Romania fishes for gas options from Russia

Newsroom 09/06/2009 | 15:40

Twenty years after the Romanian revolution, after waving the democratic flag – joining NATO and the European Union – Romania still gets the chills when dealing with Russia. The results of the recent visit by Adriean Videanu, economy minister, to the headquarters of Russian colossus Gazprom are not too optimistic for Romania: the Russian company will not stop using the intermediary companies exporting natural gas to Romania. Gazprom isn't too interested in collaborating with Romania on investment projects, but the Russians want Romania to help build the South Stream pipeline.

Negotiating the non-negotiable
During the visit to Moscow, Gazprom leader Aleksandr Medvedev said that the firm would not renounce the intermediary companies through which Russian gas is imported to Romania. But the Romgaz GM saw a more nuanced response from Gazprom. “If Romania needs gas quantities above the levels contracted through companies controlled by Gazprom like WIEE, through which Romania imports gas, the possibility of the gas coming directly from Gazprom and not through intermediary companies will be considered,” Marcel Piteiu, GM at SNGN Romgaz, told Business Review.
The Romanian authorities believe that if the intermediary companies are eliminated, the prices of imported gas, said to be some of the highest in Europe, could drop. But it is a big if.
While Romanians talk of high gas prices, the Russians say they are competitive. In an exclusive interview with Business Review, Wolf Dieter Stucken, managing director at WIEE Zug, said: “The prices in Romania correspond with the prices on other European markets and reflect international oil prices. The biggest difference in Romania is that two thirds of the gas consumption is available from internal production. Therefore, Romanian consumers have been protected from the world market developments by political influence for a long time. Unfortunately, additional investments in gas storage and pipeline connections in cooperation with international companies have not been carried out during this period.”
Currently, Romania imports one third of the country's gas needs. The medium gas price for Q2 was set at USD 370 for 1,000 cubic meters. Markets expect the gas price to drop to USD 220 by the end of the year.
After the lack of result in the intermediary companies discussions, Romania expressed its desire to have a Russian partnership in building a gas storehouse in Roman-Margineni, a project that could be a win-win situation according to Videanu. Gazprom's response: “The company is analyzing the proposal.”
On the other side of the table, Gazprom officials obtained more concrete results: Russia expects the Romanian authorities to facilitate the construction of the South Stream pipeline, which will pass through Romania. South Stream aims to compete against Nabucco, the pipeline that is supposed to help the EU become less dependent on Russian gas.

Nabucco vs. South Stream
The decision to back the Nabucco gas pipeline to Europe does not exclude Romanian participation in rival projects, the Romanian prime minister said recently.
Emil Boc said his country holds Nabucco as a top financial priority, as well as domestic projects, but left open the possibility of other regional projects.
“The country has the strategic advantage of holding an important position in any of them, so Romania's policy will be flexible, as it can be part of other European projects,” said Boc.
Nabucco Gas Pipeline International GmbH had announced that British consulting company Penspen was coordinating the planning efforts for five local front-end engineering and design firms for Austria, Hungary, Romania, Bulgaria and Turkey.
Meanwhile, South Stream would bring around 1.1 trillion cubic feet of natural gas from Central Asia and Russia along a route that includes Bulgaria, Hungary and Serbia. Romania may be included on a northern branch of the artery.
“We can be party to any of these projects. Evidently we must see how the European Union and the other partners are inclined to support one or other of the projects,” the premier said.
The official response of the Commission is that it is supporting Nabucco politically and that it will also support it financially with the European Recovery Plan. “We don't consider Nabucco and South Stream to be competing projects. South Stream will bring gas from a traditional supplier through a different transit route, while Nabucco will open a new corridor with diversified supply sources. Romania has shown strong support for Nabucco and continues to do so, but this is no obstacle to making an agreement with South Stream,” Ferran Tarradellas, spokesperson for Energy Commissioner Andris Piebalgs, told Business Review.
Yet mention of the Nabucco gas pipeline has been deleted from a list of projects to be financed by a EUR 5 billion EU stimulus plan. EU officials confirmed in March that the pipeline, once considered a flagship EU venture, had disappeared from the list of energy projects to be financed under the plan. The move was apparently made at the request of German Chancellor Angela Merkel, who insisted that no public money should be spent on a project in which Berlin has little interest. Under a revised version of the plan, Nabucco has been diluted under a wider common heading, the 'Southern gas corridor', which also includes an offshore pipeline, ITGI, to be built between the Greek Ionian coast and Italy, and other projects in the southern region.
Romania still says that it is committed to the EU-backed Nabucco gas pipeline, but it will consider other projects if talks do not push forward, leaving the door open for a rival Russian project.
“Romania can afford to wait. Unlike other countries it proved last winter it could handle the crisis, but it cannot wait long,” said Tudor Serban deputy economy minister. He added: “If Nabucco does not materialize, it is clear that our country will enter talks for a project. I don't want to say which one now.”

By Dana Ciuraru

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