Interview with Eugenia Gusilov, Romania Energy Center
Natural Gas Europe had the pleasure of discussing energy affairs with Eugenia Gusilov, Managing Director, Romania Energy Center (ROEC).
Romania as a country offers great insights on contemporary European natural gas politics and strategies, being both a producer and importer of the energy commodity. It also aims to diversify its sources and act as a pioneer at an EU level in the search for shale gas. Furthermore, Romania sets the bar high where natural gas investments are concerned, having attracted the likes of Exxon Mobil, Chevron and Repsol in its quest for hydrocarbons.
The Romania Energy Center is based in Bucharest and is the leading think tank in the country on energy affairs. Its goal is to contribute to important public debates on domestic energy and environmental policies, and on Romanian and European energy security. Eugenia Gusilov is the founder and managing director of ROEC and her areas of expertise cover: strategic and commercial analysis of energy markets, oil and gas policies, and energy economics.
“I do not rule out a possible resurrection of some version of Nabucco - under a different name and for a different purpose”
Romania has traditionally been a hydrocarbons producer in Southeastern Europe for many decades. What can be said for the future of natural gas research and exploration in the country both offshore and onshore?
Romania has indeed a great history as a hydrocarbon producer, but its current production does not compare to what it used to be in its heydays. The country reached its peak oil production in the mid 1970s (15 Mt/y) and has been declining ever since. In the last couple of years OMV Petrom managed to arrest the decline and stabilize production around 4 Mt/y. With natural gas, we have almost the same story. Natural gas production reached its peak in 1986 (39 Bcm/y) and has declined since to almost ¼ of that. In 2012, for instance, domestic natural gas production stood at approx. 10 Bcm (while total domestic consumption was 13.5 Bcm, including imports).
Romania is a mature hydrocarbon region with its core natural gas production located traditionally onshore. The Black Sea and the unconventional resources are frontier areas. Few realize that Exxon/Petrom’s Domino-1 well was actually the first ever deep water well drilled in the Romanian Black Sea and the initial results certainly lend optimism. The future of oil and gas in Romania will depend on application of EOR techniques at mature fields, on the discovery of new onshore fields (such as the Totea gas and condensate field in 2011 by OMV Petrom), on the results of the ongoing Black Sea exploration, and on how Romania will handle the question of responsible management of unconventional resources. Of these four elements, I think the last two are most promising and may indeed provide a future for us to talk about.
The Black Sea has been a story for quite some time regarding potentially significant natural gas reserves. Do you estimate that Romania's offshore locations may offer great findings in the coming years?
We shall have to wait for the official announcements of commercial discoveries form the companies directly involved in exploration and we have many actors present in the Romanian Black Sea: Exxon, OMV Petrom, Sterling Resources, Petroceltic, Lukoil Overseas all have ongoing 3D seismic acquisition campaigns and data interpretation, and have programs to drill exploratory wells. The latest piece of news from the Romanian Black Sea comes form Petroceltic, the operator (40% share) of blocks Ex-27 and Ex-28. The company announced in mid November that the well drilled in Est Cobalcescu (Ex-28) perimeter will be plugged and abandoned for lack of commercial quantities. The GSP Prometeu jack-up drilling rig was being moved to block Ex-27 (Muridava concession) for the next exploration well (Muridava-1). Obviously, not all wells will result in commercial discoveries, but it is important to continue exploratory works. So far, we have several confirmed gas discoveries in the Romanian Black Sea: Domino-1 (the biggest), Ana, Doina, Eugenia South-1, Olimpiiski, and there may be more good news in 2014.
Pipeline infrastructure is another major theme in the Balkans. Since the selection of TAP, Nabucco has effectively been terminated. Do you share that view and how will Romanian energy policy be shaped by this latest development?
Indeed, the decision to go with TAP instead of Nabucco West for the Shah Deniz II gas has left Romania without any immediate alternatives, since there is no ‘grand’ project to take its place. But, Romania is not out of options either. It has the promise of the Black Sea offshore and of unconventional hydrocarbons, if commercial quantities are confirmed and the government will have the right policy approach. Both these potential resources are still to be delineated and properly appraised. In the meantime, Romania can focus on integrating itself in the regional gas market. To that extent, it can and should speed up the building of its gas interconnectors.
Depending on the results of the Black Sea exploration activities, and on when the FID shall be taken by the O&G companies involved, I do not rule out a possible resurrection of some version of Nabucco - under a different name and for a different purpose (to export Black Sea gas to Central Europe, for instance). So, it can remain an option for possible exports of Romanian gas, but this is worth discussing only once Romania has a clear picture about how much gas (confirmed discoveries and precise quantity assessments) it really has in the Black Sea. It is no doubt that Romanian energy policy was affected by the selection of TAP instead of Nabucco, but it also created a stronger motivation to pursue the development of domestic resources and speed up the construction of the smaller gas interconnectors which will facilitate stronger regional market integration.
