When your energy is fueling your competitors: How Romanian offshore gas could consolidate Hungary’s position as a dominant player in the region

Sorin Melenciuc 16/02/2018 | 16:55

Within the next five years, Romania will become a major producer and exporter of natural gas, due to its offshore reserves located into the Black Sea exclusive economic zone of the country.
But major producer doesn’t necessary mean major player on the natural gas market, without a strategy to play an important role in the big game of European energy.
No real strategy emerged so far from the Romanian government concerning what Bucharest has in mind to do with the natural gas exceeding its current national consumption.
But “natura abhorret vacuum” (Natures abhors a vacuum), so Romania’s lack of strategy fueled the ambitions of others governments from the region.
At this moment, Austria is the key player for some other central European countries via its natural gas hub located in Baumgarten, and the new pipeline project BRUA (Bulgaria-Romania-Hungary-Austria) was viewed from Vienna as the perfect tool to strengthen its position on the European natural gas market.
But recently, a new player with limitless ambition emerged on the map: Hungary made two key moves in order to secure a seat at the table of the energy game.
First, in July 2017, Budapest announced that the BRUA pipeline, projected to connect Bulgaria, Romania and Hungary with the Baumgarten gas hub, will have its end in Hungary and will not have a connection to Austria (by doing so, the Hungarians cut the final A from BRUA, the project becoming BRU).
If many experts viewed the move as an attempt to secure a better position of Budapest in competition with Vienna, the second move raised questions about the real strategy of Hungary, a country with almost no energy resources, to become the dominant player on the energy market of the region.
On February 9, Prime Minister Viktor Orban announced, after his foreign minister paid a visit to Bucharest, that Hungary will soon sign a deal which will allow the imports of 4 billion cubic meters of natural gas each year from Romania over the next 15 years.
“Within moments we will sign an agreement, which will allow for the next 15 years the imports of over 4 billion cubic meters of gas from Romania,” Orban said, according to Reuters.
Romania denied the deal through the Ministry of Foreign Affairs, but without insisting on the subject. Many experts remained unconvinced of the Romanian official reaction.
Experts interpreted the Hungarian move as an attempt to show that Budapest is no longer accepting the mere role of a transit country for the Romanian gas to be exported to the west European markets, but wants to be the key factor in the decision making.
This means Budapest want to decide about the destination of the gas, using its key position of unavoidable transit country.
Hungary’s strategy is to buy itself all the natural gas exported by Romania through BRUA (or BRU), fulfill its own needs and then re-export the surplus to the clients of its choice.
By doing so, Budapest harms the interests of Romania, who will be cut from the clients available via Baumgarten hub and will then be relegated to the mere position of a supplier with only one (dominant) client, and of Austria, who will lose any important role to play concerning the Romanian gas supplies.
If Romania, who doesn’t even seem to be conscious of its interests or of the stakes of the game, looks like an easy target for the Hungarian government, Austria may try to block the strategy of Budapest.
In competition with Budapest, Vienna has several trump cards, and one of them is that one major company involved in the development of offshore natural gas fields of Romania is OMV, an austrian company.
In contrast to the Romanian government, OMV – and its partner, the US giant Exxon Mobil – , is not keen to be in the position of a captive supplier of a sole customer, but is ready to negotiate with the Hungarians about their part of the stake.
“What I have learned from my business experience is that every transit country has an interest in the business of transporting natural gas on its territory, and this is a good business model. I’m convinced that Hungary will be an interested partner and will make the investments in the necessary infrastructure. This is a project that gives Hungary a much higher importance as a key player in transporting natural gas from Eastern Europe to Western Europe”, said Rainer Seele, CEO of OMV, in an interview published by Hotnews.ro in January 19 this year.
From Bucharest, this message may be understood as the beginning of a negotiation phase between Vienna and Budapest, with no Romanian participant at the table, to decide the business model of exporting Romanian natural gas resources.
Whatever the outcome of the negotiations will be, Romania seems to accept, at this moment, the role of a natural resources exporter to more advanced economies, with only a small part of the profit and no much to say about the destination of the resources.


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Sorin Melenciuc | 19/12/2022 | 18:45

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