RIGC 2022: Future of Energy Security Debated in Bucharest by Top Officials and Experts
The 5th edition of the Romanian International Gas Conference (RIGC) 2022 brought together in Bucharest, in a tensed geopolitical context, Energy ministers and high officials from nine states in the region (Romania, Greece, Bulgaria, Ukraine, Hungary, Republic of Moldova, Azerbaijan, Turkey and Georgia), experts and representatives of some of the most important energy companies in Romania. Within an exceptional debate, the discussions focused on finding the necessary solutions for the security of supply both in the short term, for this winter, and in the medium and long term.
“The current geopolitical context gives us the opportunity to rewrite the architecture of the energy sector, and despite the supply difficulties, the era of natural gas has not ended, and it still has a lot to offer to ensure the energy so necessary for life. We just must be realistic and, at the same time, creative to find the best solutions to the major challenges we are facing: the energy and climate crises. In such complicated times, solidarity is more important than ever. And this was the key word at RIGC 2022. The current crisis is showing how crucial and important it is to invest in our energy production, in the interconnection between countries, to develop and diversify the supply resources and to advance in the energy transition,” said Franck Neel, FPPG President and Member of OMV Petrom Executive Board responsible for Gas & Power, while opening the 5th edition of the Romanian International Gas Conference.
The topics of discussion focused, among other things, on the need for cooperation to diversify the sources and routes of energy supply to overcome the current energy crisis. The new alternative routes for the transmission of natural gas through the ports of Turkey and Greece and interconnection for the transmission and transit of natural gas to Romania were pointed out and identified. Moreover, Romania recalled the necessity of the interconnection project through the underground power transmission cable on the route Azerbaijan – Georgia – Romania – Hungary.
The conclusions of the regional ministerial conference, unanimously based on solidarity, showed that Europe needs the diversification of energy sources to face the challenges, and, more than that, we must focus more on our own potential. In this context, Romania, through the Black Sea gas resources, plays a crucial role, having the chance to become a regional energy hub and a nodal point in gas trade. In addition, Romania has the chance to count on the energy map of Europe, including through the development of new technologies such as hydrogen or carbon capture and storage, emphasized the experts present at the debates on this topic. The leaders of the largest gas producing companies in Romania emphasized once again the importance of a competitive legislative framework, which would ensure the continuity of investments.
“Romania is among the European countries that have important gas and electricity production resources. This dialogue format is hosted by Romania to provide the countries in the region with the necessary natural gas, but also to generate solutions that provide support to the strong economies of Western Europe, on whose success the economy of our region also depends,” said Romania’s Prime Minister Nicolae-Ionel Ciucă. “The government I lead has assumed as an important objective the achievement of energy independence and the transformation of Romania into a factor of energy security in the region. We paid special attention to the support for the Republic of Moldova, which is facing acute effects of the energy crisis. (…) The Government of Romania focuses equally on the vision of long-term development of the national energy system, in accordance with European policies. Natural gas is considered both a viable option to ensure the green transition and, like nuclear energy, which we encourage, a vital resource for balancing the power grid,” the official added.
“I think the most important conclusion today was that we all have the desire to cooperate, to find solutions to have a good supply in the short term, this winter, and in the medium and long term. There are many interconnection projects, for example with the Republic of Moldova and Ukraine. We want cooperation with Azerbaijan, Georgia. We want to connect the Caspian Sea with the Black Sea; we want to have a green energy corridor that will supply electricity to the whole of Europe. Romania also contributes. (…) Gas production in Neptun Deep Block should start in late 2026 – early 2027, when Romania will become independent in terms of gas supply and export the surplus in the region. Until then, we are preparing to use natural gas as a transition fuel,” mentioned Romania’s Energy Minister Virgil Popescu.
“Romania has a privileged situation. Consumption is almost covered from national production, and we rely on a small amount of natural gas and electricity imports. And we have this opportunity to become an important force in the region, to be able to be a supplier for the neighbouring states as well, if we take the right steps. The Black Sea has a big potential,” added George Sergiu Niculescu, Secretary of State in the Romanian Ministry of Energy.
For Romania, green hydrogen could save up to 10% of gas demand by 2030, while biomethane total technical potential could replace 90% of current gas production by 2050. These two green gases will significantly contribute to Romania’s decarbonization ambitions: hydrogen will develop Romania’s RES potential; biomethane has an important role in circular economy, being able to create additional revenues for communities, being fully compatible with existing gas grid and appliances.