On the level of natural gas interconnectors, several projects move almost at the same time with republic of Moldova, Serbia, Hungary and Bulgaria. How far are we from having a regional natural gas hub and to integrate the mostly fragmented so far Southeastern European gas market?
We cannot yet talk about a functional regional natural gas hub, but things are moving in that direction and we are getting closer to that objective. The gas interconnector Giurgiu-Ruse (between Romania and Bulgaria) the construction of which started in October 2009 is scheduled to be completed by the end of this year (December 31, 2013), latest in February 2014. The pipeline will have a capacity of 1.5 Bcm/y and a total length of 25 km (8.4 km in Romania and 16.6 km in Bulgaria). This is a project worth €23.8 Million of which the joint contribution of the project promoters (Transgaz and Bulgartransgaz) is €14.9 Million and another €8.9 million is co-financed through the European Energy Program for Recovery (EEPR).
The construction on the gas interconnector Ungheni-Iasi (between Romania and Moldova) started in August 2013, and the intention is to have it ready by the year end (December 20 is the official deadline for the main line), however it is more likely to happen in Q1 of 2014. The 42.49 km long pipeline has 32.19 km on Romania’s territory and 10.5 km on Moldova’s territory plus a small section (134 meters) under Prut river. The total cost is estimated at €26.5 Million (of which €7 Million funded by the EU through the Joint Operational Program "Romania–Ukraine-Republic of Moldova 2007-2013". In mid-November, Romania’s Ministry of Regional Development and Public Administration (MDRAP) has signed a contract with Moldova’s Ministry of Economy providing Moldova with € 5.3 Million worth of technical assistance (representing Moldova’s co-financing for the €3 Million it receives from the EU).
The Arad-Szeged interconnector (between Romania and Hungary) was completed in 2010, but for the moment operates in one direction only (gas imports from Hungary). The gas interconnection Mokrin-Arad (between Romania and Serbia) is in a conceptual stage, although the proposal dates back to 2002 and the idea is even older. The project has been discussed during the meeting between the Romanian Minister Delegate for Energy Constantin Nita and his counterpart, Serbian Energy Minister Zorana Mihajlovic, that took place on November 25th on the sidelines of the China-CEE summit that took place recently in Bucharest.
On the topic of shale gas - there have been numerous demonstrations lately in Romania, as well as in neighbouring countries for reasons mostly of an environmental nature. How do you view the progress of the shale gas sector in Romania and most importantly the prospects for the local energy sector?
Unfortunately, what we have seen happening in Romania over the past 2 months points to a complete failure of public engagement and at a chronic and deep-seated mistrust of citizens towards government institutions. The energy policy decisions need to be explained and argued for, but our key institutions do not have the habit of a sustained explanatory exercise with the public at large. It requires accountability on the part of national and local authorities it requires independent, modern and transparent institutions, which is not at all the case for Romania’s National Agency of Mineral Resources (ANRM) for instance. Communication with the concerned citizens is quite deficient and that is why the positive arguments simply do not get across.
The agency did launch a dedicated information website: http://www.infogazedesist.eu/, but it has not been promoted adequately and most people don’t know about its existence. The dialogue itself on the shale gas topic has started very late which did not help, adding to the mistrust. The good regulatory provisions that Romania has in place are not emphasized enough, nor do we talk about what should be done in addition to address any legal loopholes or concrete measures taken to strengthen monitoring and oversight and how to make this information transparent and accessible to any interested party. With very few exceptions, we witness a parallel dialogue: the industry, one the one hand, downplaying and even denying any risks and the environmental NGOs, on the other hand, highly exaggerating those risks.
Then, we also have the unusual involvement of the church. Hence, the predicament we are in today. I do not see a way out of this tense situation without modernizing the key institutions with responsibility in natural resource management, without developing and embracing a culture of dialog, without more transparency and accountability on the part of government agencies, and many more experts able and willing to answer questions that come from the public, as well as without an open discussion about alternative technologies to hydraulic fracturing that already exist on the market.
Lastly, regarding the AGRI project and how this develops or could evolve in the future. Is there room both in energy security terms and in financially for a route starting from Azerbaijan to Georgia up to Romania, taking into consideration all the latest developments in the regional natural gas sector?
The interest on the part of the Romanian side remains strong mainly because it would be Romania’s first LNG project and would fit the energy supply diversification strategy. Azerbaijan too has an interest in diversifying its natural gas exports to Europe. However, the immediate focus in Azerbaijan seems to be on Shah Deniz II gas and construction of TANAP and TAP, but there are other projects such as the Absheron field (up to 350 Bcm gas reserves, first gas expected in 2020), the Babek field (gas production to start in 2019), or the deep-bed gas extraction underneath the Azeri-Chirag-Guneshli (ACG) oilfields - expected to begin production in 2019 - which could provide gas for AGRI, but not earlier than 2020. So the project remains a medium to long term possibility. The feasibility study for AGRI LNG on which Penspen is working is expected to be ready in February 2014 and will certainly shed more light.