financial report published by the company. The dynamics of the operating revenues was influenced by the decrease in transmission tariffs, although the total quantities transported surged by 2.5%, to 73.3 million MWh. The increase in costs relating to technological consumption, taxes and charges and especially from the impairment of receivables (to RON 39.5 million compared to RON 4 million) led to an operating loss of RON 2.3 million, but, thanks to a positive financial result, the company ended the semester in the black.

Transelectrica, 69% lower profit

Oltenia Energy Complex, the second largest energy producer in Romania, announced a record gross profit for the first quarter of 2019, of almost RON 190 million. According to figures published by the company, on June 30, 2019 the company posted a gross profit of RON 188.98 million and a turnover of RON 1,510.6 million, compared to RON 35.12 million gross profit and RON 1,414.4 million turnover on June 30, 2018, which are not influenced by the provisions with the acquisition of CO2 allowances. Moreover, on June 30, 2019, Oltenia Energy Complex did not have outstanding debts to the consolidated state budget or to banking institutions.

“For the reporting deadlines June 30, 2018 and June 30, 2019, the recorded results are not influenced by provisions for the greenhouse gas emission allowances, as the company has the obligation to establish provisions for the CO2 allowance quantity not purchased during the year, at the end of the financial year of each year, at the purchase price valid on December 31, according to the

The power grid operator in Romania, Transelectrica, reported for the first half of 2019 a net profit of RON 30 million, decreasing by 69% compared to the similar period of last year, while total revenues fell by 4%, to RON 1.1 billion.

“Total operating revenues achieved in H1 of 2019 registered a 4% decrease compared with the similar period of last year, mainly determined by the operating revenues related to the zero profit activities - technological services and balancing market,” the company’s report shows.

In the segment of activities with allowed profit, an increase by 9% in revenues was recorded, to RON 609 million compared to the same period of 2018, determined by the increase in tariff starting with July 1, 2018. In the first 6 months of this year, the total amount of electricity charged for the services provided on the electricity market (27.92 TWh) fell by 0.1%, the difference between the periods being 0.04 MWh.

Oltenia Energy Complex, gross profit by five times higher than a year before

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Accounting Regulations compliant with the International Financial Reporting Standards - IFRS, approved by Order of the Ministry of Finance no. 2844/2016, applicable as of January 1, 2018, as well as in accordance with the Accounting Policy adopted at company level,” a communique of the company shows.

“The positive result obtained from the operating activity indicates stability in the operational functioning of Oltenia Energy Complex, and evaluation of financial statements by the institutions competent to assess companies in terms of financial performance is a key item in assessing the efficiency and effectiveness of the economic operator’s activity. However, there are external factors affecting the financial result, mainly the exchange rate and the CO2 allowances market, whose evolution cannot be adjusted by any energy producer,” Oltenia Energy Complex also mentioned.

Sorinel Boza, President of the Executive Board of Oltenia Energy Complex, is confident in the future: “We are trying to continue this activity even if pressure of the European decarbonization process becomes stronger by the day.

Adequacy studies show we need to be here, and to this end we started two types of actions at the same time, which will help this complex maintain its welldefined place in the national energy system. Thus, we act and have presented our interest in transforming on the go at least two coal-fired groups into gas-fired groups, benefiting from funds from the modernization plan. We will also soon start the studies for the installation of 3 high-power photovoltaic parks on the tailings located near our thermal power plants. Moreover, we are working and are in full process of defining a support scheme. We are responsible for the national energy security and at the same time for the life of the 13,000 employees and their families, and to this end our effort in these directions is nothing compared to our future as a company.”

Oltenia Energy Complex is the only electricity and heat producer that can operate irrespective of weather

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conditions, being an important pillar in terms of Romania’s energy security.

Oltenia Energy Complex can ensure 30% of the electricity consumption of the National Power System and has a total installed capacity of 3,240 MW, operating 11 groups in Turceni, Rovinari, Isalnita and Craiova 2 thermal power plants.

the year, electricity delivered from own production was 8.95 TWh, down by 0.7 TWh compared to the similar period of last year, while total electricity sold reached 9.62 TWh, up by 0.13 TWh from last year.

Conpet recorded a 44% higher profit

Oil Terminal, operator of petroleum products controlled by the Romanian state, ended the first half of 2019 with a turnover of RON 81.6mln, up 20% compared to the same period of 2018.

The company switched to profit in H1/2019, with a net result of RON 4.6mln compared to losses of RON 1.07mln in the first half of last year. The operating result related to H1/2019 was RON 6.8mln, compared to losses of RON 310,500 obtained in the first half of 2018. Oil Terminal has a market capitalization of RON 153mln and is owned by the Romanian state through the Ministry of Energy with a 59.6% stake.

The US investor Amerocap has recently announced that it planned to invest in the company, even targeting the majority stake, which has led to a significant increase in the price of company’s titles.

Conpet, the national transporter of crude oil and petroleum products, controlled by the Romanian state, reported a turnover of RON 200.6 million in the first half of 2019, up 8.5% compared to the first half of 2018, while the net profit increased by 44%, to RON 31 million.

The operating profit (EBIT) climbed by 42%, to RON 33 million, which means that the margin in the operating segment at which Conpet operated in H1/2019 was 15.3%, increasing by 3.7 percentage points compared to the first half of 2018.

The turnover was RON 101.8mln, the equivalent of a moderate growth, supported by a positive contribution of revenues in the import subsystem, which offset the slight decline in the country subsystem. The company managed to maintain the growth of operating expenses to 2.4%, while the profit reached RON 16.7mln.

Hidroelectrica, 18% higher business Hidroelectrica, the largest producer of electricity and one of the most profitable state-owned companies in Romania, reported for the first half of 2019 a turnover of RON 2.3bn, up 18% from the first half of 2018. On the other hand, the net profit fell by 8.3% compared to H1/2018, to RON 901.5mln. The decline compared to the first half of this year was determined by the additional tax obligations recorded by the company as a result of using the amount of RON 1,574.2 million from the revaluation reserve not previously taxed, in order to cover losses related to impairment adjustments for complex historical investments. In the first 6 months of

Oil Terminal switched to profit

Romgaz, the best half year since its listing in 2013 Romgaz reported a net profit of RON 976mln, up 24.7% compared to the first 6 months of last year, while the turnover rose by 16%, reaching RON 2.9bn. The company produced a volume of 2,700 million cubic meters of gas, by 2.3% more than last year. The evolution was also supported by capitalization on Caragele field, by completing investment works, as well as a result of continuing the projects for the rehabilitation of the main mature gas fields, resulting in the cancellation of decline of production in these fields.

Among operating expenses, we note the increase in the cost of goods sold from RON 17.16 million in H1/2018 to RON 102.7 million in H1/2019, as a result of an increase in the imported gas quantities.

The national gas producer controlled 70

by the Ministry of Energy has, in 2019, in terms of financial indicators, the best half-year since its listing in 2013. Thus, brokers believe that the shares in the most valuable state-owned company on the stock exchange will continue to be in the top of returns this year.

Electrica, consolidated net profit of RON 109mln Electrica Group posted, in the first six months of this year, a consolidated net profit of RON 109mln, covering the loss in the first three months in the amount of RON 41mln with a net profit posted in Q2 of RON 150mln. The consolidated net profit budgeted for 2019 is RON 121mln, so that the consolidated net profit at the end of H1/2019 accounts for 90% of the annual budgeted value.

