Caspian Energy (CE): Mr. Popescu, what are the plans for oil and gas production in the Romanian sector of the Black Sea? How attractive is the Romanian shelf for investments?

Virgil Daniel Popescu, Minister of Energy of Romania: When we talk about the South-Eastern European countries, Romania has a privileged position being the second gas producer in the European Union.  More than that, we have the chance to become a net exporter in the region by capitali­zing on the significant gas reserves discovered in the Black Sea area that are estimated at 200 bcm. The Neptun Deep asset in the Black Sea represents a unique opportunity for Romania, but also for the entire region. The Romanian Company ROMGAZ SA signed on May 3rd, the sale-purchase contract of all the shares issued by ExxonMobil Company, represen­ting 50% of the rights and obligations assumed in the Oil Agreement for the Neptune Deep perimeter in the Black Sea. It is a huge investment in consolidating the energy security not only of Romania, but of the entire region. Romania will take all the necessary steps, so that this exploitation to become a reality. We estimate that the first gas production from Neptun Deep block, where the estimated reserves are of approximately 100 bcm, will be obtained at the end of 2026 or in early 2027. We hope also that after the last technical tests the production in the Midia perimeter, another important perimeter in the Black Sea, will start by the end of June, with 1 bcm/year.

Romania has a privileged position on the Black Sea, an area of production and distribution of strategic importance for the regional energy security, so the development of Black Sea resources is a priority for Romania, as well as attracting investment and collaborating with companies that have the necessary know-how and technology. The Romanian offshore area covers 22,000 square kilometers and reaches depths of over 1,000 m. Given the significant potential of natural gas reserves that could become commercial exploitations, large-scale investments in the upstream sector of the Black Sea should be made in the coming years. I want to mention that the Romanian Parliament has approved the Law amen­ding and supplementing the Offshore Law, which regulates the activity of exploration and production of natural gas in the Black Sea and in deep onshore perimeters (over 3,000 m). The new legal framework creates a useful tool for reducing dependence on natural gas imports, given the potential for natural gas production from proven onshore and offshore deposits on the Romanian territory. Moreover, the internal gas transmission infrastructure can ensure the takeover of current production, with additional investments being made to meet the expected increase in extracted volumes.

But, the Black Sea does not mean only hydrocarbons, this area has also a significant potential in the offshore wind sector which Romania wants to capitalize on. It is important to mention that Romania benefits from funds offered by the National Recovery and Resilience Plan and Modernization Fund for investments in renewable sector, as well as green production capacities.

CE: How much gas is imported and how is the crisis of a fourfold price increase being overcome?

Virgil Daniel Popescu: Romanian gas demand is covered using approx. 20-25% imported gas. The volumes depend on how long and severe the cold season is. But the increased prices are not driven just by the imported gas. Romanian market is li­beralized and integrated in the regional gas market. Romanian National Gas Transmission System is connected with the neighbors’ transmission systems through interconnection points which ensure bidirectional flows of gas  between our markets. In that case, the prices are determined by regional balance of demand and supply.

Due to the current context, Romanian authorities adopted a package of legal measures in order to reduce the pressure from the wholesale market on the final clients, especially on the ones being affected by the energy poverty. In this regard, the price reduction for gas and electricity was made through GEO 118/2021 and GEO 27/2022 by establishing caps for both utilities on the level of the final clients. In order not to distort the wholesale market, Romanian Government has engaged important budgetary funds so that the final prices would be limited until March 2023.

Concomitant with these measures, Romania is making the best efforts for fin­ding out alternatives to the Russian gas. It is worth mentioning here the Romania’s approach for mitigating the impact of Russian gas dependency:

 -Diversification of gas supply sources and routes is the key to ensure security of supply for the upcoming cold seasons and phase out EU’s dependency on Russian gas imports.

-Ensuring access for the Southeast Europe, including Romania, to new gas sour­ces (LNG and/or pipeline imports) for example such as those from the Caspian region (AZ) can be ensured via the Vertical Gas Corridor (Greece-Bulgaria-Romania) and Trans-Balkan reverse flow Corridor (Turkey-Bulgaria-Romania-Ukraine-Republic of Mol­dova). These are two very important Corridors and making them operational at their full capacity is critical.

 The interconnection points between Romania and the neighboring states, as well as the transport capacities ensured in bidirectional flow through these points can increase their relevance at regional level, provided that the neighboring states also make the necessary efforts to optimize the use of gas infrastructure at regional level.

Given the current general context, both at regional and European level, caused by the serious events currently unfolding, coupled with the ambitious process of the European Union to complete the metamorphosis of the European energy sector, it is necessary to take all legislative steps and investment, which will allow Romania to ensure as much as possible the security of supply of primary energy resources and especially natural gas.

The Black Sea offshore gas resources from the Romanian territorial waters will increase the energy security of Romania and of the region. Consequently, the new legal framework can help to achieve an optimal balance between the sources of budgetary revenue and the taxation policy to which the activity of crude oil and gas production is subordinated, representing an important premise for ensuring an efficient exploitation and use of primary energy resources and to ensure the supply of natural gas to the Romanian energy market.

