Energy Industry Review February 2018 by Energy Industry Review

Comment What lies ahead in 2018

Lavinia Iancu CEO and Publisher

e are going through a period of intense W transformation, in which the Fourth Industrial Revolution plays a key role. The watchwords are digitization, energy efficiency, IoT, cyber security. Continuing last year’s trends, the major milestones for 2018 in the energy sector remain innovation and disruptive technologies. With an average value of USD 56/ bbl, estimated by US Energy Information Administration, the oil and gas sector begins the year under favorable auspices, especially given that at the ICE Futures exchange in London the price of Brent oil with delivery in March had exceeded the value of USD 70/bbl at the end of the first decade of January, the highest level since 2014. Also, the extension of the agreement of the Organization of Petroleum Exporting Countries (OPEC) to decrease output until the end of 2018 and the reduction of U.S. oil stocks have contributed to an increase in oil prices. Regarding important projects, there are some worth mentioning. Libya oilfield (Brazil), estimated to hold 8-12 billion barrels of recoverable resources and whose first production was obtained in November 2017, awaits a new confirmation of its huge potential in 2018. The development of Phase 11 of South Pars field, the largest gas field in the world (14,000 billion cubic meters of gas), split between Iran and Qatar, whose costs (only the first phase) are estimated at USD 2bn, is in progress. Also, in 2018 we could witness the first gas deliveries through the Southern Gas Corridor, with a length of 3,500km, a major project (costs estimated at USD 41bn), which will allow the transmission of over ten billion cubic meters of gas per year from the Shah Deniz II field, in the Caspian Sea, to Italy. Starting with 2018 it will have a peak annual average output

(gross) of approximately 325 mboed. Project leads at BP expect first gas volumes from Shah Deniz to reach Turkey in 2018, with Europe receiving its first supplies via the Southern Gas Corridor by 2020. As environmental protection concerns are still on the political agenda of international leaders, it’s no wonder the trend of the year is transition to a clean energy. For this purpose, through the package ‘Clean energy for all Europeans’, the European Commission aims not only that the EU adapt to this trend, but also be at the forefront of this process. This is why it has set new targets for 2030, including the reduction of CO2 emissions by at least 40%, a decision which could result in modernizing the economy, creating new jobs and economic growth for European citizens. In this context, nuclear power can become an attractive source for mature economies, in tandem with the use of the cheapest renewable sources - wind and solar panels. Technology transforms the world in an unpredictable way, changing it completely, including in the modality of doing business. And changes are amazing, in terms of size, speed and scope. A new reality is rapidly emerging, powered by state-of-the-art technologies. Huge opportunities and also threats lie before humanity, bound to face the new wave of technological revolution. Increasing the efficiency and productivity of companies is closely related to their ability to innovate, to implement new software and hardware technologies, to automate and robotize manufacturing processes, to adapt to the global market evolution needs. In order to gain competitive advantages, companies have to produce at high standards, without raising production costs - a challenge that carries on into 2018. 3

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Content 40

Oil prices started 2018 on a strong note. The price of Brent oil with delivery in March had exceeded the value of USD 70/bbl at the end of the first decade of January, the highest level since 2014.

Dumitru Chisalita Judicial Technical Expert in Oil & Gas page 16

Lavinia Tanase Energy Law & Policy Associate at Florence School of Regulation page 18

page 20

Scientific Counsellor at World Energy Council Romanian National Committee

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A potential USD 10.5 trillion market According to a report issued by Research and Markets, the global construction industry is expected to reach an estimated USD 10.5 trillion by 2023, and it is forecast to grow at a CAGR of 4.2% from 2018 to 2023.

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Director & Founder at Romania Energy Center

Gamification reaches the process industry Finnish company Neste Jacobs has launched a new game called NAPCON Games Distiller for operator training in the process industry. The game is the first one of a completely new generation of training games.

Partner at Vlasceanu, Ene & Partners

Eugenia Gusilov

Upgrading process In order to improve environmental performance, Petrotel-Lukoil has recently announced new investments exceeding USD 30 million by 2020.

Daniel Vlasceanu

Ioan-Corneliu Dinu

Oil prices on upward trend

Decade of Smart Global Smart Cities spending is projected to rise from USD 14.9 billion in 2015 to USD 34.4 billion in 2020. energyindustryreview.com

Mercuria Energy to invest over USD 9.5 million in mining operations in Romania Mercuria Energy is one of the largest independent commodities groups in the world. Through its various subsidiaries, the group focuses primarily on energy and has activities all along the commodity value chain that form a balanced combination of commodity flows and strategic assets.

Romania’s role in the Black Sea Region Mircea Geoana, Founder and President of the Aspen Institute Romania, considers how our country should act to capitalize on its favourable position on the regional geopolitical map.

74 European Investment Bank to boost wind farms EIB is providing EUR 48 million of finance for the construction and operation of three new wind farms in Austria with a total capacity of 39 MW.

NEWS

A SUCCESSFUL YEAR WITH RECORD-BREAKING CONFORMITY LEVEL

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he OPEC/Non-OPEC Joint Ministerial Monitoring Committee (JMMC) convened in Muscat, the Sultanate of Oman, for its seventh meeting, on 21 January 2018. It announced that, based on the Report of the Joint Technical Committee (JTC) for the month of December 2017, following continuous months of excellent performances, OPEC and participating non-OPEC countries have achieved a record-breaking conformity level of 129% with their voluntary production adjustments. The monthly average conformity level for the first year of the Declaration of Cooperation was a remarkable 107%. The JMMC was established following OPEC’s 171st Ministerial Conference Decision of 30 November 2016, and the subsequent Declaration of Cooperation made at the joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting held on 10 December 2016 at which 11 (now 10) non-OPEC oil producing countries cooperated with the 13 (now 14) OPEC Member Countries in a concerted effort to accelerate the stabilization of the global oil market through voluntary adjustments in total production of around 1.8 million barrels per day. The resulting Declaration, which

came into effect on 1 January 2017, was for six months. The second joint OPECNon-OPEC Producing Countries’ Ministerial Meeting, held on 25 May 2017, decided to extend the voluntary production adjustments for another nine months commencing 1 July 2017. At the third joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting, held on 30 November 2017, it was agreed to amend the Declaration of Cooperation so that it will take effect for the entirety of 2018. Across a broad range of indicators, the first year of the Declaration of Cooperation has been a great success. In December 2017, OPEC and participating non-OPEC producing countries achieved an excellent conformity level of 129%, the highest since the start of the Declaration of Cooperation. Recent data confirmed that global oil demand growth will continue on a positive trajectory in 2018, buoyed by the strong performance of the global economy. According to OPEC representatives, “this stellar performance by participating countries in 2017 launches the new year on an extremely positive footing, preparing the path for further successes in 2018.” The next JMMC Meeting is scheduled to be held in April 2018 in Saudi Arabia.

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NEWS

SCHLUMBERGER SEES THE OIL MARKET IN BALANCE

chlumberger limited reported on January 19th results for full-year 2017 and the fourth quarter of 2017. Full-year 2017 revenue of USD 30.4 billion increased 9% year-on-year. This included a full year’s activity from the acquired Cameron businesses as compared to three quarters of activity in 2016. Excluding the addition of Cameron, revenue growth was driven by land activity in North America, which increased by 82% in line with the increase in rig count. Full-year Production Group revenue increased 21%, Reservoir Characterization Group revenue improved 2%, and Drilling Group revenue declined 2%. Full-year 2017 pretax operating income grew 20% and pretax operating margin of 13% expanded 111 basis points (bps). This was driven by improved profitability in North America due to the growth in land activity that benefited both

the Production and Drilling Groups. “We closed the year with fourth-quarter revenue growing 3% sequentially while pretax operating income rose 9%. Sequential growth was driven by strong activity in North America, Saudi Arabia, and Latin America, while revenue in the Europe, CIS, and Africa Area seasonally declined. Earnings per share of USD 0.48, excluding charges, were 14% higher than the third quarter,” Schlumberger Chairman and CEO Paal Kibsgaard (photo) commented. “Looking at the oil market, the strong

growth in demand is projected to continue in 2018, on the back of a robust global economy. On the supply side, the extension of the OPEC- and Russia-led production cuts is already translating into higher-than-expected inventory draws. In North America, 2018 shale oil production is set for another year of strong growth, as the positive oil market sentiments will likely increase both investment appetite and availability of financing. At the same time, the production base in the rest of the world is showing fatigue after three years of unprecedented underinvestment. The underlying signs of weakness will likely become more evident in the coming year, as the production additions from investments made in the previous upcycle start to noticeably fall off. All together this means the oil market is now in balance and the previous oversupply discount is gradually being replaced by a market tightness premium, which makes us increasingly positive on the global outlook for our business,” the company representatives underlined.

ROMANIA NO. 7 IN ENERGY SECURITY

he World Energy Council (WEC), in cooperation with the Marsh & McLennan group, recently came out with its World Energy Trilemma Index 2017 which covers 125 countries. The World Energy Council’s Energy Trilemma Index tool, produced in partnership with Oliver Wyman, ranks countries on their ability to provide sustainable energy through three dimensions: Energy security, Energy equity (accessibility and affordability), 8

Environmental sustainability. The ranking measures overall performance in achieving a sustainable mix of policies and the balance score highlights how well a country manages the trade-offs of the Trilemma with ‘A’ being the best. The three criteria make up what WEC calls a trilemma – ‘the basis for prosperity and competitiveness of individual countries’. Romania, with an ABA balance score, was ranked 25th overall, ranking 7th in the sub index of energy security and 64th in energy equity, the latter referring

to whether energy was affordable and accessible to consumers. In terms of environmental sustainability in energy resources Romania was ranked 23rd. 21 of the top 25 countries in the index are European, exceptions being New Zealand (9th), United States (15th), Canada (21st) and Singapore (22nd). Denmark was no. 1 followed by Sweden, Switzerland, Netherlands, United Kingdom, Germany, Norway and France. Romania completed the list at no. 25. energyindustryreview.com

NEWS

MOL GROUP LAUNCHES CAR SHARING SERVICE IN BUDAPEST

OL recently unveiled its new car sharing service MOL Limo, a true reflection of MOL Group’s ambition to become the first choice of customers and a pioneer in mobility solutions in Central Eastern Europe. As part of its 2030 strategy, MOL aims to adapt to changing market dynamics and transform its traditional fuel retailing into a broader consumer goods and services business. “Mobility represents an important direction in MOL Group’s 2030 strategy. We aim to transform our retail operations by tapping into growing areas of consumer demand and take part in the reinvention of transportation in CEE. We want to be the first choice of customers and provide them all the products and services they need on the road and make their journey as convenient as possible. Offering car sharing services, which will play a crucial role in the transportation mix of big cities, fits into this strategy perfectly,” said Peter Ratatics, COO,

Consumer Services, MOL Group. MOL Limo provides a flexible solution, which allows users to leave their car at the destination of their choice, and works hand-in-hand with public transport or even with bike sharing. Through its car and bike sharing schemes, the latter was launched three years ago, MOL is the leading provider of mobility solutions for city dwellers of the Hungarian capital. MOL’s long-term goal is to extend the network in Budapest and beyond and eventually operate a fully electric fleet, in line with the development of EV infrastructure in Hungary and the CEE region. Changes in consumer patterns such as the decreasing importance of car ownership along with increasing environmental consciousness are expected to result in increasing demand for car sharing services, which can significantly improve air quality and traffic congestion in big cities. 9

NEWS

WEATHERFORD COMPLETES SALE OF HYDRAULIC FRACTURING BUSINESS TO SCHLUMBERGER

eatherford International recently announced it has sold its U.S. pressure pumping and pump-down perforating assets to a subsidiary of Schlumberger Limited for USD430 million in cash. The parties agreed to revised deal terms that reflect an asset sale, as compared to the previously announced OneStimSM joint venture. As part of this transaction, Schlumberger will take ownership of Weatherford’s U.S. pressure pumping and pumpdown perforating related facilities and supplier and customer contracts.

Additionally, approximately 100 Weatherford employees associated with the pressure pumping and pump-down perforating businesses will transfer to Schlumberger. Weatherford will retain the entirety of its leading multistage completions portfolio, manufacturing capability and supply chain and will continue to participate in the growing completions markets in both Canada and the U.S. as well as globally. Weatherford will use the proceeds from the sale to reduce outstanding indebtedness. “The closing of this transaction represents another step on our path toward

building a solid and strong company and unlocking the potential that exists within Weatherford,” stated Mark A. McCollum, President and Chief Executive Officer of Weatherford. “Although not as originally anticipated, this transaction delivers cash proceeds that enable our Company to begin the deleveraging process and, coupled with our transformation plans, will lead to a leaner organization with lower debt and significantly higher profit margins. In addition, retaining 100 percent of our leading land-based multistage Completions business allows for significant upside potential for Weatherford.”

HONEYWELL PROCESS SOLUTIONS RECOGNIZED AS A LEADER IN CUSTOMER VALUE

rost & Sullivan Recognizes Honeywell Process Solutions as a Leader in Customer Value for its Manufacturing Execution System (MES) Software Solutions. Based on its recent analysis of manufacturing and execution systems (MES) in the European Energy Industry, Frost & Sullivan recognizes Honeywell Process Solutions (HPS) with the 2017 Europe Customer Value Leadership Award. Honeywell Smart Operations MES software solutions connect the enterprise with value driven technology deployments and bestpractice work process transformation. 10

As projects across the process industries become more complex, driven by increased demands for productivity and profitability as well as asset and operator safety, it is essential for MES to accurately and efficiently gather data from all assets, irrespective of location, ensuring the right information is available to the right people at the right time. Providing real-time digital intelligence through data, analytics and collaboration helps support increased safety, reliability, compliance and improved productivity and agility across the supply chain. “Most MES software offered by automation companies includes services

to improve process safety, increase profit margins, and integrate and optimize equipment and processes. The real challenge for solution providers is to develop an endto-end MES solution, that would provide either a customized product or a range of products from which the customers can pick the best solution to meet their needs,” said Srividhya Murali, Senior Research Analyst. HPS addresses this key customer need with its Smart Operations MES solutions portfolio, which provides customers with a wide range of software from which they can choose the optimal module(s) that will meet their defined project requirements. energyindustryreview.com

NEWS

SOCAR OPENS ITS 39TH FILLING STATION IN ROMANIA

OCAR has opened its 39th filling station in Romania. This is the second filling station to be launched under SOCAR brand in Brasov city, one of the Romanian tourism centres. It is located at Str. Feldioarei, nr. 68A. Through this new investment, SOCAR company has created new jobs. The filling station has state of the art technology and environmental friendly equipment, namely EV charging stations and jet-wash (self-service). It also sells road vignettes and peaj (Fetesti bridge toll) and has payment points for bills, utilities, phone card recharge, etc. Three pumps were installed in the station, that will simultaneously supply 4 small and 2 large vehicles with fuel and diesel. The

Tablet connected to the internet helps people who need quick information so that if you choose to stop at SocarFeldioara gas station, you save time and avoid detours. In the filling station’s Café Nar customers can find, just like in all other SOCAR gas stations, the star products – traditional items of Azerbaijani

gastronomy – coffee on the sand and the pomegranate juice, as well as other food and non-food products or car accessories. Network of SOCAR filling stations in Romania already covers 18 regions: Botosani, Suceava, Neamt, Iasi, Bihor, Bistrita, Buzau, Bacau, Vrancea, Timis, Ilfov, Cluj, Valcea, Arad, Sibiu, Arges, Bucuresti and Brasov.

ROXTEC TRANSITS ENSURE EMI PROTECTION ON NEW LNG CARRIERS

udong-Zhonghua Shipbuilding Group and power system provider ABB specified Roxtec EMC solutions for the new-build of four LNG carriers. State-owned Hudong-Zhonghua in Shanghai, China, builds the LNG carriers Pan Asia, Pan America, Pan Europe and Pan Africa for the Queensland Curtis LNG project in Australia. Each vessel will transport 174,000 m3 of liquefied natural gas to different countries. Roxtec cable transits are used for the electric propulsion system and the reliquefication system. The seals

combine protection against fire, smoke, gas, water, dust, dirt, vibration and the risk of explosion with elimination of electromagnetic interference, EMI. Today, vessels have more sophisticated equipment in narrow spaces, which increases the risk of EMI generation. By using strong EMC solutions, one can ensure reliable operation. Roxtec EMC sealing system is designed to withstand offshore conditions and certified by all major classification societies. The shipbuilder required quick response along the project and had a special requirement

regarding a sealing module size. Roxtec rapidly provided this customized solution to meet their specific needs. “We had a great time working with Roxtec. When we had an installation problem or special sealing requirements, we got very quick response. Roxtec provided us not only with good quality products, but also with excellent service!” says Ling Xiaoming, head of electric workshop of the PULNG team at Hudong-Zhonghua. The transits are openable and have optional spare capacity to simplify upgrades throughout the lifetime of a vessel. The shipbuilders decided to prepare for 30 percent more cables. 11

NEWS

ROMANIAN-KAZAKH TRADE RELATIONS: CRUDE OIL ACCOUNTS FOR OVER 95% OF IMPORTS

meeting has taken place recently at the headquarters of the Chamber of Commerce and Industry of Bucharest (CCIB), between the President of the Chamber - Prof. Eng. Sorin Dimitriu, PhD, and His Excellency Daulet Batrashev, Ambassador Extraordinary and Plenipotentiary of the Republic of Kazakhstan in Romania, accompanied by Chingiz Kemel, Principal Secretary of the Embassy. On this occasion, they discussed about the development of economic and trade relations with Kazakhstan, considered a priority within the foreign relations strategy of CCIB. According to the President of the Bucharest Chamber, organization in Bucharest of a ‘Week of Kazakh products in Romania’, followed by an economic mission led by CCIB in Kazakhstan could be excellent formulas for a better knowledge of companies from the two countries, in order to identify business and investment opportunities, as well as projects with real chances of completion

and with benefits for both sides. “I am convinced that the chamber system can contribute to the dynamization and amplification of trade, and also of exchanges at the university level. We want a constant presence in the Kazakh market, so we are taking into account the opening by CCIB of a representative office in your country, doubled with a permanent exhibition with products and services provided by companies from Romania, according to a model that has been successfully tested in countries in the Persian Gulf region”, Prof. Eng. Sorin Dimitriu, PhD, has stated. His Excellency Daulet Batrashev appreciated the potential of the Romanian market and expressed the interest of his country for the development of economic and cooperation relations with Romania. The Ambassador of the Republic of Kazakhstan has expressed his full openness to the projects presented by CCIB President, stressing the need to identify areas of interest for the companies of the two countries. The Ambassador of Kazakhstan spoke about

the economy of his country, pointing out the real possibilities of collaboration, especially in: information technology and communications, oil and gas industry, infrastructure, agriculture, transport and health. HE Daulet Batrashev highlighted that Romanian businessmen interested to invest in Kazakhstan benefit from access to the markets of member states of the EuroAsian Economic Union (Kazakhstan, Russian Federation, Belarus, Armenia and Kyrgyzstan). In the first 11 months of 2017 (available data), the Romanian-Kazakh trade amounted to USD 1,152 million, (increasing by 31% compared to the similar period of 2016), of which imports from Kazakhstan amounted to USD 1,122 million (+36.9% compared to the previous year), and Romanian export to only USD 30 million (-49.6% compared to the similar period of 2016). Of the total of USD 1,122 million, 95.3% is represented by crude oil brought from Kazakhstan to be processed at Rompetrol Refinery in Navodari.

RUSSIA’S FIRST EVER QUADRUPLE MULTILATERAL WELL

azprom Neft subsidiary Gazpromneft-Yamal has recently completed construction of Russia’s first ever multilateral well with four horizontal cased-hole side tracks, at its Novoportovskoye field. A total 6,756 metres was drilled, including 4,411 12

metres drilled in the target strata. The well was constructed in 39 days at a rate of 5.78 days per 1,000 metres. Drilling horizontally branched wells facilitates a manifold increase in drainage from disjointed low-permeability strata, significantly increasing the oil recovery factor at productive strata and bringing

marginal reserves into development without the need to drill additional wells. Russian-produced equipment was used in well construction, retooled in line with the specific geological conditions of the Novoportovskoye field. energyindustryreview.com

NEWS

ALRO SUPPORTS THE ROMANIAN OLYMPIC WINNERS

lro S.A., the largest aluminium producer in continental Europe (excluding Russia and the Scandinavian Peninsula), supports the Romanian Olympic winners in Physics by equipping the laboratories of the Ion Maiorescu National College in Giurgiu. The Company offered a RON 100,000 sponsorship for the purchase of laptops, video projectors, printers and other multimedia devices for ensuring that their work is carried out at the highest standards. “Traditionally, Romanian students have had outstanding results in the international Physics or Mathematics competitions, and these students can become the specialists we need in the future,” said Gheorghe Dobra, CEO Alro. “They are now, at that moment when they need our support, to be able to achieve great results and to qualify in the professions where we need their knowledge.

This is why we have decided to actively get involved in providing the necessary material basis for their training sessions, thus contributing to the creation of a base of future specialists from which the Romanian economy can benefit, as well.” By providing this equipment for the Physics laboratories, each group of students can perform all laboratory work as included in the Physics curriculum, including experiments required for Olympics and school competitions, in areas such as electricity, thermodynamics and heat, mechanics, magnetism and optics. “Besides carrying out practical activities by our students, this new and advanced technology equipment provided to the Physics laboratory, will also help the teachers who can perform the more difficult experiments that can now be done for all areas of the Physics department,” affirmed Petre-Mihai Cornea, Chief of Physics Department at the Ion

Maiorescu National College, Giurgiu. Alro has a complex strategy to support the technical education in Romania. The Company has established, in cooperation with Slatina Metallurgical Technical College and with the support of the City Hall of Slatina, the first dual education program in Olt County, with 27 students who are trained theoretically and practically for a period of three years and who will learn both theoretical and practical aspects of the job over a threeyear curriculum and will graduate as equipment and industrial installation mechanics. Alro will offer internships and a monthly RON 200 scholarship for each student as well as a daily hot meal for the duration of the internships. Alro has already taken steps towards establishing a new class for the following year, training future electricians and industrial equipment mechanics. This class will have 28 students.

GAZPROMNEFT-LUBRICANTS AND KPI TO COOPERATE IN R&D

azpromneft-Lubricants, operator of the Gazprom Neft lubricants business, has signed an agreement with Kuwait Petroleum International (KPI, part of Kuwait Petroleum Corporation, one of the world’s leading oil producers) governing cooperation in research and development in lubricants production. KPI specializes in lubricants development and production, and has three blending facilities throughout Europe. Pursuant to this agreement, 14

Gazpromneft-Lubricants will be given access to high-technology production facilities at KPI’s blending plant in Antwerp (Belgium) — one of the largest and most up-to-date in Europe. In addition to this, GazpromneftLubricants will be able to make use of its partner’s industry expertise in producing its own products under the Gazpromneft and, in the future, G-Energy and Gazpromneft Ocean brands. “Launching this new project for

developing production abroad in collaboration with a leading European partner will allow us to meet growing demand for our company’s products, as well as increasing our geographic presence in the markets of Western and Eastern Europe. Partnership with Kuwait Petroleum International is a major step forward in implementing our global strategy for developing Gazprom Neft’s international lubricants business,” Alexander Trukhan, CEO, Gazpromneft-Lubricants, commented. energyindustryreview.com

NEWS

WORLD’S MOST POWERFUL INDUSTRIAL SYSTEM

ni has launched, on January 18th, its new HPC4 supercomputer, at its Green Data Center in Ferrera Erbognone. According to the Italian group representatives, the new supercomputer quadruples the company’s computing power and makes it the world’s most powerful industrial system. HPC4 has a peak performance of 18.6 Petaflops which, combined with the supercomputing system already in operation (HPC3), increases Eni’s computational peak capacity to 22.4 Petaflops. According to the latest official Top 500 supercomputers list published last November (the next list is due to be published in June 2018), Eni’s HPC4 is the only non-governmental and noninstitutional system ranking among the top ten most powerful systems in the world. Eni’s Green Data Center has been designed as a single IT Infrastructure to host all of HPC’s architecture and

all the other Business applications. It’s supercomputers (the HPC3 and the new HPC4) provide strategic support to the company’s process of digital transformation across the entire value chain, from the exploration and development phase of oil and gas reservoirs, to the management of the big data generated in the operational phase by all the productive assets (upstream, refining and petrochemicals). Eni’s supercomputing infrastructure operates on the basis of an extremely advanced and complex proprietary ecosystem of algorithms, created and developed by Eni. In particular, HPC4 will support the execution and evolution of Eni’s leading-edge suite of 3D Seismic Imaging packages, as well as advanced Petroleum System Modelling together with state of the art Reservoir Simulation algorithms and optimization of production plants. “The investments devoted to reinforcing the supercomputing infrastructure and the development of algorithms are a significant

part of Eni’s digital transformation process. We can store and process enormous quantities of data for geophysical imaging, the modelling of oil systems and reservoirs, in addition to using predictive and cognitive computing algorithms for all our business activities. These technologies will enable us, on the one hand, to accelerate and make the entire upstream process more efficient and accurate, reducing risks in the exploration phase and, at the same time, giving us a significant technological advantage, but also to increase the level of reliability, technical integrity and operability of all our productive plants, while minimizing operational risks, with benefits both in terms of safety and environmental impact. With HPC4 we are tracing the path for the use of exascale supercomputers in the energy sector that could revolutionize the way in which oil & gas activities are managed. In line with Eni’s sustainability policy, Eni’s Green Data Center as well as the new HPC4 have been engineered to ensure the maximum level of energy efficiency in order to minimize CO2 emissions and operating costs,” Eni CEO, Claudio Descalzi, commented.