The operating profit of the group fell by RON 138mln compared to the same period of the last year, amid significant changes in the regulatory framework, especially with adverse effect. Thus, added to EBITDA evolution were both the unfavorable impact of the amortization expense, an increase by RON 25mln as a result of applying a new financial reporting standard as of January 1, 2019 and the volume of investments commissioned, and the positive impact of value adjustments of assets. The total operating revenue of Electrica in the first half of 2019 amounted to RON 3,180 million, representing an increase by 16.6% or RON 452mln versus the same period of 2018. In the distribution segment, revenue increased by 6.6%, following the increase in the total distributed quantity by 0.3% and in average distribution tariffs, as well as the significant increase in the value of investments in the network, in accordance with the accounting policies applicable in H1/2019 compared to H1/2018.

Regarding the supply segment, revenue increased by 20.5%, as a result of a rise by 7.7% in the electricity quantity supplied on the retail market, the increase in average sales prices by 6.3% and as a result of developing the gas supply activity.

POWER

Consolidated costs for the acquisition of electricity went up by 32.6%, to RON 1,683 million, mainly as a result of an increase in trading prices on OPCOM. This evolution was felt in the distribution segment, by increasing the cost electricity purchased to cover network losses by 22.3%. Thus, the positive effect generated by the slight decrease in the quantity necessary to cover network losses compared to H1/2018 was canceled by the increase in electricity acquisition prices. In the supply segment there was also an increase in expenses with electricity acquisition, by 35.6%, being the cumulative effect of higher electricity purchase price and the increase in the quantity of electricity purchased. The supply margin was negatively affected, mainly because, through the tariffs approved by ANRE, the price recognized for the first two months of 2019 on the regulated segment does not cover the purchase price of electricity actually realized. Electrica Group distributed approximately 8.86 TWh (up 0.3% from H1/2018) to a number of approximately 3.79 million users. Distribution operators within the group distributed electricity on an area covering approximately 40.7% of the national territory. Electrica Furnizare has a market share of 18.84%. It is leader in the regulated market, with a share of 50.53%, and on the competitive market it has a share of 10.97% (according to ANRE report for May 2019). The company supplied to a number of approximately 3.5 million end-consumers (both in last resort regime and in the competitive market) 4.6 TWh of electricity.

OMV Petrom: Upstream covered 2/3 of the operating result OMV Petrom increased its profit by 53% in the first half of this year compared to the similar period of last year, to RON 1.98 billion, mainly as a result of Upstream segment evolution, whose contribution accounted for over two thirds of the operating result. The value of consolidated sales increased by 15%, to RON 11.32 billion. It took place

in the context of a reduced reporting base in 2018, when Petrobrazi refinery underwent turnaround, and an increase in demand for fuel in the retail segment in 2019. The Clean Operating Result of the Upstream segment was RON 1.6 billion, by 9% higher than in the similar period of the previous year. Daily production in Romania fell by 5%, mainly due to natural decline, in conditions of decrease by 8% in natural gas production. The production cost was USD 11.4/boe, falling by 3% mainly due to the favorable exchange rate evolution. Regarding Downstream Oil, the operating result was RON 560mln, by 28% higher. The refinery utilization rate was 95%, compared to a utilization rate of 71% in the first half of 2018, due to Petrobrazi refinery turnaround. The OMV Petrom indicator refining margin fell by 44%, to USD 3.74/bbl, being influenced by the evolution of international crude oil and petroleum products prices. Group retail sales volumes increased by 4% as a result of higher demand in Romania and in the region. The Downstream Gas segment obtained an operating result of RON 140mln, increasing, in turn, by 34%. Gas sales to third parties fell by 13% due to a decline of own gas production and increase in the volumes injected in the storage facilities. Net electricity production fell by 14%, to 1.13 TWh, due to planned closure of Brazi power plant and market conditions (negative margins).

OMV Petrom made in the first half of the year investments of RON 1.7bn, while contribution to Romania’s state budget during January - June 2019 was RON 6bn.

Rompetrol Rafinare, record volume of crude oil processed in H1/2019 Rompetrol Rafinare, a member company of KMG International, also continued to increase its operational results in the first half of this year, based on the strategic investments made in recent years. Thus, the total volume of raw materials processed at the Petromidia refinery level exceeded in January - June the threshold of 3.1 million tons. The consolidated financial statements of 71

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POWER

Rompetrol Rafinare include the results of Rompetrol Rafinare and those of subsidiaries Rompetrol Quality Control, Rom Oil, Rompetrol Downstream, Rompetrol Logistics, Rompetrol Gas and Rompetrol Petrochemicals.

Regardless of the operational activity, the financial results of Rompetrol Rafinare were significantly influenced by the evolution of external factors. The volatility of the global context, the high fluctuations of the market quotations on raw materials and finished products, the significant pressure on the refining margins and the depreciation of local currencies against the dollar (the reference currency for oil and petroleum products) have led to declining results. According to the evolution of quotations on oil and petroleum products, the gross turnover recorded by Rompetrol Rafinare registered a reduction of about 4% to a total level of over USD 2.5 billion in H1/2019, compared to USD 2.6 billion in H1/2018. The company recorded an EBITDA of nearly USD 55 million, down 36% compared to H1 of 2018, and the net result was negative, of approximately USD 19 million.

“We remain faithful to our strategy of integrated development of the company on all segments: refining, petrochemicals and distribution. This year we aim for investments of about USD 60 million for the alignment and further modernization of the facilities, as well as for the digitization of the Petromidia refinery. Thus, we will continue to optimize and improve our operations, and the Petromidia and Vega refineries will become efficiency models for the entire industry in Romania,” said Yedil Utekov, General Director of Rompetrol Rafinare.

The Petromidia refinery has maintained the trend of implementing programs to optimize production processes and streamline operating costs, programs started in 2014 and which continue to date. Moreover, in the last period the digital component has been successfully integrated by the implementation of projects that support a continuous automation of technological processes, in line with the global industrial

revolution - Industry 4.0.

The Vega Ploiesti refinery - the only producer of bitumen and hexane in Romania, increased by 4% the volume of processed raw materials (202 kt), and the 47 kt of hexane produced exceeded the record of the first half of last year by 3 kt. The high demand from the domestic market resulted in an increase of 8 kt in H1/2019 for bitumen, reaching a total production of 44 kt. The massive investments made in this segment and the fact that Vega is the only producer at national level add value on an important niche, which is under development.

Due to the expansion of the segment of distribution of fuels internally, but also of the demand for petroleum products, the company increased its deliveries in Romania in the first half of the year by 10% - its main market. At the same time, the refining and petrochemical divisions managed to export nearly 1.4 million tons of petroleum products, slightly lower than the volume exported in the same period last year.

Rompetrol Rafinare continued to be an important contributor to the Romanian state budget in H1/2019, the activities and products obtained generating a contribution of over USD 728 million.

In 2018, the company transferred about USD 1.5 billion to the state budget. The main shareholders of Rompetrol Rafinare are KMG International (54.63% - directly and indirectly) and the Romanian State through the Ministry of Energy (44.69%).

In the first half of this year, fuel sales registered significant increases domestically, from 1.08 million tons in H1/2018 to 1.19 million tons in the same period this year. During the same period, the Petromidia refinery obtained about 2.43 million tons of fuel, of which over 67% were diesel fuels and the special one for aviation - A1 jet.

Chimcomplex Borzesti, turnover by 4.8 higher than in 2018 Chimcomplex Borzești plant posted in H1/2019 a total business of RON 706.7mln, by 4.8 times higher y/y, while 72

the net profit fell by RON 17.3mln, to RON 577,000. “Increase in financial expenses in H1/2019, determined by expenses with exchange rate differences recorded with the update of debt balances in foreign currency, especially of bank loans, and the costs of loans contracted for the asset acquisition has led to a reduction of both the gross result and the net result recorded in H1/2019 compared to the same period of the last year,” the halfyearly report of the company mentions.