Also, Member of Parliament Oana Ozmen announced that they are working on a regulatory framework to enable a market for renewable hydrogen in Romania.
The messages of high officials from Greece, Bulgaria, Ukraine, Hungary, the Republic of Moldova, Azerbaijan, Turkey, and Georgia focused on unity and solidarity in the face of challenges generated by the current geopolitical context to contribute in full agreement to the diversification of supply and ensuring energy security in the region.
An important warning refers to confidence, stability, predictability. “Uncertainty is an investor’s greatest enemy. In times of crisis, an investor looks for predictability and stability. Amplification of volatility means an obstacle in the way of coming out of this crisis,” pointed out Franck Neel.
“The Neptun Deep project changes the rules of the game for our company and for the entire country, through the energy security it provides and for the fact that it transforms the country into a regional hub. The project is essential for the country, as onshore gas production is in decline and it’s important to see new sources. We must overcome these challenges and bring as many benefits as possible to the country, because this is the purpose of resources, to serve the country. We need the right regulatory framework. When it doesn’t exist, the appetite for investments is reduced.”
“The development of Black Sea gas is an objective that the entire state must focus on, given its strategic potential,” added Razvan Popescu, CEO of Romgaz. Mark Beacom, Black Sea Oil & Gas (BSOG), is of the same opinion, claiming that the Black Sea potential is huge. “I have seen the geological studies; it is great news to see this potential and the subsequent discoveries are much more promising.”
In the opinion of Axel Scheuer, Head of Energy & Climate Policy, IOGP Europe, confidence and stability of the game are essential for investors. “Direct support does not mean reducing prices, because if we cap prices, gas will not reach where it is most needed. When the government intervenes on prices, the investor will withdraw. In the long term, we need good decisions to be made, so that in a few years Europe will be supplied with enough gas.”
Risks related to gas supply were also raised by Eric Stab, President & CEO, ENGIE Romania: “The problem we are facing today, especially with the adoption of the GEO on September 1, is that traders are no longer stimulated to supply gas to Romania. There is a supply risk if we don’t ensure that gas reaches Romania. To buy gas, we need to be able to finance our purchases. Unfortunately, one of the big problems faced by suppliers is that they are under great stress from a financial point of view. One of the key elements of the scheme in Romania is that suppliers pre-finance the state’s support scheme. Since November last year, the entire burden of pre-financing of those schemes has been on suppliers. Unfortunately, the compensation of this pre-financing is made slowly, and we are facing discrepancies between what we are owed and what is paid. This puts financial pressure on suppliers and generates risk on the security of supply.”
“Currently there are two challenges,” noted Volker Raffel, CEO, E.ON Romania. “The geopolitical challenge in the East and security of supply this winter. We need to resolve the stability of the system right now. State producers are not selling electricity yet for next year. Things must change because no one can conclude supply contracts for 2023. We need to find a solution as soon as possible.”
Another impediment to the crisis, pointed out by François-Régis Mouton, Regional Director for Europe, IOGP, is that citizens want action because there is not enough gas production to meet demand. “However, the issues that are being discussed, such as capping prices, increasing taxes, would worsen the situation in the short term, because it would become more and more difficult to respond to demand and it would be much more difficult to increase domestic production. In the EU we need to protect the most vulnerable consumers, not only in the coming winter, but in general.”
However, according to Axel Ghanimi, Senior Consultant, Emerton, Romania is one of the countries that had a very protective approach. The measures adopted by Romania are generally incompatible with the EU proposals, especially regarding interventions on the wholesale market and the regulation of profit margins. The EC does not support intervention on the market, at least not on the wholesale market. Romania has introduced an additional tax on energy and gas above the level recommended by the EU, of 33% of the gross profit margin.
“The measures taken by Romania could lead to unwanted effects on the market. Capping wholesale margins will affect Romania’s ability to import gas, during the period when it is most needed, in the winter. It is possible that such measures will have a serious impact on the security of supply for winter 2022/23,” the expert warns.
The event, organized by the Oil and Gas Employers’ Federation (FPPG), had the theme ‘Bridge to The Future: From Versailles to Bucharest – Natural gas, the bridge between climate action and energy security’, being carried out with the support of the Romanian Ministry of Energy and in partnership with the International Association of Oil & Gas Producers (IOGP).