In order to increase resilience in security of gas supply, Romania is promoting on the current 5th PCI list 2 storage projects (6.20.4-Depomures and 6.20.7-Bilciuresti) that aim at increasing the existing storage capacity and flexibility by increasing the injection and withdrawal capacity. These projects are a key instrument in terms of enhancing the security of supply of the region of South-Eastern Europe. These pro­jects become more relevant in the context of the new Gas Storage Proposal Regulation. Therefore, Romania strongly encou­rages the European Commission to provide priority in financing for gas storage pro­jects in the upcoming calls for proposals under Connecting Europe Facility (CEF). This will allow a timely implementation that will increase the security of gas supply in the upcoming winter seasons.

Regarding the potential of biomethane, Romania is acting to overcome a number of obstacles inherent in the start of a new industry:

-  The need of supportive regulatory framework for biomethane production and injection;

- Implementing financial incentives for developing biomethane projects and injecting biomethane into the natural gas grid;

-  Ensuring the right of biomethane producers to access the gas network in a non-discriminatory manner.

Biomethane production potential can replace at least 20% of the country’s natural gas consumption by 2030, comparing with 2021 gas consumption.

CE: Which countries and companies are the main partners in the oil and gas industry?

Virgil Daniel Popescu:  Foreign companies have a special interest for the Southeastern countries, but for many Romania offers the most opportunities, due to its strategic location and a market with significant growth potential. There are few countries in the region that have the same advantages as Romania has. The country has its own oil, gas, coal, huge potential for renewable energy and is strategically located in the region, linked to other major energy markets.

The Romanian authorities have taken important steps to ensure a friendly climate for investors in Romania. In recent years, foreign direct investment has increasingly targeted the energy sector. Romania does not look only at itself when it comes to investment and energy security, but it must also look at its trading partners. And this comes natural because the economies at regional and global level are interconnected. There are extremely many examples of important foreign investments in the Romanian energy sector, so I will mention only a few of them: the French group ENGIE is present in Romania in three sectors of activity: natural gas, electricity and energy services; the German group E.ON, present in Romania through the companies Delgaz Grid and E.ON Energie Romania, has invested in the last 15 years on the local market for the modernization of the distribution networks and the development of ener­gy solutions, having about 3.2 million customers. The American company BSOG is present in the Black Sea, in the Midia perimeter and started this month the gas production in this perimeter. OMV Group Austria - OMV Petrom has oil & gas production activities in Romania and is engaged in exploration activities and they operate the Petrobrazi refinery, with a 4.5 MN tons annual capacity. Also,  they are engaged in gas and power sales and trading on the Romanian gas and power markets and are engaged in power production through the Brazi power plant, commissioned in 2012, with an 860 MWh production capacity. The main Azerbaijani oil company SOCAR is present in Romania with a chain in continuous development of distribution stations and we hope that this company will diversify its portfolio of activities in the gas supply and electricity production sector. KMGI - Rompetrol Rafinare is the largest asset held by the KMG International Group in Romania. The company operates the two refineries of the Group - Petromidia of Navodari, county of Constanta, together with the only petrochemical division of the country, and Vega Refinery of Ploiesti, which keeps the local refining industry at high standards. Also, based on the Kazakh-Romanian Energy Investment Fund, a new cogeneration plant will be built on the Petromidia platform, which will play a major role in balancing the production and distribution of electricity in the Dobrogea region, by ensuring the energy needs of the platform, but also by injecting the surplus electricity into the national system; Azerbaijan, Georgia and Romania already started the discussions on the implementation of a submarine cable project for electricity transmission under the Black Sea and the list can continue with many other examples.

CE: Are you planning to increase gas supplies from the Caspian region through the Southern Gas Corridor?

Virgil Daniel Popescu:  The Azeri gas volumes transported through the infrastructure of the Southern Corridor came as a safety belt for many states in the region in the last cold season. The extension plans of the Southern Gas Corridor are of significant importance, as new gas suppliers are needed in the Balkans and South-Eastern European countries, which still depend on a single source of supply. The project has gained new opportunities of development taking into conside­ration the growing interest of many countries in the region to access the Azeri gas volumes that could reach the European market. Therefore, an enhancement of the Southern Gas Corridor transmission infrastructure will be an extremely valuable achievement for the Europe’s energy security. Additional gas volumes could make an important contribution to Europe’s energy diversification goals.

Romania is ready to join the efforts to develop the Southern Gas Corridor pro­ject, by capitalizing on the potential of the Interconnector between Bulgaria and Romania and of the BRUA gas pipeline, the main component of the Vertical Gas Corridor. More than that, Romania is interested in importing gas from Azerbaijan and, in this regard, has identified and proposed to the Republic of Azerbaijan a concrete transport route for the import of Azerbaijani gas, on the direction of Turkey-Bulgaria-Romania. We hope that the discussions with the countries transited by the Azerbaijani gas volumes towards the border of Romania, respectively Turkey and Bulga­ria, will be completed as soon as possible, for the operationalization of this import.

Moreover, once the Interconnector between Bulgaria and Greece will be finalized in July, as the Bulgarian authorities have recently announced, Romania will be able to access the Azeri gas volumes that will be transported through the Southern Gas Corridor infrastructure.

Thank you for the interview.