Top 3 profitable companies The major companies in Romania recorded, with some exceptions, twodigit increases in profits in 2018. OMV Petrom, Hidroelectrica and Romgaz remained in the top 3 most profitable companies in the market.

The main 100 companies in terms of turnover at the end of 2018, among those that published their financial results at the Ministry of Finance, recorded an increase in profits by 5.3%, to around RON 17.3bn, but a decrease in the net margin by 0.3%, to 4.5%, in conditions in which the turnover climbed by over 15%, to RON 389bn.

In 2018 there were some changes in the top 10 companies in terms of profit, as compared to 2017. OMV Petrom remained on the first place, with a profit of almost RON 3.9bn (+62%), and the other major company of the Austrian group, OMV Petrom Marketing, dealing with filling stations, climbed to the 10th place from the 14th, after a rise in profits by 31%, to around RON 419mln.

Rompetrol Rafinare moved from the 9th place, with a profit of RON 418 million, to a loss of RON 230 million, in the context of an increase in the price of raw material in the first 10 months of last year. Hidroelectrica climbed to the second place, after another very good year with an increase in profit to RON 1.9bn (+43%) and a net margin of over 45%, and switched places with another state-owned company, Romgaz, which recorded a decline by over one quarter in profit, to less than RON 1.4bn.

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RENEWABLES

Financing for 30,000 Photovoltaic Installations On August 8, the Ministry of Environment published a press release confirming the approval of adjustment of the Revenue and Expenditure Budget of the Environment Fund Administration (AFM) addressed to the program for the installation of photovoltaic systems.

Text by Adrian Stoica

T

his program is one of the most awaited finan­ cing programs for pro­ sumers.

The pro­ gram finances 90% or up to RON 20,000 of the eligible amount, for mounting and installing photovoltaic panels. Also, by adjusting the Revenue and Expenditure Budget of AFM, the budget of the Program for the installation of photovoltaic systems was supplemented with RON 536mln, amount ensured from the Regional Operational Program (ROP) for the 7 development regions of Romania, except for Bucharest-Ilfov (this region not being eligible through ROP).

This amount is added to the value of RON 120mln, already available in the AFM budget for the BucharestIlfov region, totalling a budget of RON 656mln for the program aimed at the installation of photovoltaic systems at individual households, for the

production of electricity and heat from 100% ecological sources.

“We are ready to launch the most ambitious environment program in the last years. Through it, approximately 30,000 households in Romania will be able to reduce their costs with energy bills and even become prosumers, as any amount of energy produced and not used will be automatically delivered into the network, its value following to be decreased from the total cost of the bill,” Minister for Environment and Climate Change Gratiela Gavrilescu said on August 26.

The approved amount of RON 536mln is by RON 26mln higher than the amount communicated on June 11 through the official answer of AFM.

Stages of the program Currently, the program is in the second stage, and the start of the program 74

for individuals was conditional upon approval of funds under the Regional Operational Program. The next step is publishing the list with the validated installers and thus opening applications for individuals.

1. Publication on the website of the Authority of the information necessary to start the program; 2. Validation, conclusion of contracts with installers and publication of their list; 3. Registration of applicants, reservation of the amounts related to financing and approval of applicants; 4. Obtaining the technical approval for connection (ATR) and conclusion of grant agreements; 5. Implementation of projects; 6. Settlement and payment of the amounts requested by the validated installers; 7. Monitoring of final beneficiaries.

RENEWABLES

How much does energy sold by prosumers cost The sales price of energy produced by prosumers, according to the new legislation in force as of 2019, is calculated depending on the weighted average price registered on the DayAhead Market (DAM) in the previous year.

Energy is sold and bought on a competitive energy market where the price is based on the demand-supply mechanism. Here there are several types of contracts for medium and long terms, as well as spot trading. Spot trading is of two types: intra-day or DAM (Day-Ahead Market).

DAM is a component of the wholesale market for electricity where firm hourly transactions are performed with electricity with delivery on the day following the trading day (where energy is sold and bought today for tomorrow).

Through the liberalization of the energy market, the consumer can choose today one of the 63 energy suppliers. When the implementing rules are issued, the user will be able to decide to whom it sells the energy produced and injected into the system.

In 2018, the average price on DAM was RON 223.24/MWh, which means that in 2019 this is the price at which suppliers are required to buy energy from prosumers.

How is adjustment made The monthly bill will show the amount (quantity of energy injected and multiplied with the average price on DAM in the previous year) with the - (minus) sign, value not subject to VAT. If the prosumer should receive money, up to RON 100, it will be carried forward to the next bill.

For individuals, if the value exceeds RON 100, it is not carried forward and is paid to the prosumer by the supplier within 15 days.

For individuals, the value carried forward from one month to the next

can be increased by mutual agreement of the supplier and the prosumer.

The modality of refunding the respective amounts will be agreed by the supplier and the prosumer.

Subsidies from the state for photovoltaic systems With the issue of the new legislation on prosumers, a number of subsidies have also appeared from the Environment Fund Administration, money received from the European Union. To always verify the status of programs in preparation of progress, visit the afm.ro website, the Financing Programs section. Currently there are 2 programs in progress: • RON 20,000, 90% subsidy for prosumers; • RON 25,000, 100% subsidy for remote homes.

Green House for photovoltaic panels The new ‘Green House’ Program, intended for the installation of photovoltaic panels, will start on September 9 and is addressed to individuals who can thus also become electricity producers, Gratiela Gavrilescu announced.

Thus, the grant agreement for the ‘Green House – Photovoltaics’ contract was signed between the Ministry of Development, which is the financier - RON 656mln for the ‘Green House – Photovoltaics’ Program and the Environment Fund Administration.

According to the minister, about 33,000 housing units will be financed through the budget allocated to this program.

“The minimum installed power is 3 KW and from that moment it will be possible to negotiate with the electricity companies and conclude the connection contract. We have estimated that 33,000 housing units will own such photovoltaic cells. We are thinking now about what amounts to identify, together with the Ministry of Development, other money for 75

another program and its extension to legal entities and public institutions.

We show a great responsibility, through this program. We are trying to do things that other countries have done before. I believe it is time for each of those who want to save to be able to access money through the Regional Operational Program and from the Environment Fund Administration,’ Grațiela Gavrilescu also mentioned.

The grant agreement related to the Program for the installation of photovoltaic systems was signed by the President of the Environment Fund Administration (AFM) Cornel Brezuica, and the Deputy Prime Minister and Minister of Regional Development and Public Administration Daniel Suciu.

By accessing the program, photovoltaic panel systems can be installed for the production of electricity, in order to cover the consumption needs and deliver the surplus into the national network.

To benefit from financing within the program, the individual must comply with the eligibility criteria for the applicant, the eligibility criteria for the project and the technical requirements of the components of the photovoltaic panel system. Applicants must also submit the documents necessary for registration, as they are presented in the Financing Guide available on AFM website, in the section related to the program.

The purpose of the program on the installation of photovoltaic panel systems is to increase energy efficiency, improve air quality and reduce greenhouse gas (GHG) emissions, by using photovoltaic panels for the production of electricity necessary for own consumption and delivery of the surplus into the national energy system.

In 2018, the Regulatory Committee of the National Regulatory Authority for Energy (ANRE) approved the package of regulations for the sale of electricity produced in power plants from renewable sources by prosumers.

