Report: Romania has the lowest energy consumption in the EU and needs to increase gas consumption in order to benefit from its offshore reserves

Romania has the lowest energy consumption per capita in the European Union and needs to increase its domestic consumption by expanding distribution networks and investing in new natural gas-based power plants, according to the report “The Outlook for natural gas in Romania and proposals for its value-added capitalization”, written by energy experts Vasile Iuga and Radu Dudău, consulted by Business Review.

“The average household consumption of a domestic consumer in Romania is lower than the EU average, as is the total gross energy consumption per capita, where Romania had the lowest level in the EU in 2015 – 1.8 toe (Eurostat 2017) against the EU average of 3.2 toe and the maximum in Luxembourg of 7.3 toe,” the report says.

Households consumption

The main source of additional gas consumption in Romania is increasing household consumption as a consequence of expanding gas distribution network.

According to official data, in 2015 there were 2.2 million individual gas heating systems and about 250,000 gas-fired stoves and convectors operated in Romania. Cooking in the urban environment is based mainly on natural gas.

Read more about

Alexandrion Group is looking for a suitable location in Japan to build a distillery that will produce Japanese single malt whisky

read more

“The PRIMES projection for 2030 indicates that nearly 3.2 million households will use natural gas (45% of total) compared to 2.5 million in 2015 (33% of total), which shows both a likely expansion of the gas distribution networks and a continuation of the disconnection tendency of the users of centralized district heating systems,” the report says.

The experts’ modeling shows that natural gas will remain the preferred fuel for heating in urban areas.

“Most homes that will be built in cities by 2030 will adopt natural gas for heating at the expense of district heating, biomass, and electricity systems. In addition, some of the existing households will move away from centralized municipal systems or from the use of firewood heating to gas. The transition is expected to take place especially in the urban and semi-urban areas, even if access to the gas distribution network will continue to expand in rural areas as well,” the experts say in the report.

Power plants

Another major way to increase natural gas consumption in Romania is through supporting investment in new natural gas-based power plants.

“Romania has a net installed capacity of about 3,650 MW of natural gas production, of which 1,750 MW are thermal and electrical cogeneration capacities. 450 MW are in reserve and 1,150 MW are approaching the end of their technical ifetime, having to be withdrawn from use between 2017-2023,” the experts say.

In 2015, the share of natural gas in the country‘s electricity mix was 18 percent, or 3.75 GW of total 21.1 GW nominal installed capacity.

By 2030, according to experts’ estimates, power-generation plants of about 1,800 MW based of natural gas and 2,400 MW based on coal are expected to be withdrawn from operation.

“1,500 MW have been installed in gas-fired power plants in the last decade. Of the new plants, 400 MW do not have combined cycle and 630 MW are cogeneration plants. Investments in new capacities are needed in order to replace the old capacities that will be withdrawn or decommissioned,” the report points out.

But investment decisions in power generation capacities are based on the following factors: the long-term evolution of natural gas prices, especially in relation to the coal price; the long-term evolution of the CO2 price (EU ETS allowances and, possibly, additional CO2 taxes); mechanisms for supporting different forms of energy production (nuclear, coal, RES, cogeneration); the evolution of the cost of capital (WACC) for investment in natural gas capacities.

In order to stimulate investments in gas-based power generation capacities, Romanian government could intervene in the functioning of energy markets through various support mechanisms.

Investments in the Romania’s Black Sea oil and gas sector will generate revenues of over USD 26 billion to the public budget and an additional USD 40 billion to the country’s GDP until 2040, as a result of total investments of USD 22.2 billion, according to a recent Deloitte report.

Deloitte estimates a total production of close to 170 billion cubic meters of natural gas in Romania’s offshore fields, based on a prudent scenario.

According to the experts, much of Romania’s offshore gas will be exported without stimulating domestic gas consumption.