Energy Industry Review - May 2019 by Energy Industry Review

COMMENT

Global energy transformation A road map to 2050

Lavinia Iancu CEO and Publisher

new study by IRENA (Inter national Renewable Energy Agency) reviews the status of the energy transformation looking at recent trends. It provides a perspective for the global energy system’s development to 2050 based on current and planned policies. The report ‘Global energy transformation: A road map to 2050’ also details the REmap transition pathway to 2050 – a set of potential energy options aligned with the ‘well-below 2oC’ target of the Paris Agreement. The REmap case entails changes in energy demand and supply, energy-related CO2 emissions, and the level of investments, costs and subsidies needed for the accelerated global shift to renewables. Renewables already make up more than half of newly installed power-generation capacity. Yet their overall share in the energy mix (including power, heat and transport) needs to grow six times faster, IRENA’s analysis shows. National climate commitments under the Paris Agreement largely hinge on energy decarbonisation. The historic 2015 climate deal, endorsed nearly worldwide, calls for keeping the rise in average global temperatures ‘well below’ two degrees Celsius (2oC) during the present century, compared to pre-industrial levels. Achieving a climate-safe future, however, depends on swift global action. Current plans and policies, including Nationally Determined Contributions (NDCs), fall far short. Energyrelated emissions have risen around 1% yearly 3

since 2015, while the world’s ‘carbon budget’ looks set to run out within a decade. Based on IRENA’s analysis, energy-related carbon-dioxide (CO2) emission reductions would have to decline 70% by 2050, compared to current levels, to meet climate goals. A large-scale shift to electricity from renewables could deliver 60% of those reductions; 75% if renewables for heating and transport are factored in; and 90% with ramped-up energy efficiency. With electricity becoming the dominant energy carrier, global power supply could more than double, the report finds. Renewable sources, including solar and wind, could meet 86% of power demand. The energy transformation would boost gross domestic product (GDP) by 2.5% and total employment by 0.2% globally in 2050. It would also bring broader social and environmental benefits. Health, subsidy and climate-related savings would be worth as much as USD 160 trillion cumulatively over a 30-year period, the report finds. Thus, every dollar spent in transforming the global energy system provides a payoff of at least USD 3 and potentially more than USD 7, depending on how externalities are valued. Renewables, meanwhile, would create more new jobs than those lost in fossil-fuel industries, the report underlines. Policy inputs can further improve the socioeconomic footprint of the transformation. Of course, decision makers should do something in this regard in Romania too.

Content GEO 114/2018 and its amendments

OPINION The author explains the potential impact led to the amendments adopted under GEO 19/2019.

Foundation to ensure the long-term success of Romania’s gas sector

INTERVIEW

OPINION The best starting place to lay the first building block of the foundation for the future: how do we ensure that vulnerable consumers are adequately identified and protected?

Oil & gas, new technologies

Focus on security of supply and cleaner energy

OPINION The recent evolution of the oil industry has proven with no shadow of doubt the centrality of the technological lever in the way that new technologies can positively contribute, throughout the entire business chain.

Franck Neel discusses the role of gas in solving the current challenges, the most pressing issues in the gas sector in Europe and Romania and Downstream Gas Division’s main objectives for the upcoming years.

Modern solutions from INCDT COMOTI

OIL & GAS The long-term strategy of INCDT COMOTI is to capitalize the original, technological and constructive solutions applied in the construction of aviation engines, systems and screw compressors.

OMV concluded Europe’s largest seismic survey

OIL & GAS The measurements probe the geologic subsurface to depths of up to 6,000 meters and provide information on the composition of structures that may contain gas.

ENTSOG Summer Supply Outlook 2019

OIL & GAS The analysis investigates the possible evolution of the supplies and the injection in the storages across the season.

Deloitte study RENEWABLES

EUR 1bn spent on wind farms or electricity networks in Romania will lead to an added value in the Romanian economy of at least EUR 2bn, according to the Report named ‘Renewable Energy in Romania: Development Potential by 2030’.

Vast Resources’s primary value drivers Equinor strengthens its commitment to climate leadership

METALS & MINING Vast Resources is focussed on the rapid transformation from exploration company to mining company and delivering multiple revenue streams. This will be driven by the advancement of its two primary value drivers, the Baita Plai Polymetallic Mine in Romania, and the Heritage Diamond Concession in Zimbabwe, into production in 2019.

ENVIRONMENT In a joint statement prepared with investors participating in Climate Action 100+, Equinor announces new steps to demonstrate further industry leadership on climate change and strong support for the goals of the Paris Agreement.

Smart village, an environmental initiative

IDTechEx research

POWER ENVIRONMENT E.ON Energie Romania has thought about the extension of this initiative and aims to develop the smart village concept in Romania’s rural areas.