TECH

OMV Petrom to Fully Digitize Fuel Contracts with Business Customers O

MV Petrom has imple­ men­ ted the electronic signa­ ture for fuel con­ tracts with legal entities this summer. In this way, approximately 32,000 kg of wood and 700,000 liters of water can be saved annually, by reducing the quantity of paper used at signing and during the contractual relationship.

“Digitally signing the contracts, without sending them by post, allows a reduction of the contracting time from up to 20 days to just one day.

In addition, eliminating the paper documents contributes to reducing the environmental impact and saves costs for printing and sending the documents,” said Adrian Nicolaescu, VP Product

Supply & Sales East.

The electronic signature solution is provided by DocuSign, the most known company globally in the field and has been launched in OMV Petrom this summer. The electronic signature completes the range of digital services offered to fuel business customers, alongside with electronic bills and dedicated online platforms.

The electronic billing services for OMV Petrom’s fuels business customers have been available even since 2013.

Currently, approximately 90% of clients use this system, eliminating the need to print, send and physically archive the documents.

Moreover, the business customers benefit from dedicated online 76

platforms. For example, the customers who purchase wholesale fuels can initiate online orders via the platform Business Portal and get notifications on their status via e-mail and SMS. The companies managing car fleets and using an OMV and Petrom fuel card have a dedicated platform as well – Fleet Online Service, that allows monitoring consumption and managing card portfolio.

Technology and innovation are among key enablers in the implementation of OMV Petrom’s strategy. The company focuses on digitization solutions in all fields of activity, from oil and gas fields and internal processes digitization, to efficient solutions provided to fuel, gas and electricity clients.

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77

TECH

Modernized Installations and Digitized Processes at Rompetrol Rafinare Rompetrol Rafinare, a member company of KMG International, has recently completed a new phase of the digital transformation program of the Petromidia Navodari refinery, the modernization of the ‘In-Line Blending’ units.

78

TECH

T

he total investment amounts to about 3 million dollars, and the modernization of the units mainly focused on optimizing the production of fuels by improving the integrated system of management and automation of the technological flows. “Quality is the key word that defines the fuels made at Petromidia, and the efforts and investments made allow us a continuous improvement of them, of the operational flows and of the production units. In addition, recently implemented projects will help us to increase the volumes obtained, but also to achieve greater flexibility in adapting to market requirements. I think this is another very important step that we are taking to align, both with international standards and with the innovative tendency to reach the industrial revolution - Industry 4.0,� said Yedil Utekov, General Director of Rompetrol Rafinare.

Initiated at the beginning of last year,

the modernization works of the two installations were completed in June 2019. The implementation of the new digital system ensures detailed real-time analysis of the components and the final product obtained and, implicitly, a careful monitoring of fuel quality and compliance of them with the legislation in force.

Among the activities carried out are the modernization of the digital component with one of the latestgeneration, the implementation of a new management and distribution control system (DCS) and the replacement of analyzers - capable of analyzing and monitoring with maximum accuracy all the technical parameters. To these are added the installation of new pumps of additives with high capacities, but also the doubling of those for components (pentane, butane and biodiesel).

Currently, the Petromidia refinery is operating two In-Line Blending units for fuels (gasoline, diesel), which were built and introduced in the technological flow in 2003, respectively in 2006.

79

The main role of these units is to use the specific recipes for the preparation of the finished products that arrive at the fuel stations, respecting the quality requirements imposed by the European Union, the Romanian legislation, but also the needs of the current market.

The quality of the product obtained after the blending process is monitored and controlled through on-line analyzers, which transmit the data in real time to the operators.

The Navodari refinery last year recorded 11 new operating records, including gasoline production (1.36 million tons) and diesel production (2.75 million tons).

Currently, Rompetrol Rafinare operates Petromidia Navodari - the largest refinery in Romania and one of the most modern and complex in the Black Sea region, Vega Ploiesti the longest running processing unit in operation (1905) and the only domestic bitumen and hexane producer, but also the petrochemicals division - the only polymer producer.

ANALYSIS

Illustration indicative only

Nord Stream: A Roadmap for Secure and Safe Gas for Europe or a Continental Power Play?

NORWAY

SWEDEN

DENMARK Bornholm

Lubmin near Greifswald

GERMANY

80

ANALYSIS

FINLAND

Narva Bay

ESTONIA

RUSSIA

LATVIA

LITHUANIA

Nord Stream Route

RUSSIA

Nord Stream 2 Route Nord Stream 2 North-Western and South-Eastern Route

POLAND

Territorial waters border Exclusive Economic Zone border Landfall

81

ANALYSIS

Mapping the Projected Benefits and Involved Actors The Nord Stream 2 is one of the biggest, most innovative, most needed and most scrutinized projects and it aims to provide the means for safe and secure supply of natural gas to the European Union gas market, from Russia.

Text by Evgenios Zogopoulos

T

he European market, with its 28 (not sure about UK) members, is characterized by its depleting indigenous production capacities and an increasing requirement for gas to support the transition to sustainable energy supplies.

Nord Stream 2 will complement two already-existing pipelines through the Baltic Sea, and add 55 Billion Cubic Meters (bcm) of design capacity. It is an approximately 1,200km-long offshore natural gas pipeline aiming at to connecting Europe to the world’s largest reserves in Northern Russia. Russia’s state-owned energy giant Gazprom will own and operate the pipeline through its subsidiary Nord Stream 2. The budget for the construction of the pipeline has been estimated to be close to EUR 9.5bn, with Gazprom being the apex contributor to the investment, and the remaining to be financed by Engie, OMV, Royal Dutch Shell, Uniper, and Wintershall.

The project will serve as an expansion of the existing Nord Stream pipeline and is expected to supply energy to approximately 26 million households a year. Initially scheduled for operations in 2019, the new pipeline is expected to deliver gas to European consumers for at least 50 years and contribute to European

energy security. The energy delivered by the pipe will be equal to the amount of energy transported using between 600 and 700 LNG tankers; a huge environmental feat.

The new pipeline will supply gas from the vast natural gas field of Bovanenkovo in Northern Russia’s Yamal Peninsula, which is estimated to have 4.9 trillion cubic meters (tcm) of gas reserves. This estimate is considered to be more than double compared to the total proven reserves of the EU. The pipeline will make a landing near Greifswald close to the German coast and will have no intermediate compressor station. Nord Stream 2 is planned to follow the route laid down by the Nord Stream pipeline and run through the Baltic Sea from the St. Petersburg region (Russia) to Baltic Coast in north-east Germany.

The route will traverse the territorial waters through the Exclusive Economic Zone (EEZ) of five countries including Russia, Finland, Sweden, Denmark, and Germany.

History & Context Discussing about Nord Stream 2, brings us necessarily back to its cradle and its predecessor, Nord Stream (1).

The initial Nord Stream twin pipeline 82

system runs through the Baltic Sea from Vyborg, Russia to Lubmin near Greifswald, Germany.

The Nord Stream route crosses the Exclusive Economic Zones of Russia, Finland, Sweden, Denmark and Germany, as well as the territorial waters of Russia, Denmark, and Germany.

These two 1,224-kilometre offshore pipelines are the most direct connection between the Russia’s reserves and the energy-hungry European market.

Combined, the twin pipelines have a total of capacity of 55 bcm of gas a year to businesses and households in the EU for at least 50 years. The project was considered as a ‘European Success’ and major leverage to the stability and security of the continent.

Construction of Line 1 of the twin pipeline system began in April 2010, and was completed in June 2011.

Transportation of gas through Line 1 began in mid-November 2011.

Construction of Line 2, which runs parallel to Line 1, began in May 2011 and it was completed in April 2012.