IRAN MINING BIGGER OPPORTUNITY THAN OIL

ran is opening USD 29 billion of mining projects to foreign investors once international sanctions are lifted, roughly equal the oil and gas investments up for grabs. Iran has more than 3,000 active mines mostly privately owned. Mining contributes just 0.6 per cent to GDP and given the depressed state of commodity prices the country faces an uphill battle attracting investment to

the sector. Iran is ranked among 15 major mineral-rich countries with potential reserves worth more than USD 700 billion. As of 2011, Iran had the world’s 9th largest reserves of copper at 32.5 million tonnes even though production is only expected to reach 425,000 tonnes by next year. The discovery of two large coal and iron ore deposits in the Lut desert in central Iran was announced by the mines

ministry earlier this year. The country is the number four supplier of iron ore to China, shipping some 15–20 million tonnes annually although that would have fallen substantially given the slide in the price and the high cost of mining inside the country. A main reason Iran is so uncompetitive despite very low labour costs is a crippling lack of equipment and machinery due the sanctions regime. 15

OPINION

90 YEARS ANNIVERSARY

First gas compressor station in Europe Dumitru Chisalita, Judicial Technical Expert in Oil & Gas

pening the first gas field on the current territory of Romania in 1909, through 2 Sarmasel Well, has determined the construction of the first gas transmission pipeline, Sarmasel - Turda, in 1914, of the first urban gas distribution network in Turda in 1918 and launching the gas activity in Romania. Gas consumption provided through Sarmasel Turda pipeline increased rapidly through the connection of new consumers in Turda, as well as with the connection of new localities. Thus, from a consumption of around 50 million cubic meters/year in 1918, consumption reached 120-130 million cubic meters/year in 1923. This situation determined the exploitation of an important amount of gas in SarmaĹ&#x;el field, so its capacity to meet consumption fell. Gas consumption was to grow towards 1926-1927, and the transmission capacity, following the decrease in pressure in the production wells, no longer covered consumption demand during winter. The solution found was to install a compressor station in the initial point of the pipeline, i.e. in Sarmasel, or building a new pipeline with a larger diameter. Although it had many supporters, it was considered that the second solution had a lower return than building a compressor station. Thus, 90 years ago, without having any roads, machines and computers, it was managed to build, in only two years, as a European premiere, a gas compressor station. The project of the compressor station was made by the Design Service of Sonametan, in 1926, and at the end of the same year the compressor aggregates were also ordered. 3 gas compression units were purchased, which could operate with simple or double action, thus making possible â&#x20AC;&#x153;the close monitoring of all variations of consumption within the limit of capacity for which they have been builtâ&#x20AC;?. 16

The characteristics of aggregates purchased from the U.S. in 1926 were: Duplex Ingersoll Rand compressors with a power of 200 hp per unit, so the compressor station reached a total power of 600 hp; speed - 225 rpm.; maximum discharge pressure - 18 atm. Construction works at the station started in the spring of 1927, ensuring the transport of aggregates, materials, the construction of foundations, production of the manifold, the construction of the water pumping station, the construction of the power plant, the construction of the water cooling tower, of engines, the construction of buildings of the compressor hall, workshops, offices etc. Despite all difficulties faced by people those years - lack of any machine, oxen and horses being the only means of transporting materials, non-existence of roads for transporting materials, lack of qualified resources, the uniqueness of this project on the European continent - at the end of 1927 the compressor station was completed. It is important to mention that the team of workers who built the compressor station (exclusively the technological plant of the station, without the compressor assembly) was composed of two mechanics and eight workers led by a monteur. 90 years ago, 4 people designed and 17 people built a unique station at the time in Europe. On 22 January 1928, the first aggregate was commissioned, and on 26 January 1928 - the second. The third aggregate was commissioned on 3 February 1928. The assembly of compressors, their connection to the technological installations of the station, the setting up and testing of compressors was led by a Romanian engineer, a chief monteur from the company Inger-soll Rand and a team of 4 workers. Today, when Romania will built several compressor stations, it would be useful to aim to move beyond the level from 90 years ago! energyindustryreview.com

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Canada : (+1) 587-316-6877 Romania : (+40) 724 854 094 info@nasolid.com www.nasolid.com 17

OPINION

ROMANIA, STILL A ‘TEAM-PLAYER’? Lavinia Tanase, Energy Law & Policy Associate at Florence School of Regulation

ecurity of Supply has been, still is and will continue to be a really hot topic in energy. It is the pivotal point around which the entire energy system revolves, regardless if we discuss about it in terms of its geopolitical implications and relationships with non-EU actors, or we follow the legal approach, and discuss about concrete cases of Member States’ compliance or non-compliance with the European Union’s Security of Supply strategy. On January 25th 2018, Romania has been referred to the Court of Justice of the European Union by the European Commission for not having correctly implemented and applied the provisions of the Oil Stocks Directive1. The infringement procedure against Romania is identified by number 20154213 in the infringement decisions portal of the EC. The Energy Union’s purpose is to create a strong energy system, through solidarity, regional cooperation and concerted management of a potential supply crisis. Following the unrest unravelled by the Ukrainian crisis, the EU issued its Energy Security Strategy, with the intention to ensure sound-proof coordination of all energy sources in order to swiftly tackle a potential supply disruption. This can be achieved, of course, by 1 Council Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products [L265/9] 18

urging Member States to comply with specific legal obligations, such as to maintain a specific level of oil stocks, in this particular case. What is the ‘Oil Stocks Directive’? The Oil Stocks Directive was issued by the EC in 2009, as a response to increased market concentration, worldwide shrinking oil reserves and growing consumption2. Its main goal, as comprised in its Article 1, is to ensure a high level of security of oil supply in the Community, through reliable and transparent mechanisms based on solidarity amongst Member States, while putting in place the necessary procedural means to deal with a serious shortage. For this reason, the Member States must have available a minimum stock of crude oil and/or petroleum products, in order to ensure the security of supply of petroleum products in the European Union. This Directive represents one of the EU’s security of supply legislative pillars within the Union, as the availability of oil stocks and the safeguarding of energy supply are essential elements of public security for MSs and for the EU. But, then, what were specifically the obligations imposed on the Member States, and therefore, on Romania? They were twofold: Content related obligation • The obligation to have in place emergency procedures 2 Recital 2 of the Oil Stocks Directive

energyindustryreview.com

OPINION

•

and a contingency plan in the event of a major supply disruption. The MSs are required to maintain oil stocks equal to at least 90 days of their average daily consumption. Therefore, the MSs may impose obligations on companies to hold oil/petroleum product stocks, within certain boundaries. Therefore, MSs are under the obligation to ensure a clear and effective framework for operators to be able to delegate their stockholding obligations.

Legal procedure related obligation - Transposition A Directive is a piece of European secondary legislation, which, unlike a Regulation, is not directly applicable and enforceable in the Member States’ legal systems, as of the moment of its date of entry into force. The Directives may contain more technical details. Therefore, the Member States are given a certain period of time, within which they can take all necessary measures (i.e. not only changes in legislation, but maybe also changes in relation to a technical system) to ensure compliance with the EU piece of legislation. The Directive does not automatically become national law, but must undergo a transposition procedure, within a certain deadline. That is why, the transposing Member State “shall communicate to the Commission the text of the main provisions of the national law which they adopt in the field covered by this Directive”. Article 25 urged that the Oil Stocks’ Directive was to be transposed by December 31st 2012, at the latest. Romania did not transpose the Directive. 5 years have passed since the deadline.

HOW IS THE INFRINGEMENT PROCEDURE UNFOLDING IN REALITY? The infringement procedure has been triggered under Article 258 of the Treaty on the Functioning of the European Union (TFEU). This particularly states that: “If the Commission considers that a Member State has failed to fulfil an obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice of the European Union.” Therefore, basically, in Romania’s case the following happened: On November 20th 2015, the EC sent a Letter of Formal Notice requesting further information from Romania, reminding it of its obligations under the Directive. On November 18th 2016, the EC sent a ‘Reasoned Opinion’

to Romania, as it has concluded that Romania failed to fulfil its obligations under EU law. This ‘reasoned opinion’ was nothing more than a stringent request to comply with the Directive, accompanied by the reasons for which the Commission resorted to such a course of action. In addition, the EC asked Romania to inform it over the measures taken to remedy the non-compliance. On January 25th 2018, the EC referred Romania to the Court of Justice of the European Union. These types of matters are usually solved before being referred to the Court. Hence, the situation is not looking good at all. We now must wait for the judgement of the Court, and should it decide against Romania, Romania will then have to take all the necessary measures to comply with the judgement. Of course, considering the dark scenario when Romania would be referred to the Court for the second time, for noncompliance with the provisions of the Directive, the European Court of Justice may decide to impose financial penalties, at the proposal of the Commission. These financial penalties depend on the duration and severity of the infringement, as well as on the size of the Member State.

CONCLUSION I personally see the energy system as a Lego game in which the laws and regulations are the underlying structure. The foundation. The rule to be followed. If one of the pieces is missing, the fluidity and resilience of the system, can be heavily tainted. Romania is one part of the Lego. In this particular case, Romania seems to be distancing itself from being solidary with the other Member States, in terms of security of oil supplies. And a big one, I’d say, given its geographical position in South Eastern Europe and its potential to become a huge energy hub in the region. And do we really want that? Do we really want to be perceived as not a team player in this entire EU legal structure and interdependency game? On the other hand, given the sensitivity of the topic, this infringement increases the shadow cast on SEE countries. Romania is neighbouring Bulgaria, on the southern border. And, guess what?! On January 25th 2018, the EC triggered infringement procedures against Bulgaria also, for failing to transpose the Electricity and Gas Directives of the Third Energy Package issued in 2009.

EPILOGUE This makes me wonder when are we actually going to be given as good examples, as performers, and not as laggers? Are we ever? When are we going to be game? At least part of the middle-ranged performers of the EU? 19

OPINION

A new construction law at the horizon? Daniel Vlasceanu - Partner at Vlasceanu, Ene & Partners

n 15 January 2018, a draft law (the ‘Draft Law’) was released for public consultation on the website of the Ministry of Regional Development. According to the Draft Law, it is meant to replace the currently applicable Construction Law no 50/1991. Without listing all proposed amendments, the present article intends to highlight only the main changes primarily relevant for energy related operations.

WORKS THAT NEED TO BE AUTHORIZED The Draft Law does not change the general types of construction works that need to be authorized. However, certain minor amendments compared to the current framework are envisaged. At present, petroleum operators apply for the ‘drilling and excavation’ permit. The Draft Law refers to authorizing the ‘drilling and equipment’ of a well; as such, on top of the existing difficult discussions with the authorities when applying for a drilling permit, we foresee the risk that authorities might ask even more details/documents before issuing such a permit. We welcome the clarification (Art 28 under the Draft Law) according to which for certain works not affecting the resistance structure or the architectural outlook there will be no need for authorization. Such works may be: • Periodical maintenance and recurrent repairs for the transport infrastructure and related installations; • Intervention, maintenance, repairs, side-tracking and 20

• •

deepening of the petroleum objectives as long as they do not imply opening a new drilling hole; Repairs, maintenance, protection, conservation and thermal insulation for oil and gas pipelines, without modifying their route or purpose; Certain works for the protection of the oil and gas wells.

AUTHORIZATION PROCEDURE (MILESTONES AND REQUIREMENTS) Although the milestones of the current procedure are maintained, the Draft Law reflects an intend to simplify and shorten formalities. Art 8 para 3 of the Draft Law removes the authority’s right to request supplementary documents if the said authority did not react within 10 days. Even though it may seem to increase the authorities’ accountability, we do not appreciate such pseudo sanctions as they might ultimately lead to unpractical solutions (e.g. what if the initial documentation is not complete/correct? will the authority reject the application?). An unusual provision of the Draft Law (i.e. Art 13 para 8) sets forth that in order to issue the building permit, there must be no pending litigation related to the respective land plot/ construction. Considering the litigating Romanian business culture (i.e. abundant law-suits), we believe such a provision should be removed as it lays the foundation for abusive litigations. The Draft Law maintains the removal of the urbanism documentation (when applying for a drilling permit) only for energyindustryreview.com

OPINION

wells located extra-murros; per a contrario, one may interpret that such documentation will be required for intra-murros wells.

OTHER PROPOSED PROVISIONS Even if the public character of a building/demolishing permit is stated under the current law, it is for the first time when it will be clearly stated that the building/demolishing permit must be released upon request of any interested person (Art 14 para 1 of the Draft Law). The Draft Law introduces (under Art 40) a simplified administrative procedure (without a court of law intervention or a technical expertise) for demolishing the unauthorized constructions located on public or private property of the state or of the local authorities. The only deciding authority will be the local authority owning the land/where such construction is located. Considering the urbanistic Romanian historical background (for example, not many wells were drilled before 1989 with a building permit…), but also the need for a neutral third party’s opinion, we believe that a court of law should be the one ascertaining the (i)legality of the respective construction; after the court’s decision is obtained, the local authority may

decide the measures to be taken for such a construction. Execution of certain unauthorized types of works would no longer be qualified as a criminal offence (e.g. drilling works for petroleum wells). Civil fines would be applied to the public authorities (and not to the public servants, as the Law 50/1991 currently provides). The Draft Law refers to the set-up of a National Registry of Buildings (i.e. a national database, monthly updated, including all authorized buildings on the Romanian territory).

CONCLUSIONS The Draft Law addresses even projects of national importance (such as BRUA) or the Neptun Deep gas production project. It is clear that the legislator intends to simplify formalities and that is without a doubt a positive change (we have faced too many times the authorities’ reluctance and too many permitting problems nurtured by the current legal framework). However, the Draft Law contains certain provisions that absolutely must be improved/even removed as they will only facilitate the appearance of other problems in practice.

OPINION

PHOTOVOLTAICS,

ALWAYS IN FASHION

Ioan-Corneliu Dinu - Scientific Counsellor World Energy Council Romanian National Committee

EA - the International Energy Agency, an intergovernmental organization coordinated by the OSCE (Organization for Security and Cooperation in Europe), placed Italy in the first place in 2016 for the success of having the largest photovoltaic electricity production - 8.2% worldwide. It was followed by Greece with 7.4% and Germany with 7.1%. In parallel, China recorded a very significant increase in electricity production following the discovery and promotion of solar panels that can also work in the rain, which has brought China today in the first place in the world. We recall that IEA includes 29 of the most industrialized countries in the world.

Returning to Italy, it is noticed that the National Energy Strategy sets as a short-term target that 50% of the country’s electricity needs be covered by clean energy obtained from renewable sources (geothermal, hydro, photovoltaic energy). Of course, the entire scenario relies inclusively on state’s support schemes. Referring to the contribution of states aiming at material support for fossil fuels, the support schemes have generated growths compared to the reduction of state aids for renewable sources, a general reduction due to international reasons. It was greatly felt in what electricity production meant in Italy, for example.

IEA’s report ‘Snapshot of Global Photovoltaic Markets’ shows that two years ago the global energy capacity produced by photovoltaic systems had grown by 50GW (gigawatt), reaching around 230GW in early 2017. As early as 2015, China’s production growth was already high, with production at the end of 2016 by 15.3GW higher than in 2015. This trend was also seen throughout 2017. Japan followed with 11GW, USA with 7GW, EU with 7GW, India with 2GW etc. Completing the aforementioned figures, the IEA ranking continued, after Italy, Greece and Germany, with Belgium - at par with Japan, then Bulgaria, the Czech Republic, Australia etc.

Generally speaking, global contribution for oil, natural gas and coal witnessed an increase from USD 1.8bn in 2013 to USD 13.2bn in 2014, the figures being taken from data provided by the International Monetary Fund. It is safe to assume that the trend of state aids was maintained at this level for the following three years, today reaching the need to review these support schemes.

The UN report ‘Global Trends in Renewable Energy Investment’ shows that Italy must admit that, globally, it has lost positions in the race to new energy markets due to reduction of energyindustryreview.com

OPINION

state intervention in the period when costs became too high in terms of poor results obtained due to low returns. The return to clean energy is intended to be more accentuated, advocating for this approach based on the idea that renewable sources are inexhaustible (sun, wind, water). Given that energy coming from these sources is obviously useful for everyone, this huge potential should be capitalized by using the new technologies that give significant returns. At the same time, the Italian publication ‘Tecniche Nuove’ insisted on saving the environment, giving an example that could be understood by everyone, of that regarding petroleum products such as gasoline, diesel etc. which, burned in engines, willingly or not lead to harmful toxic gas emissions, creating smog and not only, all contributing to the increasingly dangerous process of global warming with the known adverse effects on the existence of life. Experts have demonstrated through calculations and material balances that currently carbon dioxide emissions, generically called ‘toxic’ and coming from the burning of petroleum products, account for 50% of the world’s total.

A significant part of total harmful emissions comes from the activity of major oil companies, with climate change also endangering their future existence. Through the responsible control of the balance between oil giants’ activity and increased attention to the environment, it will be possible to move to a clean energy industry, as the only way to diminish the magnitude of climate change. Therefore, the irreversibility of the process, which can only be slowed down, is accepted. For the future, the technical and commercial approaches of the major energy producers, both those using traditional fuels and especially those using renewable sources, are of particular importance. Thus, the aforementioned balance can in fact be circumscribed to the requirements imposed by the Paris Agreement. Attention also includes management of the future economic decline, predicted by analysts from the economic environment in general, from banking, but also the stock market, a decline that will span over several decades, if we are to believe the experts’ estimates.

OPINION

Research and innovation in Romania, a land of two realities Eugenia Gusilov - Director, Romania Energy Center

At European Union (EU) level, Romania is a junior in innovation. Insufficient funding aside, a more damaging factor are the self-created domestic obstacles, by which legitimate research is over-shadowed and/or squeezed out by weak projects draining a significant part of the national funds. Given the inefficiencies of national funding mechanisms, the main driver of innovation (in all sectors) are the European policies and funds. There are a few high-prestige R&D projects (such as the ELI-NP - Romaniaâ&#x20AC;&#x2122;s star public research project) in what otherwise could be described as a sea of yet-to-be-fulfilled potential. There could be so many more high value-added projects, if only Romania cleaned up house and enforced strict integrity and accountability rules in its academic and research establishment. That means not only pressing ahead with serious research, but calling out the impostors and a zero-tolerance towards plagiarism. 24

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OPINION

here is a growing gap between how Romania perceives itself and how it actually ranks in research and innovation compared to other European countries. On the one hand, Romania is home to new cutting-edge research infrastructure projects such as the Extreme Light Infrastructure – Nuclear Physics (ELI-NP) - a pan-European research project hosted by 3 countries (Czech Republic, Hungary and Romania). The three pillars of the project are: ELI – Beamlines (Prague), ELI - Attoseconds (Szeged), and ELI-NP (Bucharest). The Romanian leg of the ESFRI project is developed in Magurele and overseen by the National Institute of Physics and Nuclear Engineering Horia Hulubei (IFIN-HH). Scheduled to become operational in early 2019,

ELI-NP is the largest investment so far in Romania’s R&D system and will result in an interdisciplinary research facility described as the most advanced European and global one dedicated to the study of photonuclear physics and its applications (in nuclear materials, radioactive waste management, material science and life sciences). The project is financed from EU structural funds in 2 cycles: in phase I (2013-2015) total investment reached EUR 179 million; in phase II (20162018) it will be EUR 205 million. However, despite this and other great projects being implemented in Romania, the country ranks last in EU in terms of innovation. On aggregate, Romania’s research, development and innovation (RDI) system is an underperformer, not only at EU level, but also in its

regional group of peer CEE countries. According to the European Innovation Scoreboard, the year 2015 has seen the worst performance in innovation since Romania joined the EU. While accounting for the effects of the economic crisis (2010-2012), Romania’s individual evolution declined abruptly since 2012. Even compared to Bulgaria, Romania’s innovation performance took a nosedive (notice the steep divergence between the two countries starting with mid-2012). So, what are the reasons for the current underperformance and downward trend? While Romania’s government expenditure on R&D (GERD) as % of GDP is an issue (0.5% in 2015 is very low), there are bigger structural problems at stake. Even if Romania increases public spending on R&D

PERFORMANCE OF EU MEMBER STATES’ INNOVATION SYSTEMS Romania ranks last in EU Figure in terms4:ofPerformance innovation of EU Member States’ innovation systems 160 140 120 100 80 60 40 20 0

RO BG HR PL LV HU EL SK CY MODEST INNOVATORS

IT MT ES LT EE PT CZ

MODERATE INNOVATORS

SI EU FR

STRONG INNOVATORS

IE BE LU AT DE UK NL FI DK SE INNOVATION LEADERS

2010

2015

Coloured columns show Member States’ performance in 2016, using the most recent data for 27 indicators, relative to that of the EU in 2010. The horizontal

hyphens show performance in 2015,States’ using the next most recent datausing for 27the indicators, relative to that of the EU in 2010. Grey to columns Member States’ Coloured columns show Member performance in 2016, most recent data for 27 indicators, relative that ofshow the EU in 2010. The performance in 2010show relative to that of theinEU2015, in 2010. Forthe all years the same measurement has beentoused. dashed show thecolumns threshold horizontal hyphens performance using next most recent data for 27methodology indicators, relative thatThe of the EU inlines 2010. Grey valuesMember between States’ the performance groups 2016, comparing Member performance 2016the relative that of the EU methodology in 2016. Scoreshas relative EU 2016 show performance in in2010 relative to that of theStates’ EU in 2010. For allinyears sametomeasurement beentoused. The used for determining group membership are shown in dashed lines show the threshold values between the performance groups in 2016, comparing Member States’ performance in 2016 relative to that of the EU in 2016.

SOURCE: EUROPEAN INNOVATION SCOREBOARD 2017 25

15 2016

OPINION

INNOVATION SCOREBOARD PERFORMANCE ROMANIA 0.28 0.26 0.24 0.22 0.2 0.18 0.16

2008

2009

2010

2011

2012

2013

2014

2015

Romania SOURCE: EUROPEAN INNOVATION SCOREBOARD 2016 – DATABASE

MODEST INNOVATORS 90

Greece

Hungary

Slovakia Latvia

60 Poland 50

Croatia

Bulgaria Romania

30 2010

2011

2012

2013

2014

2015

2016

The graph shows the average performance of the Modest Innovators, calculated as the unweighted average of the respective Member States. SOURCE: EUROPEAN INNOVATION SCOREBOARD 2017 26

to 1% of GDP by 2020, this measure alone will not fix the ills of Romania’s education and research or improve its overall performance overnight. One reason is that there are several established narratives or national myths that no longer have a correspondent in reality: Romania’s claim of having a great educational system is not supported by current international rankings. Not one of Romanian Universities, not even the best ones - Babes-Bolyai, Politehnica Bucharest, University of Bucharest, Technical University Iasi, and Politehnica Timisoara - are in the Shanghai Top 500 best universities in the world (RIO Country Report 2016: Romania, JRC Science for Policy Report, 2017, pg. 12). It is true, that there is still a strong tradition in math and engineering inherited from the communist time. However, the achievements of Romanian students and scholars today are not so much the product of a strong and modern education system, but the combined result of individual talent, huge sacrifice and commitment made by loving parents and gifted teachers. It is also indicative that much of this talent does not ultimately stay in Romania. Issues with inefficient distribution of national funding for research: there are widespread reports regarding the ‘unprofessional assessment’ of applications: evaluators without minimum expertise for the job, the exclusion of foreign experts from the assessment process (as of March 2017, under then Research Minister Serban Valeca, foreign experts have been excluded from the assessment process, making it exclusively a domestic affair), non-transparent panels of evaluators all of which essentially give free reign to favouritism. It also makes it extremely difficult for young researchers (especially Romanian graduates of Western universities) to have their proposals evaluated in a fair manner. In fact, the opposite seems to occur, weaker insiders energyindustryreview.com

OPINION

are being favoured over competitive outsiders, which results in a huge waste of talent, and eventually brain drain, the long-term impact of which is yet to be fully grasped. Moreover, there is a credibility question mark that hovers over Romania’s entire higher academic production, especially in fields that are not exact sciences (questionable quality and cases of undetected and unsanctioned plagiarism). There is also a circulation problem. Romania’s research system is described as ‘isolated’ by the World of Research 2015 report with little international collaboration. Few Romanian scientists get their work published in accredited Western journals, 60% have never published with an affiliation outside Romania (Alfred Radauer and Laura Roman, The Romanian Entrepreneurial Ecosystem. Background Report, DG for Research and Innovation, November 2016, pg. 29). The lack of a strong reaction from the Romanian scientific and/or professional community to outrageous appointments to top roles (including in education & research) is another issue. In the past few years, a cabal of impostors (people with no or with very weak qualifications, from bottom of the barrel universities, or with plagiarized PhDs) have successfully occupied high public office in Romania (former PM Victor Ponta, ex-Vice Minister and exInterior Minister Gabriel Oprea, ex-PM Mihai Tudose). One factor that accounts for this deterioration is the deep human resource crisis within Romania’s biggest party (PSD) coupled with the excessive politization of public administration (professionals and experts being consistently side-lined in favour of party yes-men for top decision-making roles). This has led to a severe deterioration in public management of the likes Romanian has not seen before and to the appointment of highly unqualified individuals. The most recent example is the case of Valentin Popa, the newly appointed

Minister of Education, an obscure university rector, who has publicly stated that: “Our education is good, very good even in some fields, and excellent in some study programs, and it is a pity to shadow these values of the Romanian education system by talking too much about elements that are not so important, such as plagiarism, especially since nowhere in the text of the law does it say that you must use quotes for a text that you take from someone else”. In response, the rector of the Bucharest University (the only university that has classes on academic integrity in its curricula), Mr. Mircea Dumitru, has resigned from all positions held in the National Council for University Titles, Diplomas and Certifications (CNATDCU) - a rare gesture in Romania. This incident underlines the extent to which public office in Romania has been compromised, but at the same time shows that there are still some parts of an immune system in place. Academic excellence takes a long time to build, but can be easily tarnished. Those who embrace ethical standards and practices in academia have to distance themselves from holders of such views or from holders of unearned academic titles as a matter of principle and as a matter of urgency. It is not enough for the professionals out there (in institutes, universities, private companies, innovators and entrepreneurs) to press ahead with their work, they need to stand together against incompetence and defend Romanian excellence in research and education against ethical aggressors. That means forcefully reacting to appointments of people who do not meet minimum professional qualifications and a zero-tolerance policy for plagiarism as well as anyone who treats this topic lightly. Until that happens, Romania will continue to be a land of two realities: peaks and islands of excellence (poster projects acting as feedstock for national pride) in a swamp of mediocrity. 27

MIRCEA GEOANA, FOUNDER AND PRESIDENT OF THE ASPEN INSTITUTE ROMANIA

His views on Romaniaâ&#x20AC;&#x2122;s role in the Black Sea Region Romania has recently been to the forefront of the European energy scene, through meetings of particular regional importance that took place in Bucharest. About Romaniaâ&#x20AC;&#x2122;s role in enhancing energy security and stability in the region, opportunities, challenges and vulnerabilities in the Black Sea area as well as the Davos Forum messages we have extensively discussed with Mircea Geoana. 28

energyindustryreview.com

INTERVIEW

Short CV Mircea Geoana is the founder and president of the Aspen Institute Romania and a prominent international public figure. He serves on the boards of trustees of the Aspen Institute US, Aspen Germany and Aspen Italia. He is also Co-chair of Aspen European Strategy Group. Mircea Geoana ran for the Presidency of Romania in 2009. In an unprecedented narrow and contested election, he received 49.6% of the casted ballot. He served as the President of the Romanian Senate between December 2008 and November 2011 and President of the Social Democratic Party, from 2005 to 2010. Between 2012 and 2014, he served as Chairman of the Joint Committee of the Romanian Senate and Chamber of Deputies regarding Romania’s Accession to the Schengen Area, and as High Representative of the Romanian Government for Strategic Economic Projects and Public Diplomacy. Between 2008 and 2012 he also served as chairman of the Foreign Policy Committee of the Romanian Senate. Previous to his political career, Mircea Geoana had a successful diplomatic activity. Appointed Ambassador Extraordinary and Plenipotentiary of Romania to the United States of America at age 37, in February 1996, he was the youngest ambassador in the Romanian diplomatic corps. From 2000 to 2004, Mircea Geoana served as Minister of Foreign Affairs of Romania. He also served as OSCE Chairmanin-Office in 2001 and during 2005 he was the personal representative of OSCE Chairman in office for Georgia. Mircea Geoana is a founding member of the Harvard Club Romania – Republic of Moldova and of the Association of Former Students of E.N.A. (Ecole Nationale d’Administration). He also serves as Honorary Chairman of the George C. Marshall Association – Romania. He is the Chairman of the National Development Committee think-tank and the Romania Noastra civic platform. An alumnus of the Polytechnic Institute and, respectively, the Law School at the University of Bucharest, Mircea Geoana graduated in 1992 the ‘Ecole Nationale d’Administration’ in Paris, France. He graduated in 1999 the World Bank Group Executive Development Program at the Harvard Business School. He holds a PhD in world economy at the Economic Studies Academy of Bucharest. Mircea Geoana is an expert on European and Trans-Atlantic integration. He also was a NATO fellow on democratic institutions in 1994. He lectured on foreign policy, transitional economies, and globalization at major universities and think tanks: Sorbonne, Harvard, Georgetown, Yale, CUNY, University of Pittsburg, CSIS, Atlantic Council, GMF, Chatham House, Policy Network, Friedrich Ebert Stiftung and is a contributor to important Romanian and international publications, like the New York Times, International Herald Tribune, The Atlantic, Frankfurter Allgemeine Zeitung. Also, he has been invited on foreign policy issues at CNN, BBC, PBS, Bloomberg, TV5, Fox Business, ZDF. He served as visiting professor and developed Leadership graduate and executive education courses at the Polytechnical University and the Academy for Economic Studies in Bucharest. Mircea Geoana is author of several books: ‘Romanian foreign policy in the beginning of the XXIth century - The road to Europe and transatlantic world’, ‘America, Europe and Romania’s modernization: bases for a Romanian societal model’, ‘The Romanian social model: the way towards a new Romania’, ‘Trust’. Mircea Geoana was decorated Commander of the National Order ‘The Star of Romania’ in December 2000, awarded the ‘Legion d’Honneur’ in 2002 (France) and ‘Stella della Soliedarita’ in 2013 (Italy).

For Romania the Black Sea is vital. The art for Romania would be to be able to combine the fortress and gateway concepts, to be strong and vigilant when it comes through aggression and security risks, many from Russia, but also to be able to create a context to be a gateway, not only East-West, but also North-South.

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Dear Mr. Mircea Geoana, please tell us a few words about the Aspen Institute, its method, main objectives and projects. The Aspen Institute was originally created in 1949, in Colorado, in the small mining city with the name of Aspen. It started with the idea to try avoiding the horrors of the Second World War. This is why the Aspen Institutes worldwide have embraced the mission of investing in a valuebased leadership, and also in a debating, rational and a multi partisan way to find a solution to the critical issues facing the human society. Aspen was created in Romania 11 years ago as a part of Aspen’s global network. We have 7 Aspen Institutes in Europe. Together with Aspen Germany we are

the co-leaders of the Aspen Europe Strategy Group. There are also Aspens in Japan, India and Mexico, we will open new ones in New Zealand, possibly in Colombia. So, this is a global organization. We are running independently, we have our own governance. We are 100 percent privately funded and we are trying to stay true to our mission of encouraging valuebased leadership and an educated conversation om the critical topics impacting our society. We have invested in hundreds of young leaders and more mature leaders throughout our leadership programs. We have a network of fellows and alumni of our organization from 22 different countries. So, it’s not only Romania, it’s also the region.

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We have developed policy programs, in which energy is already a mature program - the Aspen Energy and Sustainability Program - an Aspen Energy Lab, which is, I’d say, a little bit more narrowly focused on various topics. We have policy programs on governance, on technology, on healthcare, on the future of work, speaking of the fourth industrial revolution, on sports, arts and society. So, we’re trying to cover, as our mission indicates, the critical issues faced by our society. And, also, we are probably one of the most important public platforms. Our project, Bucharest Forum, is the largest conference organized in Romania. We organize other Internațional conferences on security, in partnership with NATO, an Aspen Energy Summit in Ploiesti every year, and we are very happy to have the cooperation and partnership of your magazine on such endeavour. We also produce impactful healthcare, technology and the future of work forums. Basically, our work relies on this threelayer approach based on leadership, public events and policy programs. The Aspem Method consists in bringinging around at the same table the three dimensions of any society, namely the public sector, the decision makers, and the private sector, and of course the non-governmental and academic sectors. Sometimes, in countries like Romania with a weak tradition of governance, there is a sort of a culture of ‘working in Silos’. But most of the time there is a conversation about policy solutions that they are not conducting together. They just meet at the end of the process. So, when the government already has a draft strategy, let’s say on energy, they have had some consultations with the others, but they’re not very serious or very conclusive. And I think we’ve done some progress in propsing public policy recommendations. They are easier to be digested by the public sector if they contribute to the process until the outcome, rather than being served a very smart and nicely coloured brochure. In a nutshell, we try to go to the next level, we start new leadership programs. We start a Nicolae Iorga public service fellowship for young politicians and 32

young civil servants, including from the regulatory agencies, ANCOM, ANRE, the Competition Council, the Court of Auditors. These are institutions that sometimes are more important for the private sector than the Government itself or the Parliament itself, which are also very important. As technology is growing, we are trying to invest in higher quality, we are starting a new program called the Aspen Leadership and Technology Academy (ALTA). This is the first program where we also cooperate with universities from abroad and restart something on public sector and also on technology. We also have programs for students. We’ve tried to go into high schools, because today you have to start putting the right seed very early in their lives. So, we hope to continue to be a relevant voice. We are encouraging the partnerships. We have partnerships with the main universities in Romania, including UPG in Ploiesti, ASE, Politehnica, SNSPA or Babes-Bolyai University. So, we recognize the need for intellectual content. We have partnerships with a number of public institutions like the Government of Romania, the Foreign Ministry, the Ministry of Defence on our conferences. And we also have something more specialized, called City Labs - a combination of an urban regeneration and smart cities with the city of Bucharest and with the city of Constanta for the time being. We also try to be helpful to the Romanian Presidency of the Council of the European Union, mainly on the strategic and foreign policy front when it comes to the Black Sea and what we would call the Gdansk - Constanta corridor, etc.

We can pay attention to two messages of the Davos Forum. The first is that the world is in full swing - politically multipolar, economically multilateral and with an industrial revolution that will resettle everything, politics including. The second concerns the risk of resting on our laurels. We are approaching the end of the growth cycle of the global economy, so we would better pay attention to what’s next.

In your opinion, how should Romania act to capitalize on its favourable position on the regional geopolitical map? I strongly believe, from my professional experience, that consolidating the Eastern flank of NATO and the EU is important. Romania should play this role, a simultaneous role as a fortress but also as a gateway because I think Romania shouldn’t be only a fortress of the West in this region, as there are forces coming from the East as energyindustryreview.com

INTERVIEW

well, not only Russia, but also China, the Caucasus, Central Asia, Turkey, also the Greater Middle East and Romania should benefit from the Gulf. These are very dynamic regions that Romania should capitalize on, but of course being true and loyal to our alliances with Europe too, to our partnership with America, to NATO. So, in fact, this dual role of Romania as a fortress and gateway, I think this is something that Aspen is very keen in contributing to and assisting the leaders of Romania in achieving Romanians’ national ambitions. I think Romania has done a decent job in capitalizing on our, let’s say, strategic relevance. To be honest, NATO and EU accession for Romania were mainly based on geopolitical and geostrategic reasons. I think what Romania should do at this point in time is to start to also capitalize on the geo-economic and economic relevance, because no matter how strong military cooperation, security

cooperation and intelligence cooperation are in Europe and the U.S., they will never be able to compensate the economic weakness and the lack of capitalization of our economy and the lack of sufficient technology transfer to our economy. Thus, I believe we should continue to be strong at the military, defence, security and intelligence levels, because that’s something we need to do, helping NATO and helping Ukraine to fight cyber-crime or cyberdefence. That’s great. Ministry of Defence is spending two percent of GDP for defence, that’s great. Having big American and European corporations investing in our defence, that’s absolutely great. But I think the time has come for us to bring to the same level of relevance the economic potential and the technological potential, as well as the market potential of Romania. How can this be done? I think first of all by identifying new projects. Money comes and ideas come when there is a fertile soil. So, there are lots

INTERVIEW

of private equity firms that are looking for financing projects. Speaking of corporations, let’s say with the Chinese, we’ve been proposing the same projects over and over again without any sophistication and getting some fresh money. We always complain that the strategic partnership with the US, which is very strong in defence, is very weak in terms of economic issues. And people in Bucharest, Cluj, Timisoara, Constanta or Iasi are expecting the White House or Trump, or even Obama before, to give an order - to let’s say Exxon or Halliburton - to come. No, they come if they have a business interest. So, I think strengthening the business case is important. The other issue, which I consider to be the number one liability of Romania, is the poor reputation that we have in Europe. Romania has a bad image. Even if the country is attractive, even if there is a room to do more business, if there is room for using Romania as a platform at the regional level or as a gateway between East and West, the moment when there is zero investment in what we call the brand of Romania, we should start a national effort, at the level of public and private sectors again, and NGOs and universities to reposition Romania. Why is Romania still the country where most of the news is on the negative side? Why is Estonia, a tiny country, able to be presented as the beacon of digitalization? Romania has today hundreds of R&D centres across its territory. How many people know that the latest Amazon tool, the artificial intelligence, were produced by Romanian engineers? How many people know that the latest Fitbit watch of Apple was produced by a Romanian Vector company? How many people know that Amazon is renting now six floors of offices in Bucharest? How many people know that Deloitte is creating artificial intelligence in Romania? How many people know that Bosch has moved its R&D centre to Romania? These are just a few examples. So, Romania is a country of technology, of IT, of engineering and research and development, investing in the laser in Magurele (southern Bucharest), expanding what happens in Cluj and Iasi and so on. Thus, in my opinion these are the major components: stay strong on defence, stay strong on security, 34

open up the economy, invest more in the economy, ‘groom’ national economic champions. We have some examples of companies in Romania today. Look at CEZ, MOL, Hidroelectrica, Electrica, Transgaz or Romgaz. Why are the other governments able to have national champions that are competing with the big players abroad, not against, but competing? I think this is something that the new government has to think hard about because I do not believe that this anti big corporation rhetoric is leading anywhere, but economic patriotism is. This is something that every nation does. So, we still have huge assets in the Romanian state control. I think we have to make sure that there is also private investment into these because it means more transparency, more capital, and more accountability. We have to be exceptionally careful in making sure that the new Sovereign Fund of Romania, that will take assets from these very companies, will become a tool that will help Romania’s economic strength and not debilitate further these crown jewels that I mentioned before. So, these are very important strategic economic decisions that the government has to make. And I hope that it will be listening to the ones who are really interested in developing strong Romanian champions with regional coverage, able to finally start becoming an economic player in the Republic of Moldova. Of course, there is BCR there, there is Petrom, but there is no large Romanian owned company over there. And also, the last point I would like to make, I think we have to find real policy with practical solutions to help the Romanian private sector. There are a lot of SME plus companies, I see them dealing with EBRD, even with EIB, trying to get a private equity, to get some funding. There are probably hundreds and hundreds of Romanian companies and Romanian entrepreneurs, including in the energy sector, including in R&D, and I think that if we find a smarter policy to assist them through market rules, because we cannot go outside of the antitrust and state aid policy, I think we could have, in the next three to five years, with big players like Exxon, Halliburton or others, help for the rest of the local ecosystem to

The energy sector is changing dramatically. Digitalization is something that will have an impact. Renewables are something that we have to look into. The famous energy mix will be changed and the business models will also be changed. We have to anticipate the future and prepare for the future. The future will be disruptive.

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INTERVIEW

grow to the next level. I didn’t mention Conpet, which is another great company that has potential and I think with a little bit of sophistication on behalf of the government or the Ministry of Energy we could really reach the level of Poland or the Czech Republic or Hungary, the top regional players, in economic terms, not only in geopolitical and strategic terms. We have to start being more realistic and also be able to execute strategies because the potential is here, everybody speaks and brags about potential. But then I still don’t see an action plan with steps, with money in line with the strategy. I think this is a wake-up call. I think all these famous strategies that we have in almost every sector - some people are saying that we have the country with the largest number of strategies per capita - is a politicized game. There is a complicated conversation about the National Energy Strategy. There’s a new government coming and

changing things and I think we should try to start acting and doing something, as I mentioned. Some things are happening but I still don’t see a sort of integrated vision about this act in Romania. We hope the new government will have now more time to work - we had five economy ministers and three energy ministers changed in one year, that’s too much, they cannot focus. We have to keep working with them and again, the Aspen method, as I mentioned, having the public, the private and non-governmental sectors working together could be one of the solutions. It would be a pity to continue complaining for other 20 years that Romania used to have such a potential and we’ve missed it. This will be a great, great and severe failure on behalf of all of us. This is not only the failure of the government, is a failure of all of us having such a gold nugget on our hands and being unable to have the sophistication to put it to work.

INTERVIEW

According to the Ministry of Foreign Affairs, the Black Sea region will be a major theme on the list of Romania’s priorities in the context of supporting the presidency for the EU Council in 2019. What opportunities, challenges and vulnerabilities do you see regarding the exploitation of hydrocarbon resources in the Romanian Black Sea sector (from a political, economic and other points of view)? I think exploration and exploitation in the Black Sea, now with the oil price moving up and also with the right kind of policy and regulation and the fiscal policy for this specific issue, will go forward, this is my instinct. I’ve also seen recently Exxon offering a big public tender for some operations. They also brought, all the way from Egypt, this state-of-the-art drilling operation. They have also developed new technology to work in the very sulfurous waters of the Black Sea. If a giant like this one is starting in Romania, I

think that they have projects around the Black Sea, possibly in Ukraine, although there is a difficult situation because of the Crimea annexation by Russia. We’ll see how things develop in the offshore area – OMV Petrom will go forward and also Carlyle Group will go forward. This is a game changer for Romania and also for the Black Sea What will happen with this natural gas? Of course, this is another conversation about the pipeline system about how much do we export, about how much is used domestically. But having said that, I still believe that the Black Sea would be an area of confrontation and geopolitical rivalry, we see this rapprochement between Turkey and Russia… It’s clear that everybody will be expecting the new German government to come in and see what will happen with Nord Stream 2, because we cannot look only at the Black Sea without taking a look at the broader context. We have to see if the LNG from Louisiana and the Gulf of Mexico,

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INTERVIEW

I think energy has been underutilized in the attempt to put Romania on the map. Now, with America becoming in 2018 probably the number one producer of oil in the world, together with the fact that within energy security there will probably be a new conversation, I think Romania could finally start playing a significant role. We have to end the isolation of infrastructures, including oil and energy, which Romania is facing today.

the U.S. natural gas reaches the Baltic shores and Poland. And speaking of GdanskConstanta corridor, we also have to see how these new sanctions that US has imposed on Russian oligarchs and Russian companies will continue, we’ll see lots of other issues. I will not rule out the possibility for a certain balance to be reached in the Black Sea region. But I think we have to be ready for a continuous rivalry with Russia in the Black Sea. And I will also add the point that for Romania what will happen in Ukraine is also very important, also in Turkey, in Georgia. For Romania the Black Sea is vital. So, again, the art for Romania would be to be able to combine the fortress and gateway concepts, to be strong and vigilant when it comes through aggression and security risks, many from Russia, but also to be able to create a context to be a gateway, not only East-West, but also North-South. This is why I welcome the fact that European Commission is starting to fund the Dobrogea connection to Bulgaria, from Issacea to Burgas, the interconnectors of all sorts. I’m welcoming the fact that the European Commission is funding also the compressor stations. So, I think we must play our game in a more coherent way, using the fact that we are the only quasi-independent country in the region in terms of energy, and be good with our neighbours… We have cards to play and I think we have to continue to play the European card. The Energy Union will also be good for us. The Energy Union also means that the Western European companies will not strike separate deals with Russia and Gazprom behind our back. So, I’m cautiously optimistic that Romania will be able to play all of these cards, as well as each of us who has something to add, a small platform like Aspen or much bigger players like the government or municipalities. The World Economic Forum in Davos brought together this year, as always, important leaders and politicians around the world. What were in your opinion the most important messages of speeches and debates? How do you explain the absence of our country at this event? We can pay attention to two messages of the Davos Forum. The first is that the world is in full swing - politically multipolar,

economically multilateral and with an industrial revolution that will resettle everything, politics including. The second concerns the risk of resting on our laurels. We are approaching the end of the growth cycle of the global economy, so we would better pay attention to what’s next, be prepared for what follows. In the past 10-15 years there have been some Romanian businessmen attending the Davos Forum, but in the past 15 years I don’t remember seeing politicians from Romania there, although their counterparts from other countries participate. For example, this year Poland is represented at both Prime Minister and President levels. Romania seems to lack the appetite for the conversations that are polishing its future. Our leaders are often reluctant to go there, because, probably, they are not prepared to support theses and ideas. It’s a provincial complex. Then, when you change 10 Foreign Ministers in two years, and you change prime ministers as you change the subway, so when people do not know how long they will remain in office, who has the time for forums like Davos? As you recalled, we are going through a period of intense transformation, in which the industrial revolution plays a key role. The watchwords are internationalization, digitalization, innovation, cyber security... How do you see the future? The truth is that the energy sector is changing dramatically. I’ve seen a contract signed by a Hungarian company and a Finnish company for creating a network for electric cars all over Hungary. That’s something that is coming. Digitalization is something that will have an impact. Renewables are something that we have to look into. The famous energy mix will be changed and the business models will also be changed. So, I think we have to play our cards as they are today, but also to anticipate the future and prepare for the future. The future will be disruptive. This is something that all of us should start preparing for. What are the plans of the Aspen Institute Romania for 2018 and the next period? We have spin in energy because this a 37

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primary sector. I was struck going to Ploiesti for the Aspen Energy Summit last fall. And we had this great participation, such as Commissioner Šefčovič, the American Ambassador, we had ministers, Government officials, we had the private sector, the State Department and Department of Defense from Washington also attending the conference. But looking to the presence of the American companies around Ploiesti, I’ve seen there also Schlumberger, Honeywell, Halliburton… Now with the price of oil going up, probably, hopefully, Exxon, OMV Petrom and the others will start exploiting natural gas in the Black Sea. And speaking of Houston, because all these American companies - Exxon, Halliburton and Schlumberger-Cameron, Honeywell, have their headquarters in Houston, Texas (the capital of energy worldwide), most of these companies have a presence in Romania, in Ploiesti and in Constanta. In Houston, they’ve started an energy corridor, which is basically a physical space involving companies that are dealing with energy, also suppliers of the big companies, or R&D, services or equipment companies, or universities, traders, technology companies that are influencing and contributing to this industry. Why not try to emulate and create an energy corridor, between these three cities – Houston, Ploiesti and Constanta? I was thinking even, and this is something we are trying to do and convince the Americans and also our local leaders, why not have a triple twinning between Houston, Ploiesti and Constanta and thus create a triangle that could be useful? The same thing should be applied for European energy players because this is not just an American thing exclusively. There are also OMV Petrom and other European companies that are important, like Enel, or E.ON, ENGIE. What we are trying to do is come up with more creative ideas, because of course when it comes to implementing strategies for all these things, you need the public sector and the private sector, but we try to be a little more creative. There is also something else that we would like to do for 2018. We also try to transform the conversation about the Energy Union and the preparation for the new financial perspective, the new budget of the EU for 2021-2028, as a more, let’s say, internalized discussion in Romania. Because the problem that we will be facing (speaking of the poor absorption of EU funds that unfortunately is chronical in Romania and hopefully this will improve now) is that the money, European money for the next seven years up to 2021 will not be appropriated on the traditional way - cohesion funds and then structural funds. It will be closer to what Juncker plan represents today. There will be appropriate projects, in a more competitive manner, the system will change. So, what we’re trying to do this year as the Commission will present a new draft budget for the next seven years is to prepare Romania and also prepare 38

the private sector and the public sector in Romania to cope with this new logic. There will be a new universe of EU funds organized differently – a new model. The issue is that the negotiations between Berlin and Paris, the negotiations between the Eurozone countries, the negotiations between all 27 of us, we’ll probably, this is our hypothesis, make many changes, and in fact what we are trying to do is use energy, one of the few strategic, competitive and edge domains we have in the country. There are not many – there is technology and IT, R&D, engineering and energy. So, I think energy has been underutilized in the attempt to put Romania on the map. Of course, there are also geopolitical and geo-economic constraints, Russia, Turkey… But now with America becoming in 2018 probably the number one producer of oil in the world, outperforming Saudi Arabia and Russia, together with the fact that within energy security there will probably be a new conversation, I think Romania could finally start playing a significant role. We have to end the isolation of infrastructures, including oil and energy, which Romania is facing today. The fact that we have this connection with Hungary is not enough. We have to do more, the one with Chisinau, the one with Bulgaria, the Southern Corridor, the BRUA project. These are the things that I believe all of us, including the private sector, not only the public sector, and of course, NGOs like Aspen and specialized media like the Energy Industry Review, should join forces for. I think all of us should try to steer in the same direction. When do you think the energy corridor mentioned above can be started? I think it’s relatively easy to be started because in Europe there is a big, big, big chunk of money for industrial clusters. Horizon 2020 is another source of EU funds and any local administration, sometimes also with the national government, if there is a need, will start operating in the logic of having energy as one of the priorities for economic development. I think projects on EU funds can be written rapidly. I also know that within the Juncker plan there is money from the European Investment Bank for such projects and I believe it also brings the non-EU players, like American companies and others, and we should be in the situation of moving forward. As you know, Rompetrol today is a consortium of Chinese and Kazakh investors and they are a player in Romania. If everything goes well, we hope to have a high-level presence from Europe and America to the Ploiesti Energy Summit and then going back-toback to Constanta and eventually starting to crystallize the concept. I also count on the big consulting names, active in this field - the Big Four, A.T. Kearney, McKinsey - they are all members of the institute. So, we also hope that when we need professional help, they will join this process, which is a win-win proposition for everybody. energyindustryreview.com

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Oil prices on upward trend The price of OPEC basket of fourteen crudes stood at USD 67.60 a barrel on 29th January, 2018, according to OPEC Secretariat calculations. The OPEC Reference Basket of Crudes is made up of the following: Murban (UAE), Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), and Merey (Venezuela). 40

il prices started 2018 on a strong note. The price of Brent oil with delivery in March had exceeded the value of USD 70/bbl at the end of the first decade of January (at the ICE Futures exchange in London), the highest level since 2014. Extending the agreement of the Organization of Petroleum Exporting Countries (OPEC) to cut output and decrease US oil stocks pushed oil prices up, but in the long run analysts are not in a hurry to forecast a retention of the price rising trend, especially as production cut is not part of the OPEC culture. Amid output cut and higher demand, boosted by economic growth over estimates, Brent oil prices, which energyindustryreview.com

OIL & GAS

HOW LONG WILL OPEC MAINTAIN THE PRODUCTION LOW? On the other hand, Damien Courvalin, the strategist of Goldman Sachs, specializing in raw materials and energy markets research, has stated in an interview with â&#x20AC;&#x2DC;Les Echosâ&#x20AC;&#x2122; that oil output decline, orchestrated by OPEC, has never been part of a long-term strategy. As such, at a certain point in 2018, the organization will move to output growth. The problem is when. OPEC has clearly shown that it would do it gradually, once the global stocks are normalized, Damien Courvalin has stated. According to the current data, it seems that this stage is almost reached: the stock surplus has disappeared or has almost disappeared. OPEC will thus have to act quickly. Given that it is less optimistic in terms of normalization of stock surplus, the organization could delay the decision on resuming oil output growth. THE PRICE COULD FALL IN 2019

had fallen to less than USD 30/bbl in early 2016, managed to climb to around USD 70/bbl. Oil demand covered by OPEC countries in 2018 is expected to reach 33.09 million bpd, compared to 32.89 million bpd in 2017, according to the forecasts of the organization.

NON-OPEC SUPPLY TO GROW According to an OPEC report in January this year, the organization expects a higher supply from nonblock members in 2018, as the U.S. shale oil producers take advantage of rising prices stemming from the extension, in November 2017, of the oil output-cut deal. The document

shows that oil production in certain regions, especially in North America, will witness a consistent growth this year, as situation in the oil market has improved and prices are rising. The increase in U.S. production is also driven by the fact that shale oil producers have managed to cut their costs by 30-50% in 2015-2017, by improving technology and efficiency. It is estimated that oil production of non-OPEC producing countries will reach 58.94 million bpd, by 1.15 million bpd more than last year. According to OPEC report, global oil production witnessed in December last year a slight increase, reaching 97.49 million bpd, by 400,000 barrels more compared to November 2017.

Evolutions in 2019 are estimated to be less constructive - the expert from Goldman Sachs warns - because, at a certain point, OPEC will increase production. At the end of next year there will be more oil produced than estimated for example three months ago, which is why prices in 2019 will go down, the analysts believe. Damien Courvalin claims the U.S. is already the largest producer if ethanol and liquefied gas are taken into account. The race for the pole position takes place between three countries: USA, Saudi Arabia and Russia. Russia and Saudi Arabia, Courvalin warns, are producers with small costs and will strongly increase their production in the years to come. In the short term, the expert believes, the Americans can certainly outpace the other two producers, as the U.S. capacities are growing steadily. But in the long run, these three countries will each continue to invest with the clear purpose of increasing their production, with impact on oil prices. 41

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Responsible use of resources is one of the key factors to which Kaeser Kompressoren owes its success. As a leading compressed air systems provider and a renowned industry trendsetter, Kaeser is proud to present yet another technological milestone. For the first time, the ASD series of variable-speed compressors will be equipped with synchronous reluctance motors – a major advantage due to their considerably lower losses in the crucial partial-load range, compared to asynchronous motors.

ith Sigma Profil and innovative drive concepts, Kaeser’s ASD series of rotary screw compressors offer flow rates ranging from 3.15 to 5.5 m³/ min, delivering outstanding performance and reliability, combined with energy efficiency and space-saving design. The trendsetting company is now taking another important step – releasing its ASD series of variable-speed rotary screw compressors with a completely new drive technology. The major advantage of this complete solution, which was developed in close partnership with Siemens, is that it delivers efficiency gains of up to ten percent in the partialload range. This drive principle has been understood for decades. But only now has its implementation in production series motors attained the technical perfection required to benefit users throughout the world.

VARIABLE-SPEED DRIVE WITH HIGH SYSTEM EFFICIENCY With our variable-speed versions (SFC) of the ASD series, we offer customers worldwide an opportunity to embark on a path of minimal energy consumption – and minimal operating costs. This is important because compressed air stations are often constructed on a modular basis: Continuously running compressor

systems with IE3 and IE4 motors cover base load demand, whilst additional peak-load compressors respond flexibly to meet extra demand; the system as a whole is controlled and co-ordinated by a SIGMA AIR MANAGER 4.0 master controller to ensure maximum efficiency. With the Siemens synchronous reluctance drive systems, this will be performed with even greater efficiency, particularly in the all-important partial load range. The new EN 50598 eco-design standard applies not only to the efficiency values of individual drives, as previous legislation did; rather, it represents a shift in regulatory emphasis to overall system efficiency. Consequently, the compliance of variable-speed drive solutions will now be assessed based on their overall system efficiency, and not on the efficiency of their components alone.

COMBINING THE BEST OF SYNCHRONOUS AND ASYNCHRONOUS MOTOR TECHNOLOGY This new and innovative range of general-purpose motors combines the advantages of both asynchronous and synchronous motors in a single drive system. On the one hand, no aluminium, copper or expensive rare earth magnets are used in the rotors; instead they are made of electrical steel with a specialised

profile and arranged in series – making the drive highly durable and maintenance friendly, the characteristic advantages of asynchronous motors. On the other hand, the control properties of the new motors are comparable to those of synchronous motors. Because of the special rotor design, reluctance motors deliver high speeds without additional rotor warming due to current flow. The key to this lies in optimised matching of the drive system elements, i.e. the motor and frequency converter. It is the perfectly harmonised interplay between these two components that facilitates maximum energy savings.

INNOVATIVE DRIVE SYSTEM FOR A SUSTAINABLE FUTURE The ASD-SFC series has now been equipped for the first time with the innovative synchronous reluctance motor drive system from Siemens. The new drive technology delivers efficiency gains of up to ten percent in the partial-load range, top IES2 classification as per the new EN 50598 efficiency standard, as well as significantly lower energy costs. This translates into average energy cost savings of around 450 euro per year, according to the compressor manufacturer (based on 6,000 operating hours at a rate of 10 cents per kilowatt-hour). Users therefore not only enjoy maximum flexibility for specific applications and varying environmental conditions, but also with regard to load response. Together with its high efficiency IE4 asynchronous motors, Kaeser has now raised the bar of drive technology efficiency to a new level, exerting environmentally friendly competitive pressure across the market. KAESER KOMPRESSOREN S.R.L. Address: 179 Ion Mihalache Blvd., 011181 - Bucharest Tel.: +40 21 224 56 81 Fax: +40 21 224 56 02 Web: www.kaeser.com Email: info.romania@kaeser.com 43

OIL & GAS

NEW DOWNSTREAM SOLUTIONS FOR SDM

SAP SDM steers and optimizes the complete order-to-cash process.

SAP S/4HANA is making its mark in the downstream industry. As of December 12th, 2017, SAP’s new solutions for the oil and gas industry have been available with their full range of features. SAP’s integrated in-memory database technology and the new denormalization procedure accelerate data processing considerably, providing the basis for digital transformation. Although these new SAP solutions can only now be fully utilized, the Implico Group already has a globally unmatched wealth of expertise in this area. As a long-term development partner of SAP, the Hamburg-based consultancy company has developed the official SAP solutions for Secondary Distribution Management (SDM) as add-on and has already supported multiple pilot projects on several continents. The complete solution is named SAP S/4HANA Oil & Gas for Secondary Distribution Management. It supports the entire order-to-cash process for downstream companies, and SAP has just launched the latest release. For operators of service station networks, there is also SAP S/4HANA Oil & Gas for Retail Fuel Network Operations which, in addition to the SAP solution for SDM, provides all specific functionality for service station operators in a standardized SAP application. As the solution architect and developer of these SAP products, Implico understands every last detail of these solutions. Many customers have taken advantage of this expertise and, with the help of the consulting company’s specialists, are realizing projects in Europe, North America and Africa. “SAP S/4HANA represents a quantum leap for digital transformation in the downstream industry,” said Torsten Peter, Managing Partner responsible for the SAP business at Implico. “Data can now be processed almost 300 times faster than before. In particular, this creates entirely new management, transparency, loyalty management and business process automation opportunities for companies carrying out large volumes of transactions.”

ENTRIES IN RECORD TIME AND REAL-TIME ANALYSIS © SAP

SAP RFNO automates all payment and quantity flows of service station networks. 44

What makes SAP S/4HANA so special is its in-memory technology. All of the data that needs to be routinely accessed by the solutions is directly available in the RAM, facilitating lightning-fast analysis of large volumes of data and enabling energyindustryreview.com

OIL & GAS

innovative new process workflows. The new solutions also utilize an innovative data storage procedure called denormalization. Instead of initially assigning individual data by business activity as was previously the case, the data is now simply written to a table unsorted – and is only sorted when a query is submitted. This technology speeds up workflows considerably, for instance when entering extensive business processes. The new solutions also enable real-time business analysis for the first time. “We are delighted that the SAP S/4HANA solutions for the downstream industry are now officially available,” added Torsten Peter. “We will soon start completing our first projects for customers looking to make the most of digitalization and the new opportunities it creates. The ways in which this new SAP S/4HANA technology will change the downstream business and make it faster and more transparent will become apparent in practice. New loyalty management possibilities and services mean that customers of downstream companies will also notice these changes,” he underlined.

IMPLICO SERVICES AND SOFTWARE SOLUTIONS The Implico Group optimizes logistics and business processes for oil and gas downstream companies. The international consulting and software company with its headquarters in Hamburg, Germany, has subsidiaries in Malaysia, Romania and the USA. Founded in 1983, the company today employs around 200 staff. Implico provides consulting services, data services and software solutions for the entire supply chain – from forecasting, order entry, dispatching and tour optimization to data collation and invoicing. Leading oil and gas companies all over the world trust in Implico’s industry expertise and high-performance IT solutions including OpenTAS and iGOS. OpenTAS automates the storage and transportation of hydrocarbons for refineries, tank farms, and service station networks. iGOS (Implico Global Operation Services) offers innovative downstream solutions out of the Cloud. Additionally, Implico offers unique consulting expertise surrounding the SAP Secondary Distribution Management for Oil & Gas (SAP SDM) and SAP Retail Fuel Network Operations (SAP RFNO) downstream solutions. SAP SDM steers and optimizes the complete order-to-cash process. SAP RFNO automates all payment and quantity flows of service station networks. Implico is a Microsoft Gold Partner, a Software Development Partner of SAP and a member of the Oracle PartnerNetwork. The company has been recognized for its products and services on numerous occasions. It was named, for example, Oil & Gas Logistics Company of the Year in 2015 and Best Oil & Gas Software Specialists in 2017. In the field of Terminal Automation Systems, Implico is market leader in Eu rope, Middle East and Africa (ARC market study, July 2016). 45

OIL & GAS

NEW ERA OF PETROLEUM REFINING

PETROTEL-LUKOIL TO INVEST OVER $ 30MLN BY 2020 Most of the refineries in Europe are in full upgrading process, new modern technologies being implemented, in which human workforce is replaced by machinery. This leads to cleaner processes, lower costs, increased efficiency and productivity. The same happens in Romania. The entire refining sector, as the entire energy industry, goes through a period of deep transformation, supported by ambitious investments. 46

ETROTEL-LUKOIL has recently announced new investments exceeding USD 30 million by 2020, in order to improve environmental performance. Thus, the refinery will allocate USD 7 million to upgrade the coking plant (Stage I), a process that will reduce process emissions to zero. Also, the amount of USD 25.9 million will be allocated to build a new sulphur recovery complex, which will virtually reduce accidental sulphur oxide emissions to zero. The Ploiesti-based refinery was taken over by LUKOIL Group in 1998. At the time, the facilities of the refinery were partially obsolete and did not comply with the environmental legislation. The new shareholder started an extensive investment program, in both technological and environmental objectives undertaken upon privatization. Starting with 1998 and until 2005, investments have been made in environmental protection works, worth approximately USD 11 million. The results were reflected in the reduction of sulphur dioxide emissions by approximately 35% and volatile organic compounds emissions by approximately 20%. In 2007, the refinery received the Integrated Environmental Authorization and with it the Action Plan for compliance with the national and European requirements. From 2008, a new investment stage started, in projects related to environmental factors and to carry out all measures included in the Action Plan. The total volume allocated by LUKOIL for refinery’s compliance was USD 120 million. Completion of each investment project led to a significant improvement of environmental factors and especially of air quality. Thus, starting with 2011, the ‘LowNOx’ combustion system has reduced the emissions of nitrogen oxides in the stacks of technological energyindustryreview.com

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ENVIRONMENTAL IMPACT REDUCTION PROJECTS (2004-2015) Project brief

Value (thousand USD)

Construction of the sulphur recovery plant (Claus)

10,000

Construction of the tail-gas treatment unit

5,492

Modernization of auto and railway loading terminals

2,400

Increasing the flare gas recovery

2,941

Construction of a new wastewater stripping plant

5,365

Implementing the online monitoring system

699

Refinery gas scrubbing and reduction of sulphur dioxide emissions

3,001

Mounting ‘LowNOx’ burners on all furnaces

1,511

Flue gas scrubbing at the fluid catalytic cracking plant Replacing fresh water with purified water Construction of a temporary storage facility for waste from the treatment plant Depollution of pits

16,400 1,110 600

FIGURES & DATA •

77.7mln tons/year - overall capacity of LUKOIL Group refineries

•

2.4mln tons in 2017 (2,77 million tons in 2016) - output of PETROTEL-LUKOIL

•

99.5% - processing depth

•

6,000 - number of LUKOIL employees in Romania (refining, energy, lubricants, distribution, exploration)

•

Over USD 120mln - total of investment for environment

•

USD 40mln - investment in lagoons treatment

•

USD 600mln - investment in new plants building, revamp process (2005-2017)

•

Products of refinery go: 60% internal and 40% external

•

Production range: gasoline, gas oil, LPG, MTBE, sulphur and coke

43,700

furnaces by approximately 70% and the powder concentration has decreased by about 8 times. Starting with 2012, by completing the refinery gas scrubbing plant, the concentration of sulphur dioxide in the gases exhausted in the atmosphere decreased by 90 times. In early 2015, PETROTEL-LUKOIL completed the last investment project within the Action Plan, commissioning the flue gas scrubber plant from the Fluid Catalytic Cracking (FCC) complex. The performances achieved were remarkable. Emissions of sulphur oxides dropped 30 times, and those of powders 15 times.

INVESTMENTS IN RENEWABLE ENERGY SOURCES LUKOIL invested in Romania, in the energy sector, approximately USD 300 million to upgrade the thermal power plant, build a windfarm and a photovoltaic park. Investments in the Ploiesti platform (thermal power plant and photovoltaic park) led to a higher profitability of the refinery, by using the industrial land to build the photovoltaic park and using

OIL & GAS

PERFORMANCE IMPROVEMENT Percent variation of the specific air pollutant emissions between 2000 and 2016 120

100

2000

2005

2007

2008 Powders

2009

2010 SOx

the petroleum coke as a fuel for the thermal power plant in cogeneration. LUKOIL’s energy division managed to implement a modern combustion technology allowing the incineration of a wide range of fuels while meeting emission limits. Commissioned in 2011, the new thermal power plant (installed electric power of 61MW and rated thermal input of 300Gcal/h) uses a circulating fluidized bed boiler technology that can burn almost any type of fuel and provide the refinery’s thermal power needs. Besides the fact that it provides flexibility for fuel, the mentioned technology also ensures a higher profitability while reducing emissions. Moreover, electricity production allows a financial optimization of electricity acquisitions. In 2013, the wind power plant was commissioned, with an installed power of 84MW, following an investment of USD 109 million. In 2014, the photovoltaic power plant’s commissioning followed, with an installed power of 9MW, the investment value amounting to USD 18 million. Overall, investments in renewable energy sources allowed an 48

2011

2012

2013

2014

2015

2016

NOx annual reduction of emissions of greenhouse gases by 220,000 tons of CO2. PETROTEL-LUKOIL refinery has fulfilled all its obligation regarding environment under Order 2014/738/UE which sets emissions according to BAT (Best Available Technologies) for oil industry by project implementation: optimization of heat processes; revamp of waste water treatment; fuel gas system optimization; cut of sulphur or propylene content; program to increase energetic efficiency; optimization of amine washing systems; cut of greenhouse gas; eliminating dust, Sox and NOx from FCC flue gas (Belco System). Refinery upgrading meant the reconstruction of facilities for crude and vacuum distillation, diesel hydrotreating, catalytic reforming, FCC, gas fractionation and isomerization, fuel and LPG loading facilities as well as construction of new units: hydrotreatment of FCC gasoline (Prime G+), new hydrogen plants, MTBE-TAME unit. Moreover, a number of projects was dedicated to the increase of energetic efficiency, increase of reliability, increase safety level and optimization of tank farm. energyindustryreview.com

More than air. Solutions and innovations. - Fixed speed rotary screw compressors - Va Variable speed rotary screw compressors - Fixed speed oil-free compressors - Variable speed oil-free compressors - Centrifugal oil-free compressors - High pressure compressors - Blower Blowers and low pressure compressors - Adsorbtion dryers - Refrigeration dryers - Filters - Receivers - Pneumatical tools - Winches and hoists - Accessories and controls - Turn-key projects - Service and aftermarket

IRCAT- CO Bucharest Air Solutions Ingersoll-Rand Bucharest no. 10 street, Ciorogarla, Ilfov (A1 Highway, km 14) Tel: +40 21 317 01 90 Fax: +40 21 317 01 96 E-mail: office@ircat.ro www.ircat.ro www.compresoare.ro

OIL & GAS

ROPEPCA’S POINT OF VIEW

The truth about the payment of natural gas royalties The Romanian Association of Petroleum Exploration and Production Companies (ROPEPCA) expresses its concern about the harsh and unjustified accusations brought more and more often in the public space against the Romanian natural gas producers, accusations that refer to the allegedly incorrectly paying royalties on natural gas.

he members of the association consider that these allegations lack of any real substance and their apparition in the public space can be explained only by insufficient information about the process of calculating royalties. The “Technical instructions related to the take over and grasp of petroleum quantities representing royalties” as outlined in NAMR order 98/1988 state that the production value is determined by considering the prices used by the concession holders to exploit their petroleum quantities, which may not be lower than the reference prices established and communicated quarterly by the NAMR. In other words, the reference price for domestically produced natural gas as published quarterly by the 50

NAMR represents nothing more than a lower limit, which the price for calculating royalties is not allowed to go below. “We emphasize that the Romanian petroleum industry strictly followed the instructions received from NAMR and fulfilled the obligation to pay royalties, by applying in the computation formula of the royalties the maximum between the reference price set by NAMR – in its quality of representative of the Romanian State under the concession agreements – and the selling price, according to the applicable legislation”, states Harald Kraft, ROPEPCA President. ROPEPCA mentions that, for the better understanding of the subject, as well as for supplementary information regarding the issues related to the

upstream sector, it stays at the disposal of the mass-media representatives who wish to conduct interviews with the Association’s President, on the margin of this press release’s subject. ROPEPCA brings together 17 of the most important holders of oil concession agreements concluded with the Romanian state. The members of the association hold most of the oil concession agreements for Romania’s onshore exploration, development and production blocks, representing cumulated investments of 650 million euros in 2016, a turnover of almost 2.9 billion euros, contributions to the state budget of 300 million, and are responsible for creating and maintaining 14,800 jobs. energyindustryreview.com

OIL & GAS

ÂŠ Napcon

Neste Jacobs arranges the Operator World Cup, where the best operators in the world compete by playing the NAPCON Games Distiller. The finals will be held in Houston in February 2018.

Gamification reaches the process industry 52

energyindustryreview.com

OIL & GAS

Operator training can be both fun and efficient when done through gamification. Finnish company Neste Jacobs has launched a new game called NAPCON Games Distiller for operator training in the process industry. The game is the first one of a completely new generation of training games. “Although the main target is to train operators, the game is still very fun and engaging to play. Gamification is one of the best ways to enhance training in any field,” explains Mika Neffling, Sales Manager at NAPCON Games. Designed to train operators in the distillation process, the NAPCON Games Distiller can be used in practically any branch of the process industry that includes distillation. Sophisticated scoring systems and instant feedback enables players to track their progress and learn at a faster pace compared to traditional training methods. The game has been piloted with customers prior to launching and the results are very promising; all the respondents stated that the learning experience was suitable for their training needs and 75% stated that their learning time was decreased. The NAPCON Games Distiller can be used by operators on all levels, regardless of their earlier experience. “The game works just as well for beginners as for more experienced operators. It offers a safe way of learning in a digital yet realistic environment.” In the future, Neste Jacobs plans to launch more training games for other fields within the process industry. In addition to the industry, the game can also be used by universities and other educational institutes. Neste Jacobs has 30 years of experience in the process industry and over ten years of experience in creating

innovative training games. Mika Neffling believes it is not a coincidence that a Finnish company is at the forefront of digital training in the process industry. “In Finland we have an excellent track record of successful teaching methods as well as a world class gaming industry. When these two are combined, the results are groundbreaking.” Neste Jacobs is a preferred solution provider of high-quality technology, engineering and project services for a wide range of industries in the fields of oil and gas, petrochemicals, chemicals, biorefining, biochemicals, biopharma and industrial infrastructure. The company has 60 years of experience in technology development and industrial investment projects as well as maintenance and performance improvement in Europe, North and South America, Asia and the Middle East. Neste Jacobs NAPCON products offers a wide range of advanced process improvement and automation technology solutions to enhance production. The dedicated solutions based on extensive process knowhow and modern control software engineering fulfil all the needs on the areas of Production Optimization, Quality Optimization, Safety, Logistics, Business Optimization, Energy Efficiency, Big Data and Analytics. NAPCON offers also innovative solutions to train operators with simulators and games. 53

CONSTRUCTION

A potential $ 10.5 trillion market According to the ‘Growth Opportunities in the Global Construction Industry’ report issued by Research and Markets - the world’s leading market research store - the global construction industry is expected to reach an estimated USD 10.5 trillion by 2023, and it is forecast to grow at a CAGR (compound annual growth rate) of 4.2% from 2018 to 2023.

he future of the global construction industry looks good with opportunities in residential, non-residential, and infrastructure. The major drivers for the growth of this market are increasing housing starts and rising infrastructure due to increasing urbanization and growing population. Emerging trends which have a direct impact on the dynamics of the construction industry include increasing demand for green construction to reduce carbon footprint, bridge lock-up device systems to enhance the life of structures, building information systems for efficient building management, and the use of fibre-reinforced polymer composites for the rehabilitation of aging structures. Asia-Pacific is expected to remain the 54

largest market during the forecast period mainly due to increasing urbanization, higher expenditure on infrastructural development, and affordable housing projects. Within the global construction industry, the residential segment is expected to remain the largest segment. Financing for residential construction projects has become available with improvements in market fundamentals, like lower interest rates. The residential segment is expected to show above average growth during the forecast period. The construction industry is very important to the EU economy as well. The sector provides 18 million direct jobs and contributes to about 9% of the EU’s GDP. It also creates new jobs, drives economic growth, and provides

solutions for social, climate and energy challenges. The goal of the European Commission is to help the sector become more competitive, resource efficient and sustainable. The construction sector has been hit particularly hard by the financial and economic crisis. The main challenges facing construction are: • Stimulating demand: Efficiency improvements in existing buildings and renovations have the highest potential to stimulate demand. • Training: Improving specialised training and making the sector more attractive, in particular for bluecollar workers, technical colleges and universities. • Innovation: More active uptake of new technologies. • Energy efficiency and climate energyindustryreview.com

CONSTRUCTION

change: Buildings account for the largest share of total EU final energy consumption (40%) and produce about 35% of all greenhouse emissions.

CONSTRUCTION SECTOR IN ROMANIA The economic crisis had severe repercussions on the Romanian economy and, consequently, on the construction sector. According to the European Commission’s report (March 2017) there were 82,232 enterprises in 2014 the broad construction sector, a 16.2% decline since 2008, whereas employment dropped by 30.1% since 2008, reaching 562,107 people in 2015. Similarly, production in construction of buildings dropped by 28.3% and production in civil engineering experienced a 14.7% decrease over 20082015. Profitability was also affected, with the turnover of the broad construction sector declining by 22.4% over 2008-2015 (to EUR 28.3 billion) and the gross operating surplus dropping by 30.6% (to EUR 5.3 billion). Residential construction and the housing market suffered following the crisis, with the house price index dropping by 22.7% over 2009-2015 and the number of issued residential building permits falling by 38% in 2014 from the peak of 61,092 in 2008. Moreover, despite having the highest homeownership rate, Romania reports an above average housing cost overburden rate, highlighting housing affordability issues, as well as the highest overcrowding and severe housing deprivation rates in the EU, underscoring poor housing conditions. To address these issues whilst stimulating residential construction, the government introduced several schemes, such as the First Home Programme with a budget or RON 2.7 billion (EUR 594.8 million) for 2017, which provides state guarantees of up to 50% of the value of the mortgage. Furthermore, the National Housing Agency implements several affordable

home programmes, including the Rental Housing Units for Young People and the Mortgage-financed Dwellings Programme. The important cut in public spending on infrastructural projects over the last years has severely affected the quality of infrastructure, especially roads and highways, and was coupled with poor absorption of EU funds and questionable public procurement transparency. However, considerable investments are planned through the General Master Plan for Transport, which details strategic interventions in transport infrastructure up until 2030, for a total value of EUR 43.5 billion (with EUR 27.1 billion for road and EUR 10.2 billion for railway projects). In addition, Romania benefits from EUR 9.5 billion from the EU Regional Funds under the 2014‑2020 Large Infrastructure Operational Programme (LIOP), to be invested in transport, environment and energy projects. Given the poor energy efficiency condition of the building stock, Romania is taking action to stimulate its renovation, focusing particularly on residential buildings. The Thermal Rehabilitation Programme, with a budget of EUR 8.8 billion for 2017, covers up to 80% of the costs incurred for thermal rehabilitation interventions of apartment blocks. However, the construction industry is facing considerable pressure, particularly in insulation and thermal rehabilitation, with 50,000 such workers being estimated to be needed by 2020 to satisfy this demand. To this end, both public and private training initiatives were introduced to upskill the workforce. Infrastructure and residential construction are predicted to drive the revival of the Romanian construction sector in the future, with growth forecast at an annual rate of 5.4% in 2017, 2.0% in 2018, 3.8% in 2019 and 5.4% in 2020. However, improved absorption of EU funds, better project selection and management and greater procurement transparency are essential to ensure the sustained expansion of the sector.

TURNKEY SOLUTIONS FOR SITE ORGANISATION

The most cost effective MODULAR SPACE SOLUTIONS - for RENT Complete functional site organisation with shortest delivery time • complete functional oﬃce buildings (furniture & accessories) • data-net & utilities (internet -, data -, IT solutions, phone,

fresh & sewage water supply, waste empty, generators) • accommodation on site (sleeping room equipped units) • hygiene & confort ( sanitary units, lockers & eco toilets) • fencing & security ( mobile fence, security hut,

manned security 24/24, alarm systems & video surveillance) • storage solutions (lighted storage units with shelfs

and secure lock) • on site rental services (telehandler, crane, nacelle,

light towers) • EHS solutions ( ﬁre extinguisher, ﬁrst aid kit, FPE kit,

lighted signs, EHS signs) • design and consulting services

No. 30 Turda Street 550052 Sibiu, Sibiu County Tel: 0269.224.555 Fax: 0269.253.201

No. 4 Bucharest Ring Road 077125 Magurele, Ilfov County Tel: 021.457.44.55 Fax: 021.457.46.53

CONSTRUCTION

ASTALDI to build the suspension bridge over the Danube T Astaldi Group announced on January 17th that, in a joint venture, it has been awarded the contract to build a suspension bridge over the Danube, in the Braila area in Romania. The value of the works totals approximately EUR 435 million, with Astaldi responsible for a 60% share. 56

he contract calls for designing and building a suspension bridge totalling 1,975 metres in length, with a main span of 1,120 metres, and two side spans 490 and 365 metres long. Two bridge access viaducts, 110 metres in length, will also be built, in addition to 23 kilometres of connecting roads. For the performance of the works, one year is planned for design and 3 years for construction. The Customer is CNAIR, the state company headed by Romania’s Ministry of Transport and Infrastructure. The works are included in the Master Plan for the country’s transport, and are financed with dedicated EU funds under the Large Infrastructure Operational Programme (LIOP). The design and construction will be carried out in a joint venture by Astaldi (the leader, with a 60% share) with the Japanese company IHI (40%). IHI is the world leader in design and construction of suspension bridges and it has already worked with Astaldi for the construction of the Osman Gazi Bridge in Turkey, the world’s 4th longest suspension bridge and part of the GebzeOrhangazi-Izmir Motorway. The Astaldi Group has been in Romania for more than 25 years, having already built more than 100 kilometres of railways and undergrounds, 250 kilometres of roads and motorways, energyindustryreview.com

CONSTRUCTION

Head Office Leobersdorf Austria Office Vienna Austria Office Riyadh Kingdom of Saudi Arabia

and 2 international airports (Henri Coanda in Otopeni, Bucharest and Avram Iancu in Cluj-Napoca). In Bucharest, it has already built the iconic Basarab cable stayed viaduct, the extension of Line 4 of the underground, the Piata Sudului road underpass, and the Lia Manoliu national stadium. It is currently engaged in building, in Bucharest, the new Line 5 of the underground and the Mihail Flamaropol ice arena, and, elsewhere in the country, is constructing the A1-Curiel limited-access motorway, the OgraCampia Turzii motorway section, and 120 kilometres of the Curtici-Simeria double-track railway line, subdivided into three lots. Astaldi Group is one of Italy’s leading General Contractors, and among Europe’s top 25 firms in the construction industry, where it also works as a sponsor of project finance initiatives.

An international player for 90 years, it addresses the market by developing complex and integrated initiatives in the field of designing, building, and operating public infrastructures and large-scale civil engineering works, mainly in the areas of Transport Infrastructures, Energy Production Plants, Civil and Industrial Construction, Facility Management, Plant Engineering, and Management of Complex Systems. Listed on the stock market since 2002, it ended the 2016 financial year with a total order backlog of over EUR 27 billion and turnover of more than EUR 3 billion. It boasts more than 11,500 employees and operates mainly in Italy, Europe (Poland, Romania and Russia) and Turkey, Africa (Algeria), North America (Canada and the USA), Latin America, the Middle East (Saudi Arabia) and the Far East (Indonesia).

Office Ploies‚ ti Romania TECON Engineering SRL 16 Negru Voda Str. RO-100149 Ploiesti ‚ Tel.: + 40 (344) 401-333 Fax: + 40 (344) 401-334 romania@tecon.eu

www.tecon.eu 57

CONSTRUCTION

ROCKWOOL’s first stone wool factory in Romania

T © Rockwool

Initial investment of around EUR 50 million will create approximately 150 direct jobs and around another 300 indirectly jobs for services and logistics.

To be located on approximately 30 hectares in the Aricestii-Rahtivani commune near Ploiesti, in Prahova County, the new manufacturing facility will be the ROCKWOOL Group’s first stone wool factory in Romania. It will build further on the Group’s already solid presence in the country, where it has been active for almost 20 years through its sales representative office in Bucharest.

he factory will be a boost for the local economy as most of the raw materials and logistics services will be sourced from within Romania, and most of the people employed directly and in subcontracting companies will be local. The process of issuing the necessary permits and authorisations has been initiated, and stone wool production is expected to begin in 2019. “This investment will enable us to better support the Romanian government’s efforts to increase fire safety and energy efficiency in the country’s buildings. We encourage the government to continue working with EU member states on the Fire Information Exchange Platform and other initiatives to further improve fire safety regulations. As the world’s leading manufacturer of non-combustible stone wool products, we look forward to sharing with the government, customers, and other stakeholders the knowledge and expertise we have built up during our 80-year history in making buildings more comfortable, energy efficient, and fire safe,” Gilles Maria, Senior Vice President in the ROCKWOOL Group commented. “We have been supplying our Romanian customers with high quality insulation products and services for almost 20 years, and when complete, this new factory will allow us to deliver even higher levels of support in Romania as well as nearby countries. We’re excited to become part of the local community in Prahova and Romania, and want to thank the Romanian government, Invest Romania and the authorities in Prahova County and Aricestii Rahtivani for the very good support and collaboration on this investment project,” Rafael Rodriguez, Managing Director of ROCKWOOL South Europe also added. The announcement is a follow-up on the ROCKWOOL Group’s 24 February 2017 statement announcing its intention to purchase land for capacity expansion in the United States, Sweden, and Romania. energyindustryreview.com

FEBRUARY’S READING

Shaping the Fourth Industrial Revolution

he World Economic Forum released on January 18th a new book by its Founder and Executive Chairman Klaus Schwab entitled Shaping the Fourth Industrial Revolution. The book aims to help leaders develop the techniques necessary to harness technological advances to solve critical global challenges. The book is a sequel to Schwab’s bestselling 2016 book, The Fourth Industrial Revolution. The new book provides a practical guide to understanding 12 sets of emerging technologies from a systems perspective and better appreciating the rules, norms, institutions and values that shape their development and use. Such an approach is necessary, Schwab argues, given the unprecedented speed at which technology is developing, which makes outdated and redundant the approaches of governments, regulators and companies on which we rely to manage the impact of technologies. Schwab’s response is for leaders to adopt a ‘systems leadership’ approach to ensure that developments in technology are not able to occur without parallel consideration being given to rules, norms, values and infrastructure. Unless technology develops within an inclusive and sustainable governance system, the Fourth Industrial Revolution could exacerbate income inequality and leaving billions of people behind, while wasting the opportunity to deploy technology to help address global challenges.

“It took the world more than a decade to develop a collective response to climate change. If we take the same amount of time to respond to the Fourth Industrial Revolution, we will have lost the opportunity to influence the development of the technologies that shape the way we work, live and act. If we act now, we have the opportunity to ensure that technologies – such as artificial intelligence – sustainably and meaningfully improve the lives and prospects of as many people as possible,” said Schwab. The book calls on leaders to rapidly adopt the concept of agile governance of technologies, matching the nimbleness of the technologies and the privatesector actors who create them in constantly updating and rethinking rules in collaboration with other sectors. For businesses, greater experimentation with

new technologies and greater investment in people and skills are required to maximize firms’ ability to develop and bring to market winning innovations. When it comes to the general public, Shaping the Fourth Industrial Revolution urges people to be engaged in the issues surrounding the evolution of technology, and to make their voice heard to ensure that technology plays a positive role in helping to build a sustainable, inclusive, innovation-driven future. Shaping the Fourth Industrial Revolution draws on the contributions of more than 200 of the world’s leading technology, economic and sociological experts to present a practical guide for citizens, business leaders, social influencers and policy-makers. It outlines the most important dynamics of the technology revolution; highlights important stakeholders who are often overlooked in the discussion of the latest scientific breakthroughs; and explores 12 technology areas central to the future of humanity. It was co-authored by Nicholas Davis, the World Economic Forum’s Head of Society and Innovation, and features a foreword by Satya Nadella, Chief Executive Officer of Microsoft Corporation. The preparation of this book has also led to the creation of the Center for the Fourth Industrial Revolution in San Francisco, soon to be supported by a network of affiliated centers around the world, to establish an agile governance cooperation platform for business and government. 59

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€ 873 million in clean energy infrastructure

U Member States recently agreed on the Commission’s proposal to invest EUR 873 million in key European energy infrastructure projects. Europe’s transition to a clean and modern economy is the goal of the Energy Union, a priority of the Juncker Commission. It is now becoming the new reality on the ground, and one important building block is adapting the European infrastructure to the future energy needs. Properly interconnected electricity lines and gas pipelines form the backbone of an integrated European energy market anchored on the principle of solidarity. Thus, supporting 17-selected electricity and gas projects, signals Europe’s willingness to upgrade and make the European energy system more competitive that will ultimately deliver cheaper and secure energy to all European consumers.

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The EU funding for the chosen projects comes from the Connecting Europe Facility (CEF), the European support programme for trans-European infrastructure. “Once more we demonstrate that cooperation and solidarity pay off and that the Energy Union is becoming a reality with tangible impact on the ground. These are important projects with major cross-border benefits and by implementing them we strengthen energy resilience of EU Member States. The Connecting Europe Facility has yet again shown tremendous added value in the modernisation of the European economy,” Commission Vice-President for Energy Union Maroš Šefčovič said. “The construction of the Biscay Gulf France-Spain interconnection marks an important step towards ending the isolation of the Iberian Peninsula from the rest of the European energy market. Only a fully interconnected market will improve Europe’s security of supply, reducing the dependence of single suppliers and giving consumers more choice. An energy infrastructure which is fit for purpose is also essential for renewable energy sources to thrive and for delivering on the Paris Agreement on climate change,” Commissioner for Climate Action and Energy Miguel Arias Cañete underlined. Of the 17 projects selected for funding: • 8 are in the electricity sector (EU support EUR 680 million) and 9 in the gas sector (EU support EUR 193 million). • 4 relate to construction works (EU support EUR 723 million) and 13 to studies (EU support EUR 150 million). In the electricity sector, a grant of EUR 578 million, the largest Connecting Europe Facility-Energy grant ever awarded, will be decisive the construction of the Biscay Gulf France-Spain interconnection. The new electricity link will better integrate the Iberian Peninsula into the internal electricity market. The project, with a 280 km long off-shore section, incorporates technologically innovative solutions

regarding the design of the route over the Cap Breton canyon and the French land section, which is fully underground. This new link will nearly double the interconnection capacity between both countries – increasing it from 2,800 MW to 5,000 MW, and will bring Spain closer to the 10% interconnection target from the current level of 6%. Such a leap will allow for an enhanced incorporation of renewable energies, thus contributing strongly to the clean energy transition and to the EU’s clean energy transition policy. SuedOstLink, one of the largest German energy infrastructure projects, will receive EUR 70 million for activities to enable the construction works to start. The project consists of 580 kilometres of high-voltage cables laid fully underground. The power line will create an urgently needed link between the wind power generated in the north and the consumption centres in the south of Germany. It will thus ensure better integration of renewable energies, as well as enhance the cross-border exchange of energy with neighbouring EU Member States. A grant of EUR 27 million will be allocated to support the construction of a new 400 kV internal power line between Cernavoda and Stalpu (Romania), which will contribute to increase the interconnection capacity between Romania and Bulgaria and help integrate wind power from the Black Sea coast. In the gas sector, the Connecting Europe Facility will support infrastructure projects important for two island Member States. First, the introduction of natural gas in Cyprus through the CyprusGas2EU project (EU support EUR 101 million) will end the current energy isolation of the Cyprus, bring diversification to a region mostly dominated by one single source of supply and help reduce air pollution and emissions by allowing switching from heavy fuel oil to gas for power generation. It will also improve energy security and price competitiveness.

Secondly, a EUR 3.7 million grant will be awarded for a study on the Malta-Italy Gas Interconnection which aims to end Malta’s isolation from the European Gas network. This interconnector will link Malta to the Italian market, enhancing the island’s security of supply in gas in similar way a sub-sea cable funded by an earlier EU programme has done for the electricity sector. Funding will also be allocated to a study on the permit-granting process of the STEP project (EUR 1.7 million), which aims at creating a new gas interconnection point between France and Spain to increase the bidirectional flows between the Iberian Peninsula and France and improve the interconnection with the internal gas market through the development of the Eastern gas axis. The Commission will also invest in studies to support the synchronisation of the Baltics with the central European electricity network. The decision is of key importance for Estonia, Latvia and Lithuania and Poland to agree on the way forward to find, by the end of May 2018 at the latest, a solution on the best way to synchronise the Baltic States’ electricity grid with the continental Europe system, in line with the results of the ministerial meeting from December 2017 (STATEMENT/17/5271). Under the Connecting Europe Facility, a total of EUR 5 billion has been allocated to trans-European energy infrastructure for the period 20142020. In order to be eligible for a grant, a proposal has to be ‘a project of common interest’. When completed, the projects will each result in significant benefits for at least two Member States, enhance security of supply, contribute to market integration, and enhance competition, as well as reduce CO2 emissions. The list is updated every two years. The latest PCI list was published by the Commission in November 2017. The Connecting Europe Facility (Energy) already granted EUR 647 million to 34 projects in 2014, EUR 366 million to 35 projects in 2015 and EUR 707 million to 27 projects in 2016. 61

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Global Smart Cities spending is projected to rise from USD14.9 billion in 2015 to USD34.4 billion in 2020

he concept of ‘smart cities’ was conceived as a part of IBMs’ Smarter Planet initiative in 2008. In the midst of a global economic crisis, IBM began a conversation with the world about the promise of a smarter planet and a new strategic agenda for progress and growth. A year later IBM launched its Smarter Cities campaign, a comprehensive approach to helping cities run more efficiently, save money and resources, and improve the quality of life. On January 12, 2010, IBM Chairman and CEO Sam Palmisano kicked off the new year and decade with a speech at Chatham House in London, England called ‘The Decade of Smart,’ in which he highlighted dozens of initiatives. “The questions we are hearing are no longer about whether the technology to build a smarter planet is real,” he said. “Now, there is an enormous hunger to learn how to get smarter operations up and running.”

PROPELLING CITIES AND COMMUNITIES TO THE NEXT GENERATION According to a study by Roland Berger, the smartest cities in 2017 were Vienna (1st place), Chicago (2nd place), Singapore (3rd place), London (4th place), Santander (5th place) and New York (6th place). As far as the ranking is concerned, in terms of the type of programs developed, the top of smart cities includes: • Singapore, Lyon, San Francisco Mobility • Copenhagen, Santander, Singapore Energy and Environment • Chicago, Vienna, Singapore Education • Singapore, Vienna, Aarhus - Health The capital of Austria, the city of Vienna can boast that it is the smartest city in the world, just seven years after the application of this concept. For the Capital of Waltz, this concept has brought together six themes of development: population, environment, administration, economy, energy and

mobility, and the main goals pursued were resource conservation, quality of life and innovation. The results of this city transformation program are visible today everywhere. The city has one of the best performing public transport networks: 5 subway lines with 104 stations over a distance of 79 kilometres, 29 tram routes and 115 bus routes and investments in city development will continue at a sustained pace in the years to come. The city has an application that provides realtime information about the schedule of each route, the hours of departure of all trams and buses on all lines, tickets can be purchased directly from the application, information about city attractions, maps. The city has also developed many bicycle paths, even making it possible to make a bicycle tour of the city. The 120 CityBike terminals provide 1,500 bicycles and, in addition, there is an application that provides information about stations and shops where bicycles can be bought or rented. Vienna has developed in the recent years the car-free concept. It is about residential areas where car access is prohibited.

170 SMART PROJECTS IN A SINGLE CITY The Amsterdam Smart City initiative was launched in 2009, the city now being one of the most developed from this point of view, with over 170 Smart City projects. These include smart lighting, which adjusts the brightness of street lamps depending on pedestrian traffic, an application that allows residents to rent their parking space and the generated data can then be used by the city to determine the parking demand and traffic flows in Amsterdam, a number of homes have been provided with smart energy meters, traffic is monitored, and traffic information is provided to users to choose the best routes.

DEVELOPMENT CENTRE IN BUDAPEST Deutsche Telekom opened at the 63

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end of last year in Budapest a research centre to accelerate the development of smart cities in Europe and has concluded a partnership with Cisco for a new application intended for municipal authorities providing Wi-Fi. The new European Smart Solutions Centre (ESC) in Hungary will bring together the expertise and activities of the German telecom operator. The centre will provide a wide range of solutions, as well as consulting to help the cities use their urban development funds.

Commission. It brings together cities, industry and citizens to improve urban life through more sustainable integrated solutions. This includes applied innovation, better planning, a more participatory approach, higher energy efficiency, better transport solutions, intelligent use of Information and Communication Technologies (ICT), etc.

EIP-SCC

Instant access to data on traffic, pollution, recycling, SMS parking payment, Wi-Fi in public transport etc. are just some of the facilities that make up the image of a smart city. Everything, at the distance of only a click on your

The European Innovation Partnership on Smart Cities and Communities (EIP-SCC) is a major market changing undertaking supported by the European

THE SMART CITY CONCEPT CONQUERS ROMANIA

computer’s mouse or a touch of your mobile phone screen. More and more cities from Romania have joined in the recent years the competition targeting the transformation into Smart City, and the results are already starting to show, even if in many cases we are talking only about pilot projects. To apply this concept, the municipalities can also use nonreimbursable European funds, but it is all related to the preparation of projects, and in this chapter, we still have great shortcomings. There are various financing opportunities for the Romanian cities to implement smart urban projects. Thus, for the period 2014-2020, within the regional operational program, two billion euros were allocated for urban mobility,

ROMANIA’S TOP CITIES CARRYING OUT SMART PROJECTS ALBA-IULIA Companies involved: Orange, Siemens, Microsoft, Schreder, Direct One, Philips, Vegacomp Consulting Number of projects: 60 Traffic monitoring system and other smart solutions; Air quality monitoring; Monitoring of water consumption and network losses; Securing internet access for all smart city components and monitoring the system through the Business Internet Security platform; Electric vehicle charging stations; Solution for analysing and reporting budget revenue; Public barometer solution (allows consultation of city residents on various topics); Integrating the Dispatch System with other mobile incident reporting solutions; WiFi hotspots with secure internet

access in public areas; LoRaWAN infrastructure through which applications and devices connected to the Internet will communicate; Digital class solution containing tablets, digital educational content, digital class book, secure WiFi Internet access and filtered web traffic; An integrated tourist platform; Electric bike rental service; Online beacons for public transport; Video-Video Analytics Surveillance; Virtual tour of the city; Smart Parking; The Civic Alert solution - which helps residents alert the authorities on the problems identified in the city; City Analytics - through which the municipality can track the city’s pedestrian traffic trends, depending on the day’s weather or weather conditions, also identifying the most common routes

CLUJ-NAPOCA Companies involved: Evozon, Tpark, ZebraPay Number of projects: 9 Smart Parking; Renewable Energy; Citizen-Municipality Relationship; Energy and Environment; Charging Stations for Electric Vehicles; Adaptive Traffic; My Cluj - the application of Cluj-Napoca Municipality for complaints BUCHAREST Companies involved: Enel (the first utility in the world to replace the traditional electromechanical meters with smart meters that make it possible to measure consumption in real time and manage contractual relationships remotely; this innovative tool is key to the development of smart grids, smart

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while almost EUR 1.2bn are provided for integrated and sustainable urban development, being about money directly managed by the county capital cities. Also, starting with 2014, through the main research and innovation program of the European Union, Horizon 2020, EUR 430 million have been allocated for projects within the initiative ‘Smart cities and communities’.

THE CENTENARY YEAR FINDS ALBA IULIA SMART One of the most ambitious projects for the transformation of a city into a Smart City belongs to Alba Iulia municipality. The project’s deadline is obviously this year, given that the Centenary of the Union will be

cities and electric mobility), I’Velo, Telekom, ZebraPay Number of projects: 6 Smart Energy; Bike Sharing; Electric buses; IT&C; Self-service terminals; Charging stations for electric vehicles GALATI Companies: UTI Number of projects: 5

celebrated here. This is the most complex project, companies being involved together with the municipality. The city already benefits from broadband internet, Wi-Fi (228 access points in the citadel and the city and 15 access points in public transportation) and LoRaWAN (network dedicated to objects connected to the Internet), smart public lighting (monitoring and control sensors for the lighting poles, on which new LEDs have also been installed). A ‘civil alert’ system has also been implemented, through which notifications and photos can be sent at any time, and within several seconds they are already on the table of municipality’s dispatching centre. The soft-school education process hasn’t been left out of this project, which means that in several high schools of the city

a Smart solution is implemented, with digital educational content, digital class book, as well as free Internet, with filtered web traffic. In terms of tourism, there is a mobile application – ‘e-albaiulia’, which is a virtual guide for tourists coming to the city.

Number of projects: 4

stations for electric vehicles

Smart Parking; IT&C; Charging stations for electric vehicles; Remote reading meters

IASI Companies involved: UTI, ZebraPay Number of projects: 3

BRASOV Companies involved: Tpark, ZebraPay Number of projects: 4

PARK OF THE FUTURE IN BUCHAREST Tineretului Park, from the District 4 of the Capital, has been a road maker in terms of projects targeting Bucharest’s transformation into a city of the future. Here, Telekom Romania, together with other partners, have introduced smart parking solutions, free Wi-Fi, smart lighting, integrated on a dedicated Internet of Things platform.

RESITA Companies involved: Siemens, ELBA, Tpark, ZebraPay Number of projects: 2

Intelligent Traffic Monitoring System; the ‘Knowledge based economy’ Project; Waste composting plant; Rehabilitation and extension of the sewerage network and modernization of the wastewater treatment plant; Collection and transport of municipal waste

Smart Parking; Smart Lighting; Charging stations for electric vehicles; Smart crosswalk CONSTANTA Companies involved: Telekom, ZTE, Tpark, ZebraPay Number of projects: 3

ARAD Companies involved: Digitax, Waze, Tpark Number of projects: 1

TIMISOARA Companies involved: ZTE, Orange, Continental, Aquatim, Tpark, ZebraPay

Telekom Group has launched with China’s ZTE a smart-city project in Constanta; Smart Parking; Charging

Mobility; Charging stations for electric vehicles; Adaptive Traffic Management System

Smart traffic management; Smart lighting solutions

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ENEL, THE DIGITAL TRANSFORMATION Enel X, launched in London on 20 November 2017, is the new brand identity, designed by Wolff Olins, for the Global Business Line e-Solutions. The Global Business Line e-Solutions offers a series of integrated digital solutions linked to electric mobility in order to improve people’s lives and the environments in which we live. Just like the four points on the letter X, the new brand has four fields of activity: e-City will develop sustainable and high tech solutions

TELEKOM HAS BROUGHT THE SMART STREET IN CONSTANTA Telekom Romania has also started a pilot project in Constanta, together with its partner, ZTE, the solutions applied being subordinated to the smart street concept. Smart parking and lighting solutions, multifunctional lighting poles (with video surveillance, car charging station, environmental sensors, led display) and free Wi-Fi are the innovating ideas implemented in the area of the Sports Hall in the city. MULTIFUNCTIONAL STREET POLES IN BRASOV The project for the transformation of the city at the foot of Tampa Mountain into a smart one started in 2015. Works for the modernization of the public lighting system were completed last year in Brasov. The poles were provided with plugs for charging electric cars, as well as with devices allowing brightness adjustment. The investment 66

for the new smart cities, from street lighting and the illumination of artistic heritage sites to energy efficiency, security and fibreoptic connections; e-Home is for smart homes that are capable of saving increasing quantities of energy and offering greater comfort and wellbeing; e-Industries provides consultancy services, energy efficiency and distributed generation technology and the creation of off-grid and Demand Response solutions; e-Mobility

‘CURRENT’ BY GE Powered by GE, Current is the digital engine for intelligent environments. A first-of-its-kind start-up within the walls of GE, Current blends advanced energy technologies like LED and solar with networked sensors and software to make commercial buildings and industrial facilities more energy efficient & productive. It combines GE’s capabilities in LED, solar, energy storage, electric vehicle infrastructures, and wireless controls into a sustainable energy ecosystem designed to help customers save money and put energy back into growing their businesses and cities.

will promote the spread of efficient electric mobility with recharging infrastructure, Vehicle to Grid (V2G) technology and second-life services for batteries. “Enel X is ready to respond to the new requirements that come from the transition from a centralized energy model to one that is distributed. The X in the logo also symbolizes the embrace between the company and the customer,” Francesco Venturini, Head of Global Business Line e-Solutions, affirms.

amounted to RON 10mln, but the municipality will save RON 650,000 per year. The project also has a component targeting citizen safety, installing surveillance cameras and panic buttons.

SMART CITY PIONEERS IN TIMISOARA Timisoara is also adapting to the Smart City concept. In the central area the Internet is free of charge, as well as in many means of public transportation. The project, which started last year, is carried out by companies Continental and Orange.

AMBITIOUS PROGRAM IN ORADEA The local authorities in Oradea have extremely ambitious plans, wishing to transform the city into the first real Smart City in Romania. The project targets several social areas, from administration, infrastructure, energyindustryreview.com

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MINDSPHERE - SMART DATA FOR SMART CITIES The future of smart cities will be shaped by the Internet of Things as a networking technology and by smart data as a resource for forecasting. For example, it will be possible to coordinate power generation and power demand more precisely than ever before. Such developments will make increasing decentralization manageable, merge the markets for heating and electricity, and

integrate industrial facilities, buildings, and vehicles as energy suppliers – and allow citizens to evolve from consumers to active prosumers. One step in this direction is offered by MindSphere, an open, cloud-based IoT operating system from Siemens that offers both connectivity and a range of industrial applications so that any enterprise, regardless of industry or size, can begin analysing data to

mobility, energy and business to housing, education, culture, medicine and computer security.

the city aims to bring back to life, in a dynamic and updated formula, the industrial potential of the city. Known in the past century as the most important oil producer in Europe, the city of Ploiesti aims to re-become a major regional pole, by revitalizing the industrial sector and the subsequent areas. The municipality primarily plans to revive the traditional sectors and higher education, by establishing, together with the Petroleum-Gas University (UPG), a center for research and innovation in renewable energy. The projection of a desirable future towards 2030 also includes the main lines of action: accessing and implementing sources of European funding for research and innovation (particularly Horizon 2020); setting up, within UPG, new profile departments (water - hydraulic energy, potential osmotic power geothermal and biomass energy), by attracting specialists from the country and abroad; the development of investments supported in preuniversity education, especially on the component of vocational schools

SILICON VALLEY EXPANDS TO CLUJ-NAPOCA Cluj-Napoca is among the first cities that have noticed the advantages that implementing the Smart City concept brings for its inhabitants. Now in this city parking is paid through SMS, taxes are paid online, the urban planning certificate is also obtained online, and any dissatisfaction can be sent directly to the mayor through an application. The next step is installing on the streets special sensors to measure pollution and noise. In order to diminish pollution, the municipality has started a program for the acquisition of electric buses.

PLOIESTI, CITADEL OF THE FUTURE A pilot project has started in Ploiesti, born from the desire to ensure a higher quality of life for the entire community. The ambitious plan to regenerate

optimize its operations. As a first example, Siemens is working with Singapore to turn the city state into a smart nation. Singapore is the first country worldwide to implement MindSphere on a pilot basis to harvest information from its infrastructures. Siemens supports this process through the creation of a digital information hub, which entered service on July 11, 2017.

for the purpose of training specialists in the field of renewable energy; increasing economic competitiveness and community welfare through the development of business infrastructure, with a focus on capitalizing on local resources and creating industrial parks in areas near the city; the development of coherent environmental policies aimed at improving the quality of the environment, protecting human health, identifying solutions to reduce the effects of pollution, prudent and rational use of resources. “I believe that 100 years after the Great Union we do not need slogans and ceremonies without substance, but first of all we need action. I notice at the level of local governments the growing interest for a theme appropriate to the present, namely the smart development of our cities. It is a concept that has a huge potential to turn Romania into a prosperous country,” Romanian President Klaus Iohannis said during the event ‘Cities of Romania 100 years from the Great Union. A smart future for Ploiesti’, organized by Ploiesti Municipality in collaboration with the Petroleum-Gas University on 22 November 2017. 67

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SMART SPECIALISATION

60 European regions get ready to develop joint energy projects The Smart Specialisation Platform on Energy (S3PEnergy) was the focus of an event in Brussels on 25 January 2018. The platform, organised by the European Commission, facilitates partnerships between EU regions that plan investments in energy innovation and assists them to use funding more effectively. Five interregional partnerships that bring together sixty European regions have been created so far, in bio-energy, solar energy, renewable marine energy, smart grids and sustainable buildings. 68

he event was a chance for representatives of the regions involved, universities, the Commission, the European Committee of the Regions and the European Parliament to discuss their mutual collaboration so far, key lessons learnt, and avenues for action in the future. The regions will now move on to the practical phase: implementing pilot activities and defining business and funding plans. S3PEnergy will help to identify and combine EU funds to finance projects, in line with the EUâ&#x20AC;&#x2122;s Energy Union strategy and the EU Plan in strategic investments in jobs and growth. Furthermore, two of the partnerships, in sustainable buildings and renewable marine energy, were recently selected energyindustryreview.com

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to receive tailored support under a new EU-funded pilot action for interregional innovation.

SMART SPECIALISATION PLATFORM ON ENERGY Energy is a topic with high interest amongst the Member States and regions registered in the S3 Platform. These strategies set priorities at national and regional levels to build competitive advantage by developing and matching research and innovation (R&I) own strengths with business needs, to address emerging opportunities and market developments in a coherent manner, while avoiding duplication and fragmentation of efforts. They may take the form of, or are included in, a national or a regional R&I strategic policy framework. In this context, there is an emerging need to align innovation roadmaps across EU policies and territories. There is also an upcoming challenge in accompanying the implementation of innovation strategies with the appropriate methodological development and related tools, with regard namely to benchmarking, transnational cooperation and mutual learning. The Smart Specialisation Platform on Energy (S3PEnergy) is the space where MS, regions and community members receive support for the optimal and effective uptake of Cohesion Funds for sustainable energy. The main objectives of the S3PEnergy are: • To support the implementation of the smart specialisation strategies of those regions/countries that have chosen energy-related priorities, in particular as regards energy innovation activities at (sub)national, regional and local levels; • To assist countries in the uptake of the Cohesion Policy funding opportunities for energy. The S3PEnergy will contribute the EU energy policy priorities by

facilitating partnerships between EU regions that have identified renewable energy technologies and innovative energy solutions as their smart specialisation priorities and by promoting alignment between local, regional, national and European activities on energy sustainability, competitiveness and security of supply. The S3PEnergy is addressing energy issues as part of the European efforts to achieve a shared vision on knowledgebased energy policy in regions and to encourage the financing of viable investments in Europe in line with the EU’s Energy Union strategy and the EU Plan in strategic investments in jobs and growth, the latter to be realised through the European Fund for Strategic Investments (EFSI). Numerous activities foreseen in the EU’s Energy Union five dimensions including a fully-integrated internal energy market, supply security, energy efficiency, emissions’ reduction and research and innovation in low-carbon technologies need to be put in practice at local or regional level. Despite these activities rely on local potential they need to be also consistent with EU broad energy policy objectives; therefore, the S3PEnergy will step-in to assure the developments in a coherent manner. The ultimate objective of the S3PEnergy is to contribute to the shift towards a low carbon economy by 2050 and to respond to some of the societal challenges identified in the EU 2020 Strategy. The EU has set out plans for a new climate and energy policy framework. Europe is determined to reduce its greenhouse gas emissions by 40% by 2030 compared to 1990. Hence, there is a clear link between innovation and the EU’s energy and climate targets.

ENERGY IN COHESION POLICY The S3PEnergy is addressing energy issues as part of the European efforts to achieve a shared vision on knowledgebased energy policy in regions. Activities initiated at local or regional

level should be developed in a more coherent manner: although they rely on local potential, they have to be also consistent with EU broad energy policy objectives. The goal is to better align local and regional activities through the identification of the technologies and innovative solutions that contribute to the EU energy policy priorities. These priorities include sustainability, competitiveness and security of supply.

FUNDING OPPORTUNITIES During the programming period 2014–2020, EU Structural and Investment Funds (ESIF) play an essential role in promoting innovation in the field of energy, developing ICT applications in the field of energy, supporting SMEs and boosting the shift towards a low-carbon economy in all sectors. Around EUR 40 billion will be allocated by the Cohesion Policy funds (ERDF, ESF and CF) to these objectives in the energy field. They include interventions in energy efficiency, renewable energy, smart distribution grids and sustainable urban mobility, as well as R&I in these areas, in complementarity with Horizon 2020. Cohesion Policy is thus making an increasingly important contribution towards EU challenges for clean, efficient and secure supply of energy. The allocated amounts for lowcarbon economy represent more than a doubling of funding compared to the previous programming period. Although Cohesion Policy funds will offer significant opportunities, their substantial extension will also represent an important challenge in terms of the readiness in the Member States and regions for their uptake. The absorption capacity of regions will become an issue. Moreover, the combination of Cohesion Policy funds with research financing, like Horizon 2020, will require learning and creative thinking. Finally, it is important to make sure that EU funding will leverage additional na tional public and private co-financing. 69

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EU Clean Energy Forum brings renewables to the fore

he first high-level meeting of the renewables section of the EU Clean Energy Industrial Competitiveness and Innovation Forum took place in Brussels on 9th January at the European Commission. Opened by Miguel Arias Cañete, European Commissioner for Energy and Climate Action and chaired by Dominique Ristori, Director-General for Energy, it was attended by a group of more than 20 CEOs, industry leaders and renewables associations and international entities (such as the European Investment Bank and the International Renewable Energy Agency). The Forum is part of the framework established to support the ‘Clean Energy for All Europeans’ package, launched in November 2016, and follows up on President Juncker’s call to include the decarbonisation industry as one of the key sectors for a renewed EU industry strategy. Discussions focused on the vast growth opportunities arising from the clean energy transition and on ways to improve the industrial underpinning for renewables in the EU. There was wide consensus that, with an advanced, ambitious and stable regulatory framework for the period from 2020-2030 under development, a strong European industrial base in the 70

renewables sector is essential if the EU wants to fully support the clean energy transition and be at the vanguard of these technologies in the world. Participants expressed pride in Europe’s renewables industry, which covers all the array of renewable energy technologies and includes the full sectoral supply chain, from material developers, to technology providers, passing through project developers. EU technologies, knowhow and knowledge are used throughout the world but an effort needs to be made to ensure that some sections of the supply chain do not leave the EU and that there is a strong, dynamic and unfragmented EU market for renewables. Renewable energy markets are opening up globally, and in this context, innovation is, as always, the only way for the EU to remain the global technology leader that it is. To continue to compete internationally with high quality products and projects, Europe must focus on areas like power electronics, sector coupling and enhanced digitalisation. Worldwide market conditions should remain evenhanded, with the rules for tenders fair and transparent, in order to guarantee that the EU industry and its project developers can compete on an equal footing. There was wide support expressed for an increase in R&I investment in the EU, which has the potential to bring about

an overall reduction in the price of RESproduced energy. Finally, participants agreed that a single European common strategy should coalesce around the industry, by stronger coordination amongst EU countries, renewable energy industries, developers of standards and research institutions. The participants committed themselves to make the Clean Energy Industrial Competitiveness and Innovation Forum a constructive platform that will deliver real results, through a specific taskforce that will identify and develop key indicators along the value chain to monitor competitiveness and present concrete and specific recommendations.

NEXT STEPS Following the High-Level Meeting, a public event with all three sections of the Clean Energy Industrial Competitiveness and Innovation Forum will be organised during the upcoming EU Industry Days on 22-23 February 2018. This will also serve as a spring board to assert EU industrial leadership in low carbon energy technologies to be show-cased during the 9th Clean Energy Ministerial and the 3rd Mission Innovation meetings in Malmö and Copenhagen in the week of 22-25 May 2018. energyindustryreview.com

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Vox Maris Grand Resort Costineยบti, Romania

14th Edition

RENEWABLES

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RENEWABLES

The European Parliament approved, on January 17th, the Directive on the promotion of renewable energy sources. According to the legislation adopted by MEPs, member states have to reach a target of 35% of energy coming from renewable sources by 2030. Increased energy consumption from renewable sources along with energy savings and increased energy efficiency represent an essential part of the package of measures needed for reducing emissions of greenhouse gases. This is in line with the commitment made by the European Union under the 2015 Paris Agreement on climate change and the need to achieve zero emissions by 2050. he solutions highlighted by T MEPs include reducing energy consumption, technological improvement, the extension of public transport, the use of high energy efficiency technologies and the promotion of the use of renewable energy in electricity generation, heating and cooling of buildings, as well as in the transport sector. These measures, together with energy efficiency measures, lead to a significant reduction in emissions of greenhouse gases, and also to a reduction in the EU’s energy dependency.

ENERGY EFFICIENCY, AT LEAST 35% Improving energy efficiency can reduce CO2 emissions and the EU’s annual bill of EUR 350 billion for energy imports. That is why the European Parliament has set a mandatory target of reducing energy consumption in the EU by 35% by 2030. An important area where improvements can be made is the heating and cooling of buildings, accounting for 40% of all energy consumed in the EU, with around 75% of these buildings being energy-inefficient. At the end of last year, the Parliament, the Council and the European Commission decided that EU Member States should prepare long-term national strategies to support

the renovation of residential and nonresidential buildings. The goal is that by 2050, buildings in the EU will no longer lead to greenhouse gas emissions. The European Parliament has recently simplified energy labels for household appliances, such as lamps, TVs and vacuum cleaners to help the consumer compare their energy efficiency. It also envisages the establishment of a cooperation and control mechanism to monitor the progress made towards achieving the EU’s energy and climate change targets by 2030, especially in terms of energy efficiency and renewable energy. Also, MEPs have decided that, by 2030, 35% of Europe’s energy consumption must be from renewable sources. Each EU member state will be able to set its own targets to achieve this goal, the only condition imposed by Brussels being that states may deviate by a maximum of 10% from these targets under certain conditions.

ENERGY CONSUMED IN TRANSPORT In 2030, each Member State will have to ensure that 12% of the energy consumed in transport comes from renewable sources. The contribution of ‘first generation’ biofuels (from food and food plants) will have to be limited at

the level of 2017 with a maximum of 7% in transport. MEPs also want to ban the use of palm oil starting with 2021. The share of advanced bio-fuels (which have a lower impact on land use than the foodbased), renewable fuels for transport of non-biological origin, waste-based fuels and electricity from renewable sources should be at least 1.5% in 2021, and by 2030 to grow to 10%. By 2022, 90% of the filling stations on the trans-European roads must be equipped with recharge points for electric cars. As far as biomass is concerned, some restrictions will be introduced. The Community Parliament wants the support schemes for biomassbased renewable energy to be created so as to avoid unsustainable use of biomass for energy production if there are better uses, as carbon stored in wood could be released into the atmosphere by burning for heating.

GENERATED ENERGY DELIVERED INTO THE NETWORK The European Parliament has decided to give more importance to household energy producers, i.e. those who produce electricity for their own consumption with the help of renewable production systems, and that the surplus be sold into the power grid without any restrictions. Brussels will ask Member States to assess the existing barriers to achieving this endeavour and to eliminate them as soon as possible.

10-YEAR NATIONAL PLANS In order to reach the Energy Union goals, each Member State must notify the European Commission by 1 January 2019 and then every ten years on its national energy and climate policy plans. The first plan should refer to the period 2021 - 2030, and the next should cover the next ten years. The Commission will assess integrated national plans and make recommendations or take remedial action if it is found that a Member State’s progress in this area is not sufficient or the actions taken are not enough. 73

RENEWABLES

European Investment Bank to boost wind farms he European Investment T Bank (EIB) is providing EUR 48 million of finance for the construction and operation of three new wind farms in Austria (Kreuzstetten IV, Dürnkrut II and Hipples II) with a total capacity of 39 MW. The facilities will be operated by Windkraft Simonsfeld AG, which has been running wind farms successfully in Austria since the end of the 90s. The overall capacity of the wind farms operated by Windkraft Simonsfeld AG currently amounts to 168 MW. The bulk of the EIB financing package – EUR 35m – will go to Windpark Kreuzstetten IV GmbH, a wholly owned subsidiary of Windkraft Simonsfeld AG, responsible for building and operating the three planned wind farms. This financing operation has been made possible by the European Fund for Strategic Investments (EFSI), commonly known as the ‘Juncker Plan’. EFSI is the main pillar of the Investment Plan for 74

Europe (IPE), under which the EIB Group and the European Commission are working together as strategic partners to boost the competitiveness of the European economy. The remaining EUR 13 million of EIB funds will be advanced for project financing via Erste Bank Österreich. “The promotion of sustainable, competitive and secure sources of energy is a key EU policy objective and a priority sector for EIB financing. We are very pleased to be able to promote the development of renewable energies in Austria in close cooperation with our Austrian partners. The Kreuzstetten, Dürnkrut and Hipples wind farm projects are a clear sign that Austria takes climate and environmental protection very seriously,” The EIB Vice-President responsible for operations in Austria, Andrew McDowell, said. “This positive decision reflects the new reality – the EU’s resolute transition to clean energy. Austria in particular is well on track

to reach its 2020 target for renewable energy. These are precisely the steps we need in order to pave the way to a swift implementation of the Paris agreement,” Maroš Šefčovič, Commission Vice-President responsible for Energy Union, also highlited.

2018, A YEAR OF STRONG GROWTH “2018 will be a year of strong growth for us. We are installing 13 additional wind power plants with a nominal output of 39 MW, increasing our production capacity by 22%,” stated Windkraft Simonsfeld AG’s CEO Martin Steininger. “The volume of electricity produced by these new wind power plants corresponds to the consumption of more than 25,000 households – an important step in the fight against climate change.” Over the next four years, the mediumsized company intends to build a further 18 wind power plants in Austria, which energyindustryreview.com

RENEWABLES

have already been approved, providing a substantial boost to the country’s wind power generation. Windkraft Simonsfeld AG operates 78 wind power plants in Austria and two in Bulgaria. With its headquarters in Lower Austria, Windkraft Simonsfeld AG generated 464 million kWh of electricity in 2017, which is equivalent to the consumption of 116,000 households. The over-the-counter joint stock company is owned by almost 2,000 shareholders.

INVESTMENT PLAN FOR EUROPE The Investment Plan for Europe (the Juncker Plan) is one of the EU’s key actions to boost investment in Europe, thereby creating jobs and fostering growth. To this end, smarter use will

be made of new and existing financial resources. The EIB Group is playing a vital role in this investment plan. With guarantees from the European Fund for Strategic Investments (EFSI), the EIB and EIF are able to take on a higher share of project risk, encouraging private investors to participate in the projects. In addition to EFSI, the new EIAH advisory platform helps public and privatesector project promoters to structure investment projects more professionally. The investment plan should also create a more investment-friendly EU regulatory environment, particularly in the digital, energy and capital markets sectors. In December 2017, the European Parliament and Member States reached an agreement to extend the duration of EFSI and increase its financial capacity.

WIND POWER IN ROMANIA

THE CHEAPEST FORM OF NEW POWER GENERATION IN EUROPE

Romania ranked number one in the top of countries with the highest share of wind in their electricity demand.

As Members of the European Parliament gave a resounding vote in favour of renewables in Europe (a target of 35% for 2030 – rather than the 27% which the European Commission proposed in 2016), Giles Dickson, WindEurope CEO, is gladly supporting this initiative. “Good on the Parliament. 35% makes sense economically. Consumers benefit – wind is now the cheapest form of new power generation in Europe. And wind is a key part of European manufacturing and exports – it supports 263,000 jobs in Europe industry and contributes EUR 36bn to EU GDP. A 27% target puts all that at risk. And 27% carries a major opportunity cost. The difference between 27% and 35% in wind is EUR 92bn investments not made and 136,000 jobs not created. And other sectors would miss out too with a lower target: every EUR 1,000 invested in wind creates EUR 250 value for the wider supply chain including chemicals, steel and construction. The Commission is starting to get it: they think going beyond 27% is cost-effective. Denmark and Portugal are also calling for a higher target: others in the Council now need to reconsider,” Giles Dickson stated.

Country

Share of wind in the national electricity demand

Romania

26% = 44 GWh

Portugal

25% = 38 GWh

Greece

25% = 37 GWh

United Kingdom

22% = 213 GWh

Spain

19% = 148 GWh

Austria

10% = 22 GWh

Belgium

8% = 23 GWh

Denmark

8% = 9 GWh

Bulgaria

6% = 7 GWh

Sweden

5% = 21 GWh

SOURCE: WINDEUROPE

METALS & MINING

Mercuria Energy to invest over USD 9.5 million in mining operations in Romania Off-take offer from Mercuria Energy Trading (‘Mercuria’) for up to 100% of the copper and zinc concentrate produced at the Company’s Manaila Polymetallic Mine (‘Manaila’) and Baita Plai Polymetallic Mine (‘Baita Plai’) Conditional Pre-payment Finance Term Sheet with Mercuria of up to USD 9.5 million over two tranches commencing from 5 March 2018 MOU with Sub-Sahara Goldia Investments (‘SSGI’) for early repayment of funding following repayment of the bridging loan of USD 1.68 million to be repaid 9 March 2018 Charge over all Romanian assets to be released on 31 December 2018, or earlier, following repayment of a further USD 1.5 million to SSGI and Romanian assets re-charged to Mercuria. 76

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METALS & MINING

Manaila Open Pit Polymetallic Mine

ast Resources plc, the AIMV listed mining company with operating mines in Romania and Zimbabwe, recently announce an update on the Company’s off-take and financing arrangements. This includes a binding Memorandum of Understanding ‘MOU’) to vary the existing loan and guarantee agreement with SSGI, and an offer of an off-take agreement capable of acceptance by Vast (‘Off-take Offer’) coupled with a related conditional pre-payment finance term sheet (‘Pre-payment Finance Term Sheet’) with Mercuria. Mercuria is part of Mercuria Energy Group, one of the largest integrated energy and commodity trading companies globally. The terms of the Off-take Offer are on substantially more favourable terms than those of Vast’s previous off-take partner and the arrangements overall, subject

to finalisation and signing, would result in material benefits for the Company. Brandon Hill Capital acted as financial adviser to the Company in relation to the Pre-payment Finance Term Sheet with Mercuria. Founded in 2004, Mercuria Energy is one of the largest independent commodities groups in the world. Through its various subsidiaries, the group focuses primarily on energy and has activities all along the commodity value chain that form a balanced combination of commodity flows and strategic assets. With a strong balance sheet and net asset value of close to USD 3 billion, more than 1,000 people are operating from offices worldwide to sustain Mercuria’s extensive business reach, while leveraging their market knowledge, diversity, and experience.

In 2014, Mercuria Group completed the acquisition of the physical commodities trading businesses of JPMorgan Chase & Co. In 2016, Mercuria welcomed the strategic investment by China National Chemical Corporation (‘ChemChina’), in addition to the investment by China Materials Storage and Transportation Development (‘CMST’) into the Henry Bath warehousing business. In 2017, Mercuria Group completed the acquisition of the gas and power trading unit of Noble Americas Corp. “I am delighted to present shareholders with our proposed financing strategy and offtake partner, which I believe could provide Vast with significantly improved borrowing and off-take terms. In addition to the nearterm benefits, which this pre-payment offtake financing facility should deliver to the Company, it also establishes the basis for 77

METALS & MINING

TRANSACTION WITH MERCURIA ENERGY GROUP IN BRIEF •

An Off-take Offer from Mercuria for the period from January 2018 to December 2021 inclusive for up to 100% of the copper and zinc concentrate produced at the Company’s Manaila Polymetallic Mine and Baita Plai Polymetallic Mine in Romania on pricing terms significantly more attractive than those on Vast’s previous off-take contract. The Off-take Offer is capable of acceptance by Vast.

Conditional up to USD 9.5 million Pre-payment Finance Term Sheet with Mercuria relating to the Off-take Offer: •

Funds to be drawn down USD 4 million on or before 5 March 2018 (‘Tranche A’) and up to USD 5.5 million on 1 July 2018

a future working relationship with one of the most recognised and respected energy and trading companies globally, Mercuria Energy Trading. The opportunity to partner with a company with such prestige as Mercuria is a tremendous endorsement of our assets in Romania, and also our ability to unlock the inherent value of our portfolio of mines and projects for all stakeholders,” Andrew Prelea, Chief Executive (NonBoard) of Vast Resources, commented. “On finalisation of this facility, we anticipate that the funds will enable us to deliver all of our near-term goals in Romania, specifically the expansion and optimisation of our Manaila mine, and, subject to the grant of the licence, the landmark commencement of production at our Baita Plai mine with no equity dilution to shareholders on the basis that the Company complies with the terms of the facility. The proposed funds from Mercuria will also support the accelerated repayment schedule that has been agreed with our partners at SSGI providing significant cost savings to the Company. I would like to extend my thanks to the team at SSGI for their support over the past 12 months, and I look forward to continuing our relationship as it develops over the coming months,” he also added. 78

(or subsequently as required) (‘Tranche B’) subject to Vast Resources PLC meeting pre-agreed conditions. •

Drawdown conditional on the Company accepting the Offtake Offer.

•

Drawdown of Tranche A is conditional, inter alia, on legal due diligence, agreement of an inter-creditor management agreement with SSGI, agreement of definitive documents, execution of security documentation and the internal approvals of Mercuria. It is also conditional on 49.9% of the Company’s 100% interest in Sinarom Mining Group SRL being pledged as security for Tranche A.

VARIATION OF THE EXISTING LOAN AND GUARANTEE AGREEMENT WITH SUB-SAHARA GOLDIA INVESTMENTS The Company has entered into a Memorandum of Understanding with SSGI which, conditional upon the Company entering into a binding off-take agreement from Manaila and a binding pre-payment agreement satisfactory to SSGI by 5 March 2018, amends the existing loan and guarantee agreement as follows: • •

• •

USD 1.68 million interim bridging loan (announced 13 September 2017) to be repaid 9 March 2018 in accordance to the current agreement. Accelerated repayment schedule agreed whereby the full USD 4.08 million (including loan arrangement fee) (as announced on 30 January 2017) to be repaid by 31 December 2019, 13 months early and in accordance with cash flow projections. Charge over 49.9% of the Company’s 100% interest in Sinarom Mining Group SRL to be released following repayment of USD 1.6 million on 9 March 2018. Charge over all Romanian assets to be released on 31 December 2018, or earlier, following repayment of a further USD 1.5 million in aggregate in accordance with the accelerated repayment schedule.

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METALS & MINING

•

Drawdown of Tranche A is further conditional upon a shareholders’ resolution of the Company granting authority for the Company to issue warrants sufficient at the share price at the date of signature of the final pre-payment finance agreement (the ‘Signing Date’) to convert, if exercised, into a share value of USD 4.4 million (‘Warrants’). The Warrants would be charged as additional security for Tranche A and would be exercisable in the event of default by the Company, but not otherwise, to the extent necessary to repay Tranche A. The exercise price of the Warrants for this purpose would be the value weighted average price of the Company’s shares in the ten business days preceding the conversion date. The maximum

The Company will convene a General Meeting as soon as it can be arranged for the purpose of proposing a resolution to grant authority for the issue of the Warrants.

VAST RESOURCES NEXT PHASE OF GROWTH The newly appointed CEO of Vast Resources, Andrew Prelea, is committed to implement a wide-ranging cost cutting and saving programme at the corporate level during the next phase of growth and to enhance the current financial model. He has set out a framework of objectives for 2018, both corporate and operational, in order to deliver real returns for the shareholders. “Looking now to our operations, 2018 will see us continuing to focus on our core assets in Romania and Zimbabwe – namely, the Manaila Polymetallic Mine and associated Carlibaba extension area and the Baita Plai Polymetallic Mine in Romania, together with the Pickstone-Peerless Gold Mine in Zimbabwe. We have comprehensive work programmes underway at all of the above interests, aimed at directly increasing production, efficiency at every asset and

number of shares which can be issued under the Warrants will be set at the Signing Date, but based on last night’s closing share price is 526 million representing 10.27% of the Company’s existing issued share capital. The Warrants would be released from charge after repayment of Tranche A. •

Drawdown of Tranche B is subject, in addition to customary due diligence and agreement of documentation, to a technical and financial due diligence on Manaila and Baita Plai and the completion of a Baita Plai plant investment plan validating the business of that mine. Tranche B would be secured on the Romanian assets of the Company.

move towards operational profitability in Romania in the near term,” Andrew Prelea underlined. “Expansion remains a core pillar of our strategy and new projects and opportunities in both jurisdictions will continue to be assessed. However, I would like to stress that expansion to new opportunities will be only be advanced if it can be demonstrated that it will not impact current projects or overall performance. We have valuable IP in both Zimbabwe and Romania and we intend to leverage our experience while both countries are going through exciting changes to deliver tangible value to investors. We have experienced and dedicated teams in both Zimbabwe and Romania, with strong roots and exceptional networks, and we strongly believe in the opportunities both countries present. It is our intention to undertake new projects that do not require significant capital or human resources from the parent company, and we will provide our shareholders with the opportunity to participate in early stage development. We will also continue our discussions with institutional investors to carry the financial backing of any new projects. With this outlook for 2018, where both corporate and operational activities look set to deliver

significant value to our shareholders, your board will not be resting idle. Our performance over the next 12 months will be critical in achieving these objectives and it is with this in mind that we need to ensure that our board and management are capable and aligned to deliver. We will be looking to strengthen our board with additional operational expertise in the coming months and we will be monitoring performance across all areas of the business to ensure that everyone associated with our company is providing the requisite skills and experience to ensure our ambitions are realised.” “2018 is set to be a hugely significant year for Vast, where the support of long-term shareholders is recognised and new investors join our register with the objective of growing Vast into a profitable mid-tier production company. I look forward to guiding our company into this next phase of growth and remain committed to keeping our shareholders updated on all developments,” Andrew Prelea concluded.

VAST RESOURCES PORTFOLIO Vast Resources plc is an AIM listed mining and resource development company focussed on the rapid 79

METALS & MINING

MANAILA POLYMETALLIC MINE • • •

100% interest in the Manaila Polymetallic Mine, northern Romania Production commenced 14 August 2015 – four weeks after Vast assumed operating control Currently producing a copper concentrate, zinc concentrate and pyrite concentrate with gold and silver credits

Total JORC Compliant Mineral Resources of: • Open Pit: (Indicated & Inferred) of 2.6Mt at a grade of 1.0% copper (‘Cu’), 0.4% lead (‘Pb’) and 0.9% zinc (‘Zn’) at a 0.25% Cu cut-off • Underground: (Indicated & Inferred) of 310,000t at a grade of 1.7% Cu, 0.4% Pb and 0.5% Zn at a 1.00% Cu cut-off Exploration Target defined for: • Open pit: 4.45Mt-11.88Mt with grades up to 2.3% Cu, 0.5% Pb and 1.1% Zn • Underground: 5.92Mt-15.78Mt with grades up to 2.6% Cu, 2.0% Pb and 2.6% Zn

advancement of high quality brownfield projects and recommencing production at previously producing mines. With this strategy, Vast Resources commissioned the Manaila Polymetallic Mine in Romania in 2015 and is currently producing a copper concentrate, zinc concentrate and pyrite concentrate with gold and silver credits, from this operation. The Board also anticipates commissioning a second mine, the Baita Plai Polymetallic Mine in Romania, in the near term, with work under way towards obtaining the relevant permissions to start developing and ultimately commissioning the mine. Vast Resources has a broad portfolio of additional exploration and development projects in Romania and additional interests in Southern Africa, including a controlling interest in the producing Pickstone-Peerless Gold Mine in Zimbabwe that has a JORC resource of circa 3.56 million ounces. 80

Phase 1, open pit, has a projected life of mine of three years at a mining rate of 10,000 tonnes per month, with significant further upside Phase 2 and Phase 3 operations are currently planned to be underground mines – further detailed work may reveal that an open pit mine is feasible on portions of the Phase 2 or Phase 3 ore body Vast Resources owns a 100% interest in the Sinarom Mining Group SRL, which owns the Manaila Polymetallic Mine in Suceava County, northern Romania where economic mineralisation is primarily comprised of copper, lead and zinc. The mine is located 26 km from the town of Iacobeni, where the project’s current metallurgical complex is located. Infrastructure at the complex consists of crushing, milling and flotation circuits.

MANAILA EXPANSION & REGIONAL METALLURGICAL COMPLEX In tandem with optimisation initiatives at the current operating Manaila open pit, Vast is currently exploring the potential to establish a new, larger Manaila Metallurgical Complex (‘MMC’) at Manaila or at the adjacent Carlibaba Manaila Extension, which is the potential site of a future open cast mine and new metallurgical processing facility. Results were reported in November 2017 from 2,150m drilling programme designed to confirm Carlibaba’s suitability as a second open pit mine within the Manaila licence area. Subject to an economic assessment, the drilling results supported the development of a second open pit operation at Manaila, in addition to a new metallurgical processing facility on site, which would reduce Manaila opex costs by up to 25%. It is

anticipated that this would be funded using the previously announced conditional USD 9.5 million prepayment offtake agreement with Mercuria Energy Group. Vast also has two additional concessions in the Manaila region: Piciorul Zimbrului and Magura Neagra (located 19km and 47km away from Manaila respectively). Previous state exploration has identified the presence of substantial mineralisation across these licence areas and Vast has commenced appraisal activities to prove-up this mineralisation. At Piciorul Zimbrului a total of six veins with associated copper and gold mineralisation of approximately 820m in length have been identified, whilst work at Magura Neagra indicates the possible presence of a porphyry copper type mineralising system together with mineralised veins containing gold, silver, molybdenum, lead and zinc. energyindustryreview.com

METALS & MINING

Manaila historically produced a 13% copper concentrate and a 3g/t gold concentrate, with excessive zinc content that resulted in penalties and therefore low prices per tonne of concentrate. Since taking operational control, Vast has successfully improved the quality of the copper concentrate in addition to commissioning a separate zinc concentrate line and a Knelson concentrator to produce a pyrite concentrate with gold and silver credits. Achievements made to date include: • Improvements to the quality of the copper concentrate through the increased recovery of the contained copper in the ore; • Increasing the quantity of copper concentrate via a higher mass pull per tonne of ore processed; • Removal of the high levels of zinc to avoid the contamination penalty; • Commencement of production of a separate zinc

Manaila Expansion

•

• • • • •

concentrate to provide the Company with a second income stream; Refurbishment of all the processing facilities at Iacobeni, the metallurgical complex, now has two operational mills, three operational flotation circuits, and a test flotation circuit to evaluate processes and chemicals to improve the quality and quantity of the concentrates; Successful implementation of reprocessing of tailings from previous operations; Successful installation of a Knelson concentrator to produce a pyrite concentrate with gold and silver credits; Granting of a twenty-fold increase in the potential mining area through the award of a large prospecting licence area; Upgrade to the resources and reserves to comply with the JORC reporting standard and increasing the open-cut mine life from eighteen months to sixty months; Significant reduction in the monthly transportation costs through outsourcing of ore and waste haulage to a specialist transport company

BAITA PLAI POLYMETALLIC MINE AND FANEATA TAILINGS DAM Key Headlines • Skarn deposit comprising several veins in calcareous sediments in eight distinct pipes • 1,800,000 tonne copper-silver-zinclead- gold-tungsten-molybdenum ore body at 6% copper equivalent (Russian Reserves and Resources Reporting System) within the mining licence area • Unmeasured resources in other pipes and substantial exploration upside • Vast’s subsidiary, African Consolidated Resources SRL (AFCR), has been selected by Baita SA, the holder of the head licence at Baita Plai, to be granted the right to mine polymetallic ore under mining licence 999/1999. • Vast is now awaiting execution of the final association licence, subject to normal due process, which 81

METALS & MINING

the milling and flotation circuits to enable assessment of the remedial work required.

HISTORICAL MOU WITH REMIN Key Headlines Opportunity to acquire up to 55 precious metal and polymetallic mines • Wide underground ore bodies that can facilitate mass mining • Major exploration opportunities over 100km prospective land package • Government has recommended awaiting near-term new mining legislation to facilitate recommencement of negotiations to acquire. Vast Resources has a Memorandum of Understanding with Remin SA, a Romanian state government company, to complete an exclusive due diligence exercise on Remin’s mining assets. Until 1997 Remin operated a chain of over 55 precious metal (gold and silver) and polymetallic (lead, zinc and copper) mines over more than 100km of strike length in the highly prospective Carpathian Mountains in northern Romania. Three main asset classes have been identified, which would provide the basis for a staged development programme targeting five high priority projects: • Tailings/stockpiles that can be recycled • Open pit mining on gold-silver caps of epithermal veins • Wide underground ore bodies that can facilitate mass mining Additional development opportunities are available with exploration potential over 100km of the Carpathian mineral belt with further upside available in the belt on land not controlled by Remin. The Company’s primary focus is on the advancement and recommencement of mining at Baita Bihor, which will act as a proof of concept for the downstream development of Remin’s mining assets. •

Tailings dam prior to rehabilitation includes a Ministerial Agreement, regulatory approvals from the Romania’s National Agency for Mineral Resources (NAMR) and final negotiations of terms and conditions of the association licence. • Baita Plai will be Vast Resources’ third mine. Vast Resources currently has an 80% interest in the well-developed polymetallic underground mine, Baita Plai, and its associated mining rights. Baita Plai is located in the Apuseni Mountains, Transylvania, an area which hosts Romania’s largest polymetallic and uranium mines. The project is 50km north-west of Romania’s largest Au-Cu mine, Rosia Montana (>10Moz Au) and 52km north-west of Rosia Poieni, which contains over one billion tonnes of porphyry copper ore. Due to lack of capital investment and modernisation the Baita Plai mine 82

became uneconomic and was put on care and maintenance in 2013. The mine benefits from full infrastructure including underground, surface and processing equipment and an EU registered and operational tailings facility, but the plant and equipment will require some rehabilitation. As announced on 30 August 2017, Vast’s subsidiary, African Consolidated Resources SRL, was selected by Baita SA, the holder of the head licence, to be granted the right to mine polymetallic ore from Baita Plai. The Company now awaits the formal association licence prior to beginning mining operations. Prior to obtaining the licence, Vast: Significantly reduced the carrying cost of the mine by installing more efficient pumps, securing direct electricity supply, and reduced the staff count; Maintained access and safety of the underground workings; Restored important underground access areas; Cleaned

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METALS & MINING

GF to acquire Swiss precision casting manufacturer 84

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METALS & MINING

recicast Industrial SA (Precicast) P is one of the only independent precision casting, also called investment casting, companies in Europe, specializing on super alloy components for aero engines and industrial gas turbines. In addition, the company started to produce components out of additive manufacturing (3D printing) through Precicast Additive SA. Established as Precicast SA in 1970 in Novazzano, Ticino (Switzerland), the precision casting specialist generated in 2017 a turnover of approximately CHF 120 million with a workforce of 730 employees in Switzerland and in Romania. Both parties agreed to keep the transaction price confidential. In order to better reflect its portfolio evolution, GF Automotive will, upon closing foreseen for the first quarter of 2018, be renamed GF Casting Solutions. Closing is subject to the approval of the relevant authorities. GF is already well present in the aerospace and industrial gas turbine sectors through its GF Machining Solutions division which will also support Precicast for the development of its precision machining activities. “The acquisition of Precicast is fully in line with the division’s strategy to increase its presence in promising industrial sectors like aerospace. We warmly welcome Precicast in the GF family and look forward to supporting its growth. Both companies not only complement each other very well, but also share similar values and cultures,” Yves Serra, CEO of GF, stated.

GF Automotive, a division of GF, is to purchase 100% of Precicast Industrial Holding SA, the swiss-based precision casting specialist. This is in line with the division’s strategy to increase its industrial sectors presence, in particular in the promising aerospace field. Upon closing, the division will be renamed GF Casting Solutions.

“The decision to go along with GF has been prompted by the desire to ensure opportunities of further developments for the company. Precicast, established more than 48 years ago, has always been at the forefront of technology innovation in the investment casting business, gaining undisputed reputation with major blue-chip customers while preserving a sound financial performance,” Paola Invernizzi, Chairman of Precicast, added.

A NEW MEMBER OF THE GF FAMILY GF Automotive also recently acquired Eucasting Ro SRL, a high-pressure aluminum die casting specialist with two productions sites in Romania. The acquisition follows GF Automotive’s strategy to expand its presence in the growing light metal components business. In 2006, the company started the expansion to Romania with a die casting foundry in Pitesti, 120km west of Bucharest. Based on a strong customer demand for aluminum castings, a second plant in Scornicesti (about 160km from Bucharest and 50km south of Pitesti) was opened in 2010. The foundries are specialists for Aluminum high-pressure die-casting with a focus on the later machining of the castings. The product portfolio especially includes aesthetic components for the automotive industry as well as for non-automotive business such as lighting and home appliances. The value chain starts at the casting process and goes over machining, surface finishing and assembling up to packaging. With a workforce of approximately 500 employees, Eucasting generates a turnover of about CHF 50 million. Sixty percent of the sales are achieved in the automotive segment followed by lighting solutions and further industrial applications. “We are excited to become a part of GF Automotive and to plan together the next steps in our development. The strong know-how and the lightweight competences of GF Automotive will increase our options to better serve our existing and new customers,” Federica Mapelli, owner of Eucasting Ro SLR, affirmed. 85

ANALYSIS

Internationalization of the Romanian energy sector The change at the helms of OMV Petrom brings back on the public agenda the topic of OMV Petrom’s internationalization. By extension, also - the ‘internationalization’ of Romanian companies in the energy sector. A topic that has been present over time on the agenda of most companies in the industry. This time, the news about OMV Petrom overlaps the high-level meeting between the representatives of OMV and the President of Romania, which takes place against the backdrop of an internationalization movement that has been taking place for some time in the Romanian energy sector. It’s true, a movement that is not very firm and clearly shaped yet, but one that OMV Petrom could reinforce, bringing it to the next level.

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ANALYSIS

2018 has brought in the Romanian energy sector one of the biggest changes in the history of the last decade. The scale of the change is first of all given by the fact that a Romanian, Mariana Gheorghe (CEO of the largest and most important company in the Romanian energy sector - OMV Petrom), was replaced (officially, on 9 January) with Christina Verchere a 46-year-old Scot (that has worked for many years for oil giant BP). Another nuance of the ‘change’ however, and maybe even significantly more important, is given by the reiteration in firm terms of a development strategy of OMV Petrom, build on company’s internationalization axis. An idea not exactly foreign to company’s development plans, but which has never been publicly exposed in such a firm manner and at such a highly official level... as it was expressed during the meeting between OMV representatives and the President of Romania. “During the meeting , OMV AG management presented the development strategy of the company, which includes an increase in Petrom’s internationalization, in order to capitalize on opportunities existing in the region, as well as on a consistent growth of investments starting with this year,” the press release available on the website of the Presidential Administration shows. Analysing the statement on Petrom’s internationalization in a note of mistrust - an approach that would be perfectly justified by the last 20 years characterized by the existence of numerous bombastic statements, full of kind and nice words and intentions, but often not put into practice... probably we shouldn’t even pay too much attention and weight to the statements of 9 January 2018 (day of the meeting between the representatives of OMV and the Romanian Presidency). A brief look back reveals that the idea of ‘internationalization’ has been released publicly before; as early as 2006, when she was appointed CEO of the company, Mariana Gheorghe talked about turning Petrom into a ‘multinational company of the East’. The first measure of the fresh (at the time) CEO was to establish a strategy division that focused on international

HIDROELECTRICA The idea of existence of an internationalization movement among Romanian energy companies is also supported by a number of other small, less visible and/or (at least for now!) without results initiatives or statements of other large players. Hidroelectrica is among them. Thus, at the end of 2015, immediately after declaring the insolvency, Hidroelectrica announced the opening of the trading office in Budapest and the intention to open similar ones in Serbia, Austria and Germany. It also mentioned the African market as a destination for potential acquisitions. “Our studies show that Hidroelectrica can become the largest provider of energy stability in the Balkan region. We have production capacity, a price with a cost in continuous decline. We are targeting the Balkan, CentralEuropean area. We are trying to prepare strategic acquisitions. I find it difficult to say whether before or after the listing. I hope the Romanian state will have the courage to increase the stake to be put up for sale (for listing Ed.). 20-25% would be as fair as possible for Hidroelectrica,” Gabriel Dumitrascu, special administrator of Hidroelectrica, said at the time.

expansion of operations - an objective especially declared was development in the Caspian region. “Our objective is to become oil and gas leaders in SouthEastern Europe. For now, we are only the largest producer in this region. Within this strategy for the internationalization of operations, we want Kazakhstan to become, together with Romania, a core business region. The Caspian region is our target” - Mariana Gheorghe said at the time of her investiture. An ambitious target, but the results are not very relevant! In other words, probably through fuel sales in the neighbouring countries and by developing the network of filling stations in the Republic of Moldova, Bulgaria and Serbia one step has been taken in the direction of internationalization; another step in this direction could be considered Petrom’s entry in various consortia, in projects for the exploration and exploitation of fields in the Black Sea, in the territorial waters of Bulgaria or Ukraine (this latter project subsequently abandoned). We can also mention the transaction performed in 2009-2010, through which Korned LLP was taken over, a Kazakh company that holds the license for the exploitation of an important local field (Petrom being present in Kazakhstan since 1998, where it already had exploitation licenses for five fields). And probably there are other examples of steps taken in the sense of Petrom’s ‘internationalization’. Their sum hasn’t managed however to bring Petrom at the level of ‘multinational company of the East’, so that the concept of ‘internationalization’ could gain its due consistency. Then, why would this time be any different? A potential answer would be that, put into a broader context, the statements of OMV representatives can be considered a commitment; so do the statements of Romania’s President, because they follow and overlap a set of elements (circumscribed to 87

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the energy sector and the political and economic path of Romania), which simply puts them in a new light. We are talking about a broader context, given by the set of information and events that, put together, bring added sustainability and credibility to the idea of internationalization, thus giving Petrom the chance to materialize its project in a more concrete and visible way than before.

MUTUAL COMMITMENT Thus, a first element to be introduced in this broader analysis framework could be extracted precisely from the

continuation of the aforementioned communiqué. “The OMV CEO also highlighted the need for predictability of the tax and legislative framework that is required to support the company’s performance and the development of a stable and competitive business environment. As far as the OMV Petrom - ExxonMobil partnership for the exploitation of the Neptun Deep block is concerned, this is further a major interest for both the Romanian state and investors. The President of Romania reiterated the importance of energy in increasing national and regional energy security. For this purpose, the status of works at the transmission infrastructure provides good perspectives for a functional transmission capacity when the

exploitation of Black Sea resources starts”. This paragraph, read in a diplomatic note (taking into account the level at which these statements are made), can be interpreted as a true mutual ‘commitment’ of the parties, publicly expressed! An agreement whereby everyone offers and receives something following negotiations (whose existence is easy to presume, but whose terms, intensity and toughness are not very much known). Simplifying, one could say that OMV ‘commits’ to resume a consistent investment program and internationalize Petrom (hinting including to potential acquisitions of profile players in the

TRANSGAZ - A SUCCESSFUL MISSION The first and obvious example that could support the idea of existence of an internationalization movement among the Romanian energy companies, is given by Transgaz. Company that in the last year alone has taken serious steps to increase its footprint in SouthEastern Europe. Participation in the tender for the majority stake in the Greek gas transmission operator - DESFA (an unsuccessful attempt in the first instance, but resumed in force at the end of 2017) is one of the most spectacular such steps; it was joined by the steps taken for taking over the Moldovan company Vestmoldtransgaz, which manages the Iasi-Ungheni gas transmission network and provides gas transmission services on the territory of the Republic of Moldova (a process started at the end of 2017 and still in progress). Less spectacular maybe, but certainly with a decisive contribution to Transgaz’s ‘internationalization’ (at least 88

as great as the two acquisitions previously mentioned) is Transgaz’s major involvement in the implementation of BRUA project; a project worth approximately EUR 560 million that translates on Romania’s territory into a 550-kilometer pipeline on Giurgiu – Podisor – Corbu – Hurezani – Hateg – Recas – Horia route and into three new compressor stations (Corbu, Hateg, Horia); they will link the existing interconnection points with the gas transmission systems in Bulgaria (Giurgiu) and Hungary (Csanadpalota). When BRUA is completed (estimated for 2019), the gas pipeline will allow the transmission of 1.5 billion cubic meters (bcm) of natural gas per year to Bulgaria and 4.4 bcm/year to Hungary. From a European perspective, BRUA links Central Europe to the Southern Corridor that brings Azerbaijani gas from the Caspian Basin, via Turkey, through Greece and Albania - so we are talking about an obvious

internationalization of Transgaz. For Romania however, it also means a line for gas transmission from the Black Sea to the remaining Europe and maybe an alternative route for gas from the Caspian Basin (exploited by Azerbaijan’s SOCAR, with which Transgaz already has a Memorandum of Understanding signed). BRUA is thus an important component of Romania’s policies aiming at transformation into a regional hub in the energy market; and a future connection of BRUA to the projected LNG terminal in Constanta could continue the policy for securing the European energy market and would complete the internationalization process of Transgaz. Last but not least, a number of projects such as the construction of new interconnection points with the neighbours (Bulgaria, Moldova and/or Ukraine), even if smaller and without visibility, also contribute to making Transgaz’s ‘internationalization’ a reality. energyindustryreview.com

ANALYSIS

region; meaning that it commits in an approach that could take Petrom to the position of regional leader). In turn receiving support for the projects able to bring consistent income in a relatively short period of time (among them, implementing BRUA - which gives access to Western Europe for natural gas extracted from the Black Sea; getting the export license; maintaining royalties at a relatively moderate level; or, last but not least, launching by Romania a new licensing round for exploitation blocks). And if the benefits of OMV AG are quite clear, it is worthwhile reviewing the benefits of Romania from Petrom’s ‘internationalization’ (benefits valid in the case of any other Romanian company, in a similar approach); first of all, it should be highlighted that a more significant presence of Petrom outside the borders would bring added

value (created abroad) in Romania; an ‘internationalized’ Petrom could also be one of the pillars for the development in Romania of a regional ‘hub’ for the human resource and specialized knowhow, as well as for companies in the auxiliary sectors (i.e. jobs for specialists and matching wages and thus important taxes and fees to the public budgets); last but not least, an increased presence of Petrom across national borders could strongly support the exit of local companies in the auxiliary industries, bringing them contracts in markets where Petrom itself would have a say. These elements (mutual benefits) could therefore be enough to justify the ‘commitments’; moreover, there is an extensive series of aspects supplementing the broader framework in which the statements of OMV officials on Petrom’s internationalization should be interpreted.

POLICY SHIFT It should also be noted that the meeting between OMV officials and Romania’s Presidency takes place following a long (and sprinkled with many harsh statements!) episode of discussions and controversies on the level of royalties paid by oil and gas companies. A set of discussions and replies whose hardiness seems to have faded lately; and the press statement on the Presidency’s website may be a first point to these controversies, suggesting that a common denominator has been reached. In the same broader framework, in which the statements on Petrom’s internationalization should be interpreted, we can also include the fact that the statement (‘commitment’) of OMV officials falls within the guidelines established by Romania for state-owned companies in the energy sector. At

ELECTRICA SEES INVESTMENT OPORTUNITIES IN REPUBLIC OF MOLDOVA At the same time, the representatives of Electrica, the largest local company in the field of electricity supply and distribution, said they were analysing the region for potential acquisitions, the Republic of Moldova being nominated. “I believe in the distribution sector, even locally, these opportunities will exist... the Republic of Moldova is an attractive area for all the Romanian companies, depending on its political and economic path, which we hope will be pro-European. The distribution area was analysed by us. We are taking into account this possibility to enter the distribution sector in Moldova, but we don’t have anything concrete yet, because the political risk, which also affects the regulatory area, is high. The rate of return there is 12.5%, which could

be a positive signal,” Ioan Rosca, General Manager of Electrica, stated. It’s true that statements of company officials have remained uncovered in reality - at least until now, but Electrica still has a consistent amount of money that it can use at any time for acquisitions. Let’s recall that Electrica listed in 2014 a 51% stake on the Bucharest and London stock exchanges, for which it received an amount of approximately RON 2 billion (around EUR 443 million). Moreover, the company has tried to invest part of the money obtained in new acquisitions, being one of the investors engaged in the transaction through which it planned to buy Romanian assets of Enel, but the Italian group gave up the transaction in 2015 after

it solved the problem of debts at group level, which reduced pressure for new asset sales. Another investment opportunity for Electrica was the tender organized by the Czech group CEZ for selling its operations in Bulgaria, but the Romanian company has not advanced in this regard either. In 2015, Electrica started negotiations for the acquisition of shareholdings in subsidiaries owned by FP, and in late 2017 (26 October) the shareholders approved the acquisition of the entire stake held by Fondul Proprietatea (FP) in the share capital of Electrica subsidiaries, for the amount of RON 752mln; a transaction that does not bring anything in the sense of ‘internationalization’, but shows company’s appetite for business consolidation and development. 89

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least this can be said if we consider the statements made in late 2017 by the Energy Minister, according to which investments made - and not the profit or turnover (as it currently happens) will be taken into account in assessing the management performance of energy companies where the State is shareholder. Such an approach, resulting from the statements made during hearings in the parliamentary committee of investigation into the activity of the National Energy Regulatory Authority (ANRE) by the relevant minister, would lead to a radical

change of the paradigm in which the Romanian companies operate; and their entry in the neighbouring foreign markets is an option, in conditions in which the potential of the domestic market is relatively limited. However, it is true that a significant component of investments required by the State can be realized in the local infrastructure - which is completely deficient in all segments... and not necessarily in the acquisition of companies/markets outside Romania. But even in this case it is equally true

that a relatively significant part of these investments (in the local infrastructure) could still be allocated to projects (either already started or new ones) connecting Romania from an energy point of view with states in the region; something that could be considered, without too much mistaking, a constituent element of the ‘internationalization’ movement visible in the entire Romanian energy sector. A movement to which Petrom would basically only align (and bring added strength - given the company’s financial dimensions and technical capabilities).

ROMPETROL GROUP, A DRIVER OF INTERNATIONALIZATION In the context of discussions about the internationalization of companies in the national energy system, we cannot ignore the Rompetrol Group! A Romanian company at origins, with a tumultuous history, that reached the portfolio of CEFC China Energy Company Ltd following the takeover of the 51% stake in Kazakhstan’s KazMunayGas International (owner of Rompetrol). China’s CEFC has received in Romania the approval of the Supreme Council of National Defence and confirmation from the Competition Council for the completion of the transaction for the takeover of the majority interest, of 51%, in KMGI. A transaction that opens the way for KMGI (formerly the Rompetrol Group) to Eastern and Western Europe, and also to other regions of the world. “This joint venture will be able to take advantage of the energy potential of Kazakhstan and China’s financial resources to expand its activities throughout the area of the global project ‘One Belt - One Road’. The project represents exceptional 90

opportunities for expanding the activities of KMGI in the territory of the Republic of Kazakhstan, which in turn will ensure the implementation of the Government’s programs to attract investment. Particular attention will be paid to projects in Romania - as the country where the main assets of the KMGI Group are located. In conclusion, it should be noted that this global project will have multiplying effects in the economies of the participating countries - Romania, Kazakhstan, China - and a positive social impact,” Zhanat Tussupbekov, CEO of KMG International, said in mid2017, putting the discussion - even in other terms - under the same sign of ‘internationalization’ of company’s operations (and thus an internationalization of operations in Romania, where the Group has the most important assets - as the CEO of KazMunayGas said). Otherwise, the KazMunayGas International Group (KMGI) is strongly internationalized anyway. It owns the refineries Petromidia Navodari (the largest profile unit in Romania) and Vega Ploiesti (the oldest

operational refinery), is present in various forms in 11 countries and owns fuel distribution networks (Rompetrol) in Romania, Bulgaria, Moldova, Georgia, France and Spain. The contract for the acquisition of the 51% stake in KMGI by CEFC involves investments of USD 3bn in 5-10 years, and approvals received from the Romanian authorities are an important step in the process of continuing the transaction - which is not completed yet. Through this transaction, in the context of ‘internationalization’ of Romanian energy companies, we can say that Romania has in Rompetrol a driver of ‘internationalization’ that could have an important say in consolidating the process at the industry level. Especially that discussions on the establishment of the Investment Fund in the energy sector - that the Romanian authorities have agreed upon with KazMunayGas representatives, are still on the books, even if for now without anything new.

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TRANSELECTRICA - PROJECTS APPROVED BY THE EUROPEAN COMMISSION Another exemple that could support the idea of internationalization movement among the Romanian energy companies is given by Transelectrica, although it has not announced yet intentions to acquire profile players in the region! However, it has been for some time in a process that can be considered an ‘internationalization’ - even if its actions in this regard have never been very visible for the general public. The latest information on projects/steps (that can be ascribed to a process of ‘internationalization’) INTERNATIONALIZATION OF THE ROMANIAN ECONOMY Therefore, relaunching the idea of ‘internationalization’ of Petrom (through company’s development strategy presented by OMV AG management to Romania’s Presidency right on the date of changing the CEO) can be considered a component of a broader internationalization process in which the energy sector as a whole is engaged - even if without many concrete achievements. A process in which we could say companies from other fields are starting to be engaged as well. And we think that energy and money are the ones moving the world... we can say that the internationalization process of the Romanian energy sector seems to be on track! To support this idea, we can mention the steps taken by Banca Transilvania, which after a modest presence abroad (through subsidiaries opened in the foreign areas inhabited by Romanians) has taken the step of ‘internationalization’ by taking

is from the end of 2017, when no less than six investment objectives carried out by Transelectrica, on the list of projects of common interest regarding the energy strategy (at European level) were adopted for approval and funding by the European Commission. The projects, included in the ‘Black Sea Corridor’ and ‘Mid Continental East Corridor’ clusters, with a value of over RON 1 billion, contribute to achieving a national high voltage ring (thus improving the national power transmission grid). They mainly aim

at increasing the interconnection capacity on Serbia and Bulgaria relations. Looking several years back, the high voltage line between Arad (Romania) and Békéscsaba (Hungary), commissioned in 2008, makes Transelectrica a company with an already relatively consistent degree of internationalization, and boosting Transelectrica’s interconnection with the energy system of the Republic of Moldova (through a new line commissioned in 2013 and other three in the stage of study) completes this picture.

Moreover, on the relation with the Republic of Moldova (and, very likely with Ukraine as well, given the proximity) Romgaz also has an approach that can be taken into account in the sense of ‘internationalization’ of company’s operations. Romgaz plans to transform some depleted gas fields in Moldavia (in Falticeni area) into a storage facility of around 200 million cubic meters.

over (together with EBRD) the most important bank in the Republic of Moldova.

CONCLUSIONS AND PERSPECTIVES Altogether, chances that the statements of OMV officials can turn into facts are significantly higher than a decade ago. And through its sizes (at financial level, in terms of natural and human resources, specialized know-how etc.) Petrom is a heavy-weight element, which can decisively influence the ‘internationalization’ of the Romanian energy sector. But at the same time there are influences in the opposite direction too! And that’s because the timid process of internationalization in which companies in the Romanian energy sector seem to be is an incentive and argument for materializing Petrom’s strategy. The (modest!) movement noticeable in the Romanian energy sector can be resembled to a wave on whose ridge Petrom shows signs that it is available and willing to position itself. 91

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Cleaner energy, the most attractive subject for the next 30 years 92

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e could argue that nothing is constant anymore, but you most likely know that. Humanity has always been looking for something solid, a foundation of sorts on which it may continue to build. This is how we make our way through this existence, always in cycles. We settle down, start growing roots, depleting the resources from one area and then moving on. We’re always on the move, whether we like it or not. Still, amidst all this fluctuation, people crave stability. We prefer tradition to change, even going as far as fearing the latter. Of course, this is also valid for our industries, our markets. We seldom move forward on initiative alone, we prefer waiting until it’s too late. Only select few have the vision of moving on before things go downhill. And there are signs, more than we could stand to acknowledge. That’s why we need someone to look out for these signs. Somebody who understands there is but only one constant in this life: change. Luckily for us, there will always be people dealing with the business of change. The International Energy Agency (IEA) is hitting the nail on the head with its 2017 World Energy Outlook aptly named “A world in transformation”. They are looking out for the signs you might have missed. Let’s face it: it all starts with cost reduction and the most attractive subject for the next 30 years seems to be cleaner energy. Cheap and easy to deploy, it is set to change the way we see energy production today. Along the same lines we may discover that energy will mostly be electrical in nature in the coming years. China already saw the opportunity and is set to direct its economy towards the service sector as the US is ever resilient in the field of shale gas and tight oil. In a world where it has become harder to tell apart consumer from producer it’s time for the upstarts, the developing countries, to leave their mark. But all this would not be possible without the star of the show, our everpresent driver of change, to call it by a simpler name – need. Change is usually driven by an incentive, and in this

«IN THE ABSENCE OF LARGE-SCALE CARBON CAPTURE AND STORAGE, GLOBAL COAL CONSUMPTION FLATLINES»

particular scenario we may call it demand, energy demand to be more precise. According to the New Policies Scenario, the global energy demand will expand by 30% come 2040. The arguments are presented in the form of a global economy that is growing at an average rate of 3.4% per year, a population of 9 billion in 2040 and an urbanization process that will see another Shanghai sized urban population emerging every four months. Talking about developing countries, India leads the contribution to demand growth with an 11% energy use increase by 2040. Not far behind we may find Southeast Asia, with their demand growing twice faster than China’s. With Asia taking two-thirds of the global demand pie, the rest will be split between Middle East, Latin-America and Africa. New needs will require new ways to meet them and this is where natural gas, renewables and energy efficiency come in. Were it not for the efficiency improvements, we would see double the rise in energy use. Somebody has to take the hit, and this time it’s coal’s turn to take one for the team as renewables are set to meet 40% of the increase in primary demand. Their expansive growth in the power sector spells doom for the golden age of coal. Good news for oil though, the demand continues to grow to 2040 even if at a rather decreasing pace. Natural gas will target the industrial sector with an

expected rise of 45% by 2040. Renewables are set to comprise two thirds of global investments as the cheapest and cleanest source of energy generation, with China and India already on the offensive. Their rapid installation of photovoltaics will spearhead the trend that will transform solar energy into the biggest source of lowcarbon energy by 2040. In the European Union it will be wind that leads the change, with great development potential both onshore and offshore, and becomes the leading source of electricity after 2030. As policies regarding the use of renewable electricity are strengthened, it is expected that household use will pitch in and help realize a 40% raise in final consumption by 2040, an effect of rising incomes and desire of better quality of life. Considering all this, it’s actually no surprise that the global investment in electricity has surpassed that of oil and gas and energy security has become a staple on everybody’s policy agenda. China is well aware of what’s coming and is now starting to act as one of the main drivers of change. The new phase in the country’s development hints towards a greater focus on natural gas, electricity and high efficiency digital technologies. Without this new efficient approach, the end use consumption by 2040 is estimated to be 40% higher. Even a blind man could see that given China’s role as a major energy player, some nations will likely follow in its footsteps. The future of transitioning to cleaner energy might be in their hands. Albeit China is set to dethrone the US in oil consumption come 2030, their iron fuel efficiency policy and decided shift towards electrical modes of transportation will eventually allow India to take the wheel on oil demand growth. China will continue to reign over coal markets but, according to the report, this market is in its death march. But oil and gas will not give up the fight and they have a serious backer. Based on its ability to unlock new resources in cost effective ways, the US is envisioned to become a net exporter of oil, not only gas by 2030. According to the Deloitte 93

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US oil and gas outlook, the US will follow its motto of ‘energy dominance’ as they already envision Mexico as a promising market for natural gas and oil. Apparently, they are still able to keep up with the cost reductions and consolidate at the same time. Demand will of course follow supply up until 2025, but will decrease afterwards based on efficiency measures and fuel switching. Oil prices will continue to be dwarfed if US tight oil continues to prosper and the switch to electrical cars is happening at an accelerated pace. This would have to be supported by extra policy and infrastructure support but all in all it would keep prices between USD 50 to USD 70 per barrel by 2040. This estimation would be valid only if we assume that major producers will survive the period of lower hydrocarbons revenue. According to the IEA Outlook, another game changer will be natural gas which will account for one-fourth of the global energy demand and will come second only to oil as the most important fuel. This transition will go rather smoothly, especially in cases where gas could substitute for oil. Developing economies will lead the growth, with significant costs attributed to importing and putting infrastructure in place. Countries in Asia will be at the forefront, as these developments also address familiar air quality policies. The market is set to become more liquid and flexible, US LNG assuring almost 90% of the expected growth by 2040. The offer also doubles, as 2040 will see major diversification in supply mostly coming from new sites in the US, Australia, Russia, Qatar, Canada and Mozambique. Thus, the price will be influenced by availability rather than in relation to oil. All around access to electricity and clean cooking still seems to be part of a utopian future but there is good news as well. Since 2012, more than 100 million people have gained access to electricity every year with impressive progress being made especially in regions like India, Indonesia and sub-Saharan Africa. Even so, there is still a long way to go according to the New Policies Scenario which states 94

«NONETHELESS, BY 2040 PERCAPITA ENERGY CONSUMPTION IN CHINA EXCEEDS THAT OF THE EUROPEAN UNION» that by 2030 there will still be some 675 million people without access to electricity and 2.3 billion still relying on pollutants for cooking. Yes, the numbers are considerably lower than before but they still herald staggering 2.8 million premature deaths per year. Premature deaths caused by outdoor air pollution are expected to increase from

development: stabilization of climate, cleaner air and universal access to modern energy with a back drop of reduced energy security risks. In order for all this to come to fruition there are a couple of milestones to achieve. The first and apparently most important would be the peak in CO2 emissions and their rapid decline, in line with the Paris Agreement. In this scenario, the low-carbon sources would have to reach 40% of the energy mix by 2040; energy efficiency would be a must, accompanied by a sharp drop in coal demand and a peak in oil consumption. Power generation should be almost carbon free with 60% power generation coming from renewables and the rest from a combination of nuclear power and carbon capture and storage solutions. In this scenario the natural gas would finally surpass oil as the main fuel, but only if action is rapidly taken on minimizing the subsequent methane leaks. This would assure a 20% rise in consumption well beyond 2030. Luckily, according to the report, 40-50% of the methane leaks could be handled for no net cost, given that the value produced by the captured methane

«Policy attention to air quality is rising and global emissions of all the major pollutants fall in the projections, but their health impacts remain severe» 3 million to more than 4 million by 2040 and industrialization and urbanization play a big role in that. CO2 emissions are also expected to increase by a meagre amount but still prove to have a devastating influence on climate change. The report would be rather anticlimactic if it didn’t also offer a solution and it comes under the guise of The Sustainable Development Scenario. This strategy works its way back from conclusion to starting point, making sure to carefully underpin the major goals which lead to sustainable economic

covers the abatement solutions. If we were to heed the Deloitte Outlook we could realize this is also the age of digitalization. Adapting or ignoring this could make or break your business. Innovative ideas are already producing great efficiency gains and demanding serious investments. By now you most likely realize that not everyone will make the cut. As times change, the industry should change as well. The bottom line not only for business, but for our whole way of life should be: If you want to see tomorrow, start investing in today. energyindustryreview.com

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European Gas Conference 29 - 31 JANUARY 2018 VIENNA, AUSTRIA ver 350 delegates gathered to discuss, debate and share O insights on the current picture of gas in Central, Eastern and South Eastern Europe and how it connects with the rest of the continent.

MAJOR THEMES • • • •

The Big Gas Debate – This year debate was focused around Nord Stream 2. The results from the European Commission’s Quo Vadis Study what effects these results will have on the gas trading environment LNG – dealing with oversupply, how will this effect pricing and impact traders as well as exploring new LNG opportunities. Changing dynamics in the European market with Naftogaz recently winning a ruling against Gazprom and Lithuania being the first to receive LNG from the US in Europe. © EGC 2018

RUSSIA TO BRING SECURITY OF GAS SUPPLY TO EUROPE “Security of gas supply is crucial, and Gazprom brings it,” said OMV’s member of the executive board Manfred Leitner speaking at the European Gas Conference. “It means gas to heat houses, schools, hospitals and for European energy. The gas comes safely and at an affordable price,” Leitner said. Leitner urged to stop being skeptical about Russia, given that the European gas production has been declining. “If you look to Russia, they have the largest natural gas reserves in the world. In order to gain security of supply we have a chance to be directly linked to the biggest reserves of gas,” he added. Manfred Leitner also mentioned that “obviously cyclical connection to these gas reserves is through the Nord Stream 2.” The United States has been thwarting the project, as it wants 96

“Security of gas supply is crucial, and Gazprom brings it... If you look to Russia, they have the largest natural gas reserves in the world. In order to gain security of supply we have a chance to be directly linked to the biggest reserves of gas.” Manfred Leitner, OMV

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EVENT

“Europe will need additional imports of 50 billion cbm pf natural gas to 2025 and 75 billion cbm by 2035. I think these data are attractive enough to all stakeholders and investors in the gas industry.” Alexander Medvedev, Gazprom

to become a big player on the European gas market by shipping LNG to the continent. At the same time, America continues to import Russian LNG to satisfy the domestic demand. Gazprom Chairman of the Board of Directors Viktor Zubkov said that the company’s share of the European gas market, where most of the revenue came from, grew last year to record levels of more than 35% compared to 33% in 2016. Gazprom’s gas exports to Europe and Turkey in 2017 increased by 8.1% to a record 193.9 billion cbm despite Europe’s efforts to reduce its dependence on Russian energy supplies. In order to maintain its market share, Gazprom quietly negotiated price deals with large customers and succumbed to EU rules that he had previously ignored. The Deputy Chairman of the Management Committee of Gazprom Alexander Medvedev explained at the conference that a stable demand for Russian gas in Europe would help keep exports of Russian gas around current levels.

“We believe that demand factors will support exports of around 190 billion cbm although climatic factors are obviously influenced,” Medvedev underlined, adding that exports of Russian gas to Europe in January fell only 3% on an annual basis despite the warm weather. “Europe will need additional imports of 50 billion cbm pf natural gas to 2025 and 75 billion cbm by 2035. I think these data are attractive enough to all stakeholders and investors in the gas industry,” highlighted Alexander Medvedev. Moving the European Union to a fully electrified economy using only renewable electricity and no natural gas would be ‘profoundly wrong,’ stated the European Commission’s, KlausDieter Borchardt. “If you go to other European conferences, you will hear that the future is the electrification of all sectors and electricity to be all renewable,” Borchardt affirmed at the European Gas Conference in Vienna. “This is, in my view, profoundly wrong and a mistake,” he said. European electricity trade body Eurelectric in December called on EU policymakers to promote switching to ‘clean’ electricity in heating, transport and industrial sectors as part of efforts to decarbonize the economy by 2050. Eurelectric has not called for an all-renewable approach nuclear is also low carbon - but environmental lobby groups have used the dramatic falls in renewable costs to argue that a high renewable electricity share is increasingly cost-effective. Eurelectric has also called for EU policymakers to promote digitalizing the entire electricity value chain, to make smart grids a reality and encourage demand-side response. Relying on a fully digitized power-only system would leave the EU tremendously vulnerable to cyber-attacks, Klaus-Dieter Borchardt affirmed. It would also be a mistake to leave the EU’s gas infrastructure, which has been built up over decades and is still being invested in today, empty, he added. Borchardt agreed with Alexander Medvedev, who was also speaking at the conference, that “gas cannot and should not be a bridge fuel for renewables... Gas should have its own role to play.” The commission official stated that the European Commission would be working this year on proposals for EU gas market regulation, and wanted to explore in particular the possibilities for synergies between the gas and power grids, and for developing renewable gases. “We can use the gas grid as (one of the storage options) that we are still lacking in the power system,” for example by transforming excess wind into methane or hydrogen, he detailed. This powerto-gas technology is still at a very early stage. “If we really believe in this technology, we have to show it can be rolled out at an industrial level,” he sustains.

AZERBAIJAN GAS TO EUROPE BY 2020 The Southern Gas Corridor project, which envisages transportation of Azerbaijani gas to Europe is expected to start up this summer, said Vitaliy Baylarbayov, Deputy Vice 97

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“We can proudly say that the Southern Gas Corridor will be inaugurated in 2018 and in the summer of 2018 the gas will start going to the SGC first into Turkey and then in 2020 to Europe.” Vitaliy Baylarbayov, SOCAR

President at Azerbaijan’s state oil company SOCAR. After years of planning, the USD 40 billion Southern Gas Corridor (SGC) backed by the EU to ease its reliance on Russia is set to start up on time this summer as line fill began just ‘days ago’ in the TANAP pipeline across Turkey, he said addressing the European Gas Conference in Vienna. “We can proudly say that the Southern Gas Corridor will be inaugurated in 2018 and in the summer of 2018 the gas will start going to the SGC first into Turkey and then in 2020 to Europe,” he noted. On the upstream side, Baylarbayov said activity continues at the Shah Deniz Phase 2 offshore development, but the wells needed for production start-up have already been drilled. SOCAR is already considering Phase 3 of development of Shah Deniz gas and condensate field, Vitaliy Baylarbayov stated. 98

However, a final investment decision on Shah Deniz 3 is not expected before 2025, he mentioned addressing the European Gas Conference in Vienna. “Under Phase 3, SOCAR would drill into the deeper layers of the Shah Deniz field. A discovery has already been made in the deeper layers, and although reserves have yet to be confirmed, there are signs that Phase 3 could produce more than the initially expected 5 billion cubic meters per year,” Baylarbayov added. Further, he pointed out that the TANAP pipeline is more than 91 percent complete and the Trans-Adriatic Pipeline (TAP) is 65 percent built. After delivering first gas from Azerbaijan, Georgia and Turkey this year, TANAP will ramp up deliveries to Turkey to the contracted 6 billion cubic meters per year by 2020, Baylarbayov underlined. He noted that TAP will supply first gas to Greece in 2020, after which it will gradually ramp up deliveries to 10 billion cubic meters per year, including around 8.5 billion cubic meters per year for Italy, 1 billion cubic meters per year for Greece and 1 billion cubic meters per year for Bulgaria. Bulgaria should receive gas via the Interconnector GreeceBulgaria, which is expected to be built by 2020, he said, adding that to cover the supplies, production at Shah Deniz Phase 2 is expected to reach its 16 billion cubic meters per year peak by 2024-25, or maybe earlier.

OMV TO GROW IN EUROPEAN NATURAL GAS MARKET VIA NEW LNG IMPORT DEALS New medium-term LNG contracts with global suppliers will help Austria’s OMV to grow its market share in the European gas market, complementing its domestic supply and Russian imports, an executive stated. OMV’s head of LNG Supply, Andy Williamson, told at the European Gas Conference in Vienna the two deals the company signed with Cheniere Energy and Qatargas in December 2017 reflect OMV’s strategy to expand its presence in Europe’s gas market. The new supply will come through the Gate terminal in the Netherlands, which has the capacity to handle 12 billion cubic meters per year (Bcm/y) of LNG. OMV is a founding shipper at Gate along with Dong Energy, Eneco, Uniper and Shell, and holds a booked capacity of 3 Bcm/y. “We’re very keen to grow our stake in the European market with LNG supplies,” he said. “They are in no way a substitution of supplies,” Williamson affirmed, adding that Cheniere and Qatargas were both ‘reliable suppliers’ and leaders in global LNG markets. In late December, OMV agreed with Qatargas for the supply of up to 1.1 million mt/year of LNG into the Gate terminal from 2019 under a five-year deal. It was the second term agreement signed by OMV as it looked to better utilize its capacity at Gate. OMV in early December 2017 said it had signed a term deal with US LNG producer Cheniere for the supply of LNG from the Sabine Pass terminal in the Gulf of Mexico. energyindustryreview.com