Competing pipeline projects are a gas, gas, gas for Romania

Newsroom 25/10/2010 | 11:53

Seen so far as just wishful thinking, gas interconnection with other regional countries has become a reality: last week Romania and Hungary inaugurated the Arad-Szeged gas pipeline. And the authorities’ big plans do not stop there. Romanian intends to connect with Bulgaria, Serbia and Moldova, and although they are seen as competitors, it also wants to be a part of both the Nabucco and South Stream gas pipeline projects.

Dana Verdes

 

The Arad-Szeged pipeline, recently inaugurated at Csanadpalota Metering Station in Hungary, clears the way for gas supply diversification in the region, long desired by European countries and a start for gas supply separation from “Mother Russia”. Hungarian gas transporter FGSZ Foldgazszallito and Romanian gas firm Transgaz jointly built the pipeline to allow natural gas transmission between the two countries, which boosts competition within the region.

Implementation of the 47-km long Hungarian section of the 109-km long pipeline with a 3 billion m3 capacity required a EUR 33.3 million investment from the Hungarian gas company. The European Union supported the implementation of the project with EUR 17 million.

”The MOL Group believes that an integrated gas market can be established in the CEE region through regional co-operation. The standard infrastructure-based platform can facilitate the purchase of gas from new sources within the region. The Arad-Szeged interconnection gas pipeline boosts market competition that will present several advantages to both traders and consumers. Relying on future transmission projects, like the Nabucco pipeline, such cross-border solutions interconnecting regions will substantially increase the security of supply,” said Zsolt Hernadi, MOL’s chairman and CEO.

The pipeline that currently sends gas from Hungary to Romania can be made bi-directional with additional investments on the Romanian side that would further increase the significance of this interconnection pipeline.

Romania also plays an important role in the transit of gas from Russia to Bulgaria and Turkey, and can play an enhanced role after the Nabucco pipeline is finished and the import of LNG is done through Constanta. In addition, the country has recently signed a memorandum with Azerbaijan and Georgia concerning the construction of the AGRI gas pipeline.

In order to enhance gas transit to neighboring countries, Romania plans to interconnect with nearby states Serbia and Moldova, according to the Romanian Competition Council.

Meanwhile, further gas interconnector projects encouraged by the EU in the region include the Romania-Bulgaria pipeline project, planned to run under the Danube River from Giurgiu (the Romanian bank) to Ruse (Bulgarian bank. The interconnector will be built by Transgaz and Bulgargaz under an existing agreement, with completion intended by the end of 2011.

In light of the geopolitical gas projects, including those for storage in depleted reservoirs or LNG tanks, the importance of the regional strategic position of Romania and its massive gas storage capacity are key factors. Moreover, the national gas grid infrastructure is well developed.

Romania imports gas from only one source, the Russian Federation. Policy in connection with gas exports across the EU is based on a large system of pipelines, of which only one passes through Romania, with a connection station in Isaccea.

The Russian gas giant Gazprom has a major gas transport project in southern Europe: South Stream. Just last week, Gazprom officials and the Romanian authorities signed a memorandum of intent over the possibility that the South Stream pipeline may transit Romania.

“Following today’s discussions (with Romanian officials), we’ve signed a memorandum of intent for a technical and economic analysis of a South Stream pipeline going through Romanian territory,” said Alexei Miller, Gazprom’s chief. The firm has already completed feasibility studies for all the countries included in the project and is now drawing up the technical-economic study for the entire South Stream project, Miller added.

The pipeline will be 900 km long and is estimated to transport 63 billion cubic meters of natural gas annually. The project is seen as a rival to the planned Nabucco pipeline, in which Romania has already committed to participate. Both projects are due for completion sometime in 2015.

Nabucco is aimed at diversifying the sources of imports. It is scheduled to deliver approximately 31 billion cubic meters of gas annually from the Caspian Sea to Central Europe via Turkey and Romania, bypassing Russia. Romania’s participation in these projects will modify the present situation, with ramifications on the internal gas market too.

 

Romania’s natural gas reserves and consumption

Romania’s natural gas reserves are estimated by Cedigaz 17 at about 630 billion cubic meters (Bcm). The country’s production used to cover more than 70 percent of total gas consumption. Due to the internal reserves, the gas provided nearly 35 percent of total energy consumption. As the local deposits continued to be exploited, local production has dropped from 35 Bcm in 1988 to only 11 Bcm billion in 2009. The decrease has led Romania to lean more heavily on imports from Russia.

On average, from 2003-2008 Romania imported 30 percent of its gas needs from Russia. This is in contrast to the early 1990s when the country was importing only 18 percent of its consumption needs.

Since the late 1980s, consumption has dropped from values of around 40 Bcm to about 13 Bcm in the recession year 2009. The explanation lies in the structural changes that have occurred in the economy over the past 20 years as the share of heavy industry has reduced in favor of the services sector. In order to cope with such variations, Romania has developed gas storage capacities in depleted reservoirs. Today, the country can rely increasingly on deposits designed to cope with winter consumption, which registers a maximum deposit extraction of 26 Mcm/day.

 

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