Gas transport through the second line began in October 2012. Each line has a transport capacity of roughly 27.5 bcm of natural gas per annum.

In October 2012, the Nord Stream shareholders examined preliminary

ANALYSIS

results of the feasibility study for the third and fourth strings of the gas pipeline and came to the conclusion that their construction was economically and technically feasible. Those new strings (third and fourth in addition to the initial two) came to be known as Nord Stream 2.

In April 2017, Nord Stream 2 AG signed the financing agreements for the Nord Stream 2 gas pipeline project with ENGIE, OMV, Royal Dutch Shell, Uniper, and Wintershall. These five European energy companies will provide long-term financing for 50 per cent of the total cost of the project. The other half would be financed by Russia’s energy giant, Gazprom.

This came as a natural evolution since European gas demand has been bulging continuously since it recovered on 2014, after its decline following the financial crisis in the early part of the decade. During this period, the European gas market has become increasingly competitive; more than 70% of wholesale gas sales are now based on traded gas market price. Gas demand has grown in all countries and across all sectors.

Moreover, German efforts are already

in full development in order to phase-out of coal and lignite, and that could bring Germany’s generation capacity down to 20% of hard coal-and lignite-fired by 2022; eventually lignite and hard coal should be out by 2038. This would occur at the same time as the exit from nuclear power, presenting an additional challenge in closing the power needs gap. It is anticipated that as a result, German gas consumption used for power and heat production could potentially double by 2023.

Major corporations involved and big contracts The route will traverse the territorial waters through the Exclusive Economic Zone (EEZ) of five countries including Russia, Finland, Sweden, Denmark, and Germany.

Major corporations from the involved countries will benefit. Kvaerner was awarded a contract worth USD 73m in 2017, for the civil, mechanical and piping works for onshore facilities at the export landfall of the pipeline in Russia.

Europipe, Mülheim, United Metallurgical Company, Chelyabinsk 83

Pipe-Rolling Plant, and Chelyabinsk signed contracts to supply steel pipes for the two pipelines in March 2016. The contract includes the delivery of 2,500km of large-diameter pipes weighing approximately 2.2Mt. Allseas was awarded a contract by Nord Stream to perform offshore pipelaying works for the pipeline project in February 2017. The contract also includes the provision of pipe-laying vessels, Solitaire, Pioneering Spirit, and Audacia. Wasco Coatings Germany was contracted in September 2016 to provide concrete weight coating services and pipes for Nord Stream 2 project. In June 2017 Blue Water Shipping was awarded a USD 46m sub-contract by Wasco Coatings for handling, storage, and transportation of the pipeline segments.

Bokaalis-Van Oord was awarded the USD 291m rock placement contract for the Nord Stream 2 pipeline project in July 2017. Saipem has been awarded the contract for providing the pipelaying vessel C10, to be used during the construction of the pipeline.

Other significant actors are: PetrolValves (supplier of critical compo­ nents), Wasco (weight coating and

ANALYSIS

logistics operations), the HaminaKotka port, Bodac (mitigation measures and munition clearance) and other subcontractors like Metallostroy, MSU90, and DAF (subcontracted via Russian Dredging & Marine Contractors, as well as through Kvaerner).

Overall, more than a thousand different contractors and subcontractors are engaged in the project, from large international industrial conglomerates, capable of producing thousands of pipes, to one-man firms providing a variety of expert services.

Technical Characteristics The two twin pipes will stretch over 1,230 kilometres in the Baltic Sea from the Russian to German coast. This route largely runs parallel to the existing Nord Stream system.

The starting point of Nord Stream 2 is located near Narva Bay in the extended Leningrad region, where the pipeline will connect to the Russian gas grid. Gas will be fed into the pipeline from the Slavyansk compressor station, operated by Gazprom. The compressor will calibrate the gas pressure to the level required for secure transportation along the entire pipeline route without the need for intermediate compressor stations. A true mechanical and engineering feat.

Logistics contractors Wasco and Blue Water Shipping work closely with Nord Stream 2 and local suppliers in four Baltic Sea harbours to prepare the pipes and deliver them to the right place, at the right time, at each stage of the project.

The 1,200k pipeline will comprise twin-parallel lines running offshore on the bed of the Baltic Sea. With a total 84

capacity of 55bcm of natural gas a year, the pipeline will be able to cover onethird of the new gas imports required in the next two decades.

The two pipelines of the Nord Stream 2 will have a capacity of 27.5bcm a year each and will comprise 12m-long individual pipe joints. Each pipeline will be made of 100,000 coated steel pipes with 24t in concrete weight. The internal diameter of the pipeline will be 1,153mm (45in) and the wall thickness will be 41mm (1.6in). Orchestrating a massive infrastructure project like the Nord Stream 2 Pipeline requires a precise and efficient logistics plan. Over 200,000 pipe segments must be delivered along the 1,230-kilometre route on an ambitious timeline, and every detail count.

Construction of the Russian section is divided into a 3.7-kilometre-long onshore segment and a 114-kilometre-

ANALYSIS

long offshore segment. It starts 3.8 kilometres away from the shore with the landfall facilities, which include the pipeline inspection gauge (PIG) trap area and shut-down valves, as well as systems to monitor the incoming gas flow and ensure safe operation. Nearshore and offshore construction activities will be performed pipelaying vessels, with these two sections of the pipeline later joined by above-water tie-in.

In the nearshore approaches to the Russian landfall and in the equivalent German part, this includes dredging and backfilling. The pipelines will be buried deep in the seabed to ensure that water and sand movements do not affect stability, which requires the excavation of a deep trench using dredgers. After the pipe has been laid, the trenches will be refilled and the top layer restored with the material previously removed. This accelerates regeneration and ensures that the intervention remains local and limited in time, with the lowest environmental (and not only) impact possible.

Crossing installations will also be needed where the pipeline intersects with telecommunications and power cables, or other gas pipelines. The cable hardware will be protected by thick

concrete mattresses. Rock placement is required to ensure pipeline integrity is maintained for its 50-year design lifetime.

Rock berms are created to support the pipeline where the seabed is uneven, for example. The same engineering approach has been selected to stabilize the seabed for the pillars of the RioAntirio bridge, in Greece.

Because of the... harsh cultural exchanges of the past, the Baltic seabed had to be thoroughly inspected for dumbed munition and ordnance. This required bringing onboard contractors specialized in such operations and that will prevent any impact to construction, operation or valuable cultural heritage.

Potential munitions in the route corridor have been cleared using extensive mitigation methods to reduce environmental impacts.

The pipeline will make landfall on the northern German coast near Greifswald.

Construction along the 85-kilometre German section of the pipeline is divided into offshore and onshore sections.

On the offshore section, the pipeline inspection gauge (PIG) receiving station is being built west of the port of Lubmin.

Two 700-metre micro tunnels will make the transition from the onshore to the underwater construction section. These

85

two small tunnels are positioned in front of the PIG receiving station, pass under the infrastructure to the north (railway track, road and supply lines) as well as coastal forest, dune and beach to end in the shallow water area approximately 350 metres beyond the shore.

In the summer of 2018 both pipelines were drawn in via the tunnels to the PIG receiving station. Before this work began, the trench area for both pipelines was prepared in mid-May 2018. In total, a 28-kilometre trench for each pipeline, as well as two parallel 21-kilometre trenches, will be made in German coastal waters.

Operations follow the award-winning ‘green logistics’ concept of the pipeline’s predecessor, Nord Stream, which is based on using low-emissions transport.

To minimize the environmental impact of moving the heavy 24-tonne pipes, routes are kept as short as possible on each leg of their journey to the seabed.