Investments of EUR 20 billion for electric mobility

ANALYSIS To mitigate climate change, the European Union (EU) has set extremely ambitious targets and objectives to reduce its greenhouse gas emissions, given that energy and its use are responsible for generating 79% of the greenhouse gas emissions in the Community space.

ROMPETROL’S FIRST GAS STATION IN ADJUD

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Publisher: Lavinia Iancu Business Development Manager: Marius Vladareanu Scientific Board: President: Prof. Niculae Napoleon Antonescu PhD Members: Prof. Lazar Avram PhD; Assoc. Prof. Marius Stan; Prof. Ionut Purica PhD; Alexandru Patruti PhD Journalists: Adrian Stoica, Daniel Lazar, Vlad-Adrian Iancu, Dumitru Chisalita

ompetrol Downstream, opened its first gas station in Adjud, located on 1D Bulevardul Republicii – at the intersection with the European road E85. The total investment amounts to approximately 1.4 million USD. This is the fifth station in Vrancea County and joins the other four Rompetrol stations in Focsani. There are 55 people employed in the five stations. The new gas station features a wide range of facilities and services: four Efix and EfixS fuel pumps, a high capacity truck pump, an Adblue tank, vignette purchase service, prepay card top-up, air/water. Moreover, the station is also equipped with a liquefied petroleum gas supply point, a cylinders rack and also with the hey restaurant - which includes a gastro & shop area and promotes fast prepared healthy food for those who want to try a new revitalizing experience. “In the new station from Adjud, Rompetrol customers will find quality fuels produced by the largest refinery in Romania and one of the most modern

in the Black Sea region - Petromidia Navodari. At the same time, we want to welcome our customers with already established products and services. Our efforts are in line with the appreciation we receive from those who use Rompetrol services, appreciation that helped us to open 27 new stations in the past two years,” says Serghei Sevcenco, Rompetrol Downstream General Director. The station is equipped with an electric charge point, a service offered free of charge to all Rompetrol customers who own electric or hybrid cars. With a capacity of 50KW it is able to charge two cars at the same time, the service being available in the next period. Rompetrol Downstream owns 13 electric charge points in its gas station network, 4 of which are in Moldova region (Vrancea - Adjud, Iasi and 2 in Bacau). The company provides the necessary energy for the route Bucharest - Iasi some 390 kilometres away, through the two gas stations located on the E85 road (Vrancea - Adjud, Bacau - 100 Republicii Blvd.). 7

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HEADLINES

GAS PROCESSING PLANT TO BE BUILT IN AZERBAIJAN

he 4th SOCAR Inter national Caspian and Central Asia Downstream Forum on Trading, Logistics, Refining and Petrochemicals was held from the 22th to the 25th of April in Baku. Over 300 participants, including representatives of the biggest oil and gas companies, refineries, trading companies, ports, terminals, banks and analytical agencies attend the event annually, writes the azernes.az agency. Speaking at the event, Managing Partner of BM Morison Partners Aykhan Asadov stated that there is a plan to build a gas processing plant in Azerbaijan by 2022. He said that engineering and design work has been completed and it is planned to begin construction of the plant this year. Asadov noted that

there was a plan to build a single oil and gas processing complex in Azerbaijan; however, due to the oil prices fall, the initial plan was changed, according to the quoted source. “The project was planned to be implemented in 2017-2020. The complex was to consist of four sections: a gas processing plant with a capacity of 10 billion cubic meters of gas per year, an oil refinery with a capacity of 10 million tons per year, a petrochemical plant and a 250-megawatt power plant,” he said. Asadov also mentioned that the changes mainly affected oil refining. In particular, instead of building new capacities, attention was focused on modernizing Heydar Aliyev Baku Oil Refinery. “By the end of November 2020, it is planned to produce 3.3 million tons of diesel per year at the refinery, and

by February 2021 - 2.2 million tons of gasoline annually,” he emphasized. Among other topics, the Forum participants discuss the development of energy sector, the SOCAR oil refining and petrochemical cluster in Turkey, the latest refining technologies, regional gas projects, possible imbalances in the global hydrocarbon market in 2019, new fields in the region and their impact on trade flows and export routes, and Caspian and Central Asian oil in a global context. Trends in the global markets of petrochemical products including price trends, trade flows and technology development, as well as current state and prospects of Transcaucasian railway routes to the ports of Georgia were also reviewed.

CONOCOPHILLIPS AWARDS EPCI CONTRACT TO TECHNIPFMC IN THE NORTH SEA

onocoPhillips has awarded a contract to TechnipFMC plc FTI. The contract is related to the integrated engineering, procurement, construction and installation (EPCI) for the Tor II development in the North Sea. Per FTI, the contract is valued between USD 75 million and USD 250 million. This contract is the first EPCI award from ConocoPhillips to TechnipFMC. It includes the delivery and installation of a subsea production system as well as the installation of umbilical, rigid flowlines

and related subsea equipment. Located in the Norwegian sector of the North