The logistics HUBs have been strategically positioned along the pipeline route so that pipes can be shipped to the pipelay barges from the closest port during construction. Around 200,000 tons of CO2 can be saved in the course of the project thanks to the optimized logistics.

ANALYSIS

EUR 10,000 mln economic benefit for the EU Because of the complexity and multitude of financial layers that multiple value chains are generating, every consequent phase of the project is adding to the value of the original activity thus creates a ripple effect which is difficult to be précised or evaluated. For every sector affected by a specific activity, such as the investment in pipeline, a dam, a bridge or new plants, there will be several ripple effects, sometimes in sequential steps, triggering value creation in other sectors.

The total economic benefit created for the European Union, receiving 58% of investments, is nearly EUR 10,000 million, creating close to 60.000 full-time equivalent jobs, and adding nearly EUR 5,000 million in GDP on an overall basis.

To classify the impact waves, we can break it down to: • Direct effects, which include all activities directly related to the event in

question; • Indirect effects, which include all suppliers of goods and services to the direct activities; • Induced effects, which consist of the household spending that results from the salaries and wages earned in the first two categories.

This represents the flow of investment from the project to each country.

The totals have been used to model the economic impact for the top 12 countries affected – Russia, Germany, the Netherlands, Finland, Switzerland, Sweden, Austria, the United Kingdom, Denmark, Belgium, Italy, and Norway.

Committed and spent funds in these 12 countries make up 97% of the total funds committed in the long-term business plan of the project.

Apparently, the effects can be different depending on the economic/industrial structure of the country examined and 86

the relative cost of labour. For example, within the EU, any investment will have a larger impact in Greece or Spain (which has a lower relative labour cost), than in Germany or France. Equally, the results in Russia can be expected to be much more significant; more specifically, every euro spent in investment will create three times more full-time equivalents in Russia than in Germany.

Estimated Overall Impact per Country • The overall impact on the Danish economy is equivalent to an economic output of nearly EUR 300 million, adding EUR 160 million to GDP and creating 1,580 jobs.

• The overall impact on the Finnish economy is equivalent to an economic output of nearly EUR 900 million, adding more than EUR 410 million to GDP and creating 4,500 jobs.

ANALYSIS

• The overall impact on the German economy is equivalent to an economic output of more than EUR 3,850 million, adding roughly EUR 1,850 million to GDP and creating roughly 24,000 jobs.

The investment does not cover the connecting infrastructure nor the compressor stations required after landfall – these will be undertaken by separate organizations and are not included in the Nord Stream 2 project.

These additional investments will have further economic beneficial effects on the German economy that are not reflected in this calculation.

• The overall impact on the Dutch (Netherlands) economy is equivalent to an economic output of EUR 2,389 million, adding roughly EUR 1,050 million to GDP and creating 11,990 jobs.

• The overall impact on the Swedish economy is equivalent to an economic output of EUR 635 million, adding nearly EUR 350 million to GDP and creating 3,270 full-time equivalents, spread over many different sectors.

• The overall impact on the

Russian economy from Nord Stream 2 is equivalent to an economic output of more than EUR 6,100 million, adding nearly EUR 2,700 million to GDP and creating more than 144,000 jobs.

The investment does not cover the connecting infrastructure or the compressor stations required – these will be undertaken by separate organizations and are not included in the Nord Stream 2 project. They will have additional economic beneficial effects on the Russian economy that are not reflected in this calculation.

Geopolitical Gambits Depending on who you ask, Nord Stream 2 is either a sustainable way to ensure European energy security or a proxy for Russian hybrid warfare. Or both.

The official objective of the Nord Stream 2 project is to provide additional means for safe and secure supply of gas to Europe. Europe’s dependency and supply gap are raging, due to growing consumption, depletion of indigenous reserves, and phasing out of nuclear and 87

coal-fired power generation capacity.

The project has been surrounded by controversies since its inception. One of the primary actors in this play has been Ukraine, from the very beginning.

Ukraine filed a lawsuit with the Energy Community Secretariat seeking action against the pipeline. It also appealed to the European Commission to terminate the gas project as it is against the country’s strategic interests. The route of the pipeline will provide a circumvention of Ukraine, which stand to lose hightransit fees. Ukraine has been obviously benefitting for a long time from its ‘middle man’ status, as it has been the energy gateway of Russia towards Europe.

The Baltic Sea offers a short, direct route from northern Russia to northwest Europe, thereby decreasing costs, increasing stability and theoretically increasing security of supply. Notably, it also enables Russia to bypass Ukraine, and maybe ‘strangle’ it; this move is depriving Kyiv of the valuable energy transit fees and allowing Moscow more flexibility to use energy as a leverage point with Kyiv without broader European impacts. Given the fact that we still face

ANALYSIS

a rather awkward ‘occupation’ of Crimea

by Russian forces after the invasion of ‘little green men’, and the ongoing civil (?) war in eastern Ukraine, this will further weaken the country’s capacity of positioning itself strongly towards Russia.

Another strong player in this geopolitical game, Poland, believes that when Russian gas no longer passes through Ukraine, the country will no longer be guaranteed protection against further aggression from Russia.

According to Kay-Olaf Lang from the German Institute for International and Security Affairs, Warsaw also sees the Nord Stream 2 pipeline as a symbol “of German disloyalty towards its eastern neighbour, and of a special relationship with Russia.”

While German chancellor Angela Merkel and others have insisted that the status quo of gas flow must remain, no specific measures have been taken towards that direction and Russia remains unreserved about its intentions to restrict gas supplies once the new pipeline is complete. The CEO of Russian oil giant Gazprom stated that gas will continue to flow via Ukraine, “but

the volumes of such transit will be much lower, probably, 10 to 15 billion cubic meters a year.” That’s just 15% of the gas currently in transit, and this comes amid speculation that Russia intends to eventually reduce this number to zero.

Additionally, the governments of ten European countries declared their opposition to the project through a letter to the European Commission stating that the pipeline project is against the interests of the EU. The countries involved are Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia. Many southern pipeline projects are apparently endangered with being obsolete even prior to their deployment due to Nord Stream and that means too much conflicting interest.

When it comes to the Nordic situation, there are concerns about dangers of letting Nord Stream workers to use Swedish ports, including their main navy base in Karlskrona. Allegedly, that could enhance Russia’s capabilities of opportunity to “gaining intelligence and plotting espionage activities”. Other analysts warned that the pipeline gives 88

Russia the pretext to increase their military presence in the Baltic Sea, even using it as a means to transmit military information on the movements of naval vessels.

Namely, Denmark who is one of the significantly involved countries in the project has yet to validate the licenses for the pipelines, without providing arguably good reasons. The Danish Energy Agency still cannot estimate when an authorization would be issued.

Despite this situation, Nord Stream representatives still claim that the gas pipeline will be ready by the end of 2019, even if the obstacles raised by Denmark delay the operations.

Not a long time ago, EU energy commissioner Miguel Arias Cañete actually stated that Nord Stream was not in the interest of Europe as a whole. The Commission isn’t openly trying to block the pipeline project, but it does want to make it an EU project, meaning it would be subject to strict EU competition rules.

This possibility is much closer today, and not just in the horizon, and can further complicate the situation.

Any such decision would require the

ANALYSIS

agreement of the European Parliament and the European Council of member states. The Commission has Poland and the Baltic countries on its side, as well as Britain, Denmark, Slovakia, Ireland, Sweden, Italy, Luxembourg and Croatia.

Germany, Austria and the Netherlands, on the other hand, want to proceed with Nord Stream 2, preferably in its current form. Businesses from these countries are involved in its construction.

One deciding factor could be the official stance adopted by France.

France has been traditionally keen on supporting Germany, and would arguably stand behind its energy supplier, Engie, which is also involved in the Nord Stream 2 project. It’s therefore likely that Paris will support Berlin. If Paris votes against applying EU common rules to the project, or if it abstains, the Commission will fail to achieve the necessary majority. Romania, which currently holds the presidency of the European Union, is trying to broker a compromise, but time is running out.

Blocking Nord Stream 2 does not seem realistic for now, but its opponents have been moving from strength to strength. Kay-Olaf Lang says that “Warsaw has succeeded in putting a project on the political agenda that for a long time was regarded as purely economic”. He comments that the opposition to Nord Stream 2 has contributed to it becoming an important element of the geopolitical discussion, not only in eastern Europe, but in Germany, too.

And as if the European playground was not crowded enough, there are also the Americans who wish to play.

Congress has been threatening to target strategic European partners with new legislation that would impose sanctions on key allies. The Protecting Europe’s Energy Security Act would mandate sanctions on those involved in the Nord Stream 2 gas pipeline project.

Texas Republican Ted Cruz along with other senate members of the Senate Foreign Relations Committee, drafted the act to increase pressure against

Russian interests and one of its most important exports. A draft version of the bill targets vessels that lay the pipeline and would also deny visas to executives from companies linked to those vessels.

It also would block transactions in U.S. based property or interests belonging to those individuals and would penalize entities that provide insurance to the project. Specifically, the Act mandates blocking (asset freeze) sanctions on those involved in the sale, leasing, facilitation, or provision of the vessels used in the undersea construction of Russian energy export pipelines at 100 feet below sea level, including Nord Stream 2.

While these measures may seem like a technical sanction aimed at Russia, the potential targets are actually major European companies including Germany’s Uniper and Wintershall Holding, Engie of France, Austria’s OMV, and Anglo-Dutch Shell. Since Russia does not involve in deep-water project technology it relies on European contractors.

The U.S. president was not less direct: “If you look at it, Germany is a captive of Russia, because they supply - they got rid of their coal plants, got rid of their nuclear, they’re getting so much of the oil and gas from Russia,” Trump said in July of last year at the start of the North Atlantic Treaty Organization’s annual summit. “I think it’s something NATO has to look at.”

Interestingly, there is no alternative offered. As it stands, U.S. gas is much more expensive than the Russian, due to transit and logistics costs. While the U.S. rate does provide the EU with leverage with which to negotiate with other gas suppliers, it is not enough.

The only really sustainable approach on behalf of the EU, in accordance with the energy supply diversification dogma, lie southern. The EU is already expanding its current energy framework, and also developing new capacities in the Adriatic Sea (on Krk island, Croatia), in the Baltic Sea (in Poland), and in the Mediterranean Sea 89

(in Greece & Cyprus). These new and expanded projects, faced with their own complicated geopolitical challenges, may allow for a significant increase of domestic liquefied natural gas for the EU.

Conclusion The starting and ending point of this article remains the fact that Nord Stream 2 is one of the potentially most beneficial and still most scrutinized ongoing projects in the energy sectors.

It has the capacity of offering Europe (Germany) a stable flow of gas, avoiding high costs, environmental threats and warzones (Ukraine); it will also a have huge beneficial financial impact for all parties involved. There is a big BUT here though; the major party involved is the Russians and the shirtless ghost of Putin, riding a bear, still hovers over Eastern Europe and taking its toll on Nord Stream 2.

On top of that, this project will rain on the parades of South Europe, where similar and very promising projects are being planned or developed. Afterall, the rest of the Europeans have a right in their claims over a piece of the energy pie.

On the other side, the Americans do not seem to be very happy with the evolution of the project or Gazprom’s good (?) intentions. They will pursue aggressive measures against the project even if that means that they hurt their European partners; after all, the Trump dogma has been unforgiving towards the traditional allies from the beginning.

At the end of the day, the Nord Stream story goes back several years proving to be financially sustainable and all parties have strong, deep, interwoven interests in continuing (namely, the ex-chancellor, Gerhard Schröder, who is currently the chairman of the board of Nord Stream AG).

The rest of the Europeans, along with the Americans have just started scraping of the surface and will continue to do so.

Until they hit bone, and as long as there is no better alternative, money talks and business will continue as usual.

EVENT

Legal and Regulatory Framework of CO2 Utilization (EOR) and Geological Storage Bucharest, 17-18 September 2019

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CO-BASE project, sup­ ported by ACT ERA-NET co-fund, aims to develop prospective revenue streams and business models for CO2-EOR combined with permanent CO2 storage (EORStore – Enhanced Oil Recovery with Storage) in South-Eastern Europe (SEE) and therefore to support large scale CCUS deployment in the region. The project is carried out by GeoEcoMar, CO2Club and PicOil InfoConsult in Romania, METU PAL in Turkey with support from TNO, the Netherlands and NORCE, Norway.

The objective of the project is to support deployment of CCUS by screening the available data, developing CCUS roadmaps and preparing for EORStore pilots in the SEE area. The project team accesses the whole revenue stream and focuses on optimization of the EORStore as a single, undividable process.

ECO-BASE project approach for the optimization of CO2-EOR process

towards more carbon neutral oil production is a full chain optimization principle in which the total volume of CO2 to be injected will have to be determined by all components of CO2 capture, transport, utilization and storage value chain. In the essence it is about maximizing monetary value for all stakeholders in the value chain and establishing the required infrastructure.

I.e. an optimal amount of CO2 per given unit of time need to be found such that the overall optimal business case is generated.

Optimising the EORStore process is an essential component of the road mapping process for each selected region. Optimised solutions obtained are essential in both determining gaps and barriers as well as planning action and priorities.

From a technological standpoint it seems to make sense to evaluate the available EORStore volumes first.

Therefore, an optimal CO2 EOR scenario will be established for each field as a baseline for how much CO2 may be needed, how much additional oil can be 90

produced and how much CO2 can be stored.

Economic evaluation of each EOR case will be estimated including ETS credits for CO2 permanently stored after completion of CO2 EOR process.

As a part of its activities, ECO-BASE is happy to offer an open two-day workshop on legal and regulatory framework in Bucharest, Romania. The seminar emphasizes on legal, institutional and political frameworks at local, national and international level and how, why and under what conditions these (could) act as barriers or as enabling elements.

Participant of the seminar will hear from a number of project participants as well as international experts from the Netherlands, Norway, USA, Greece.

Registration To register to the seminar please visit the project webpage at https:// ecobase-project.eu/legal-and-regulatoryframeworkregistration/ and sign up for the event.

Our mission is to promote the role and the importance of the entrepreneur for economic and social development.

We support entrepreneurs looking to generate evolution and an innovative approach to local business culture. office@adaaromania.ro www.adaaromania.ro

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Credibility

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The Association for the development of local entrepreneurship

Excellence

THINK BIG, ACT HUGE 91

EVENT

Black Sea Oil & Gas Region Industry Takes Action in the Face of Uncertainty

In Romania, the sudden legislative changes brought a lot of uncertainty for the offshore, onshore, and infrastructure projects. In Bulgaria, exploration campaigns are underway, while the government is standing at the infrastructure crossroad.

Ukraine and Georgia are opening new onshore and offshore licensing rounds, but investors don’t know what to expect from new markets.

Despite all the uncertainty, the industry in the region is not afraid to take action. The first offshore project was launched in Romania, BRUA and other major infrastructure projects are under construction, while low-cost onshore production projects across the region are booming.

The recent Global Oil and Gas Upstream Capital Expenditure Outlook

by Key Countries and Companies to 2025 summarized new planned and announced upstream projects for 2019 2025 period.

Romania ranked 3rd in Europe with an estimated USD 4.7 billion in spending following Norway and UK. Pelican South block announced by ExxonMobil and OMV with 2,427 US mln estimated project cost is among largest upstream project by Capex.

In Ukraine American, Canadian, and Ukrainian companies will invest USD 430 million in oil and gas fields exploration.

The 7th annual Black Sea Oil & Gas conference in Bucharest, 23 - 24th of October, gathers international oil & gas 92

companies, governmental and regulatory representatives, and local project owners for an intense 2-day program covering regulatory changes, updates on development and production projects, and technological challenges in the Black Sea. If you are interested to meet all regional stakeholders in one place and get the latest industry updates directly from them book your calendar for this event.

Among attending companies: OMV Petrom, Black Sea Oil & Gas, Romgaz, Ukrtransgaz, Ukrgazvydobuvannya, Serinus Energy, Trident Acquisitions, White Stream, EBRD, Grup Servicii Petroliere and Transgaz.

More information about the event – https://www.globuc.com/blackseaoilgas

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EVENT

2019 EPG Summer School Smart Transformation in the Energy Sector The second edition of Energy Policy Group’s Summer School, Smart Transformation in the Energy Sector, took place between 25 July and 2 August in Bucharest.

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uilding on the preceding edition, this year the program enjoyed an overall participation of 19 students and young energy professionals coming from 10 different nationalities. As a result of an attentive selection of the attendees, a genderbalanced participation was achieved. With an average age of 28 years old, they were representatives of utilities companies, working in the industry sector, pursuing an academic career, or advancing their studies. Through an intensive 8 days program, the summer school offered them an acute insight into the problems faced by the energy sector and the varying impacts of different prospective solutions.

During seminars and lectures, more than 20 speakers (high-level scholars from academia, reputed international experts, and practitioners from leading energy companies) explored critical questions for the future of energy markets.

The summer school does not only represent a learning process, but also serves as a great opportunity to debate, interact, and build a sense of community that can afterwards facilitate a cross-disciplinary and cross-border collaboration in order to

deploy the energy transition goals. To this purpose, significant attention was given to decarbonisation initiatives and the role renewable energy plays in this new framework. For a better understanding of the progress that has been made in integrating renewables, a visit to a Monsson onshore wind park in Constanta was organized. Furthermore, two professional certified trainings were provided at the Wind Power Energy training facility, approved according to the Global Wind Organisation (GWO) standard.

Transition toward a clean and safe power generation system cannot be addressed without discussing the risks and opportunities of the nuclear sector. What better chance to discuss these aspects than through a visit to Cernavoda Nuclear Power Plant?

Additionally, a discussion about the transformation of transport was included in the agenda. To achieve the vision of a carbon-neutral economy, much stronger policies are required for decarbonizing the transport sector. Various options that could contribute to its decarbonisation were approached during the summer school, including advanced biofuels, hydrogen, green gas and synthetic fuels. In 96

this context, the screening of the Frontera Invisible documentary was effective in drawing the conclusion that policies should be carefully designed because without extensive consideration of their distributional consequences there is a risk of social backlash.

In order to better comprehend the effects of these policies, the participants were engaged in a role play exercise (i.e.

World Energy Simulation Game), through which they tried out measures aiming at reaching the Paris Agreement goals.

Facilitated by Denisa Diaconu (Policy Analyst at EPG), the game was intended to overcome the existing blind spots when it comes to tackling climate change.

“Due to its content and structure, the program allowed its attendees to understand the energy sector in its full complexity and provided them a platform of interaction and networking. Once again, we added a significant piece to our community thanks to an outstanding group of participants engaged and dedicated to this common goal of attaining a smart energy transformation. This year’s edition brought us closer to our ultimate goal – being in the top energy-related summer schools in Europe,” stated Andrei Covatariu (Summer School Director).

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SEPTEMBER’S READING

Economic Woes Hold Sway Over Geopolitics W

hile geopolitical tensions in the Middle East Gulf remain high, with US sanctions recently extended to more Iranian officials and a Chinese oil importer, as well as another tanker seizure, oil prices (Brent) have eased back from the most recent high of USD 67/bbl. Shipping operations are at normal levels, albeit with higher insurance costs. The messages from various parties that vessels will be protected to the greatest extent possible, and the IEA’s recent statement that it is closely monitoring the oil security position in the Strait of Hormuz will have provided some reassurance.

There have been concerns about the health of the global economy expressed in recent editions of this Report and shown by reduced expectations for oil demand growth. Now, the situation is becoming even more uncertain: the USChina trade dispute remains unresolved and in September new tariffs are due to be imposed. Tension between the two has increased, reflected in heavy falls for stock and commodity markets. In this Report, IEA took into account the International Monetary Fund’s recent downgrading of the economic outlook: they reduced by 0.1 percentage points for both 2019 and 2020 their forecast for global GDP growth to 3.2% and 3.5%, respectively.

Oil demand growth estimates have already been cut back sharply: in 1H19,

we saw an increase of only 0.6 mb/d, with China the sole source of significant growth at 0.5 mb/d. Two other major markets, India and the United States, both saw demand rise by only 0.1 mb/d.

For the OECD as a whole, demand has fallen for three successive quarters. In this Report, growth estimates for 2019 and 2020 have been revised down by 0.1 mb/d to 1.1 mb/d and 1.3 mb/d, respectively. There have been minor upward revisions to baseline data for 2018 and 2019 but the total number for 2019 demand is unchanged at 100.4 mb/d, incorporating a modest upgrade to IEA’s estimate for 1Q19 offset by a decrease for 3Q19. The outlook is fragile with a greater likelihood of a downward revision than an upward one.

In the meantime, the short-term market balance has been tightened slightly by the reduction in supply from OPEC countries. Production fell in July by 0.2 mb/d, and it was backed up by additional cuts of 0.1 mb/d by the ten non-OPEC countries included in the OPEC+ agreement. In a clear sign of its determination to support market rebalancing, Saudi Arabia’s production was 0.7 mb/d lower than the level allowed by the output agreement. If the July level of OPEC crude oil production at 29.7 mb/d is maintained through 2019, the implied stock draw in 2H19 is 0.7 mb/d, helped also by a slower rate of nonOPEC production growth. However, this is a temporary phenomenon because 98

IEA’s outlook for very strong non-OPEC production growth next year is unaltered at 2.2 mb/d. Under their current assumptions, in 2020, the oil market will be well supplied.

Highlights • Global demand fell 160 kb/d y-o-y in May, the second annual fall seen in 2019. In January to May it was up only 520 kb/d, the lowest increase for the period since 2008. Chinese oil demand was revised upwards, but India and the US show weakness. IEA lowered their global growth forecasts for 2019 and 2020 by 100 kb/d and 50 kb/d, to 1.1 mb/d and 1.3 mb/d, respectively.

• Global oil supply held steady in July above 100 mb/d, but fell below year earlier levels for the first time since November 2017. Robust compliance with OPEC+ supply cuts and losses from Venezuela and Iran saw OPEC oil production fall by 2 mb/d versus July 2018. Non-OPEC supply was up 1.4 mb/d y-o-y in July and is set to grow by 1.9 mb/d in 2019 and 2.2 mb/d next year.

• After a year-on-year fall in 1H19, global refining throughput is expected to pick up in the second half of the year, increasing by 0.7 mb/d. This follows the pattern of refined product demand growth, which was subdued in 1H19, but is forecast to rebound in 2H19. In 2019, China and the Middle East are alone in seeing growth in refining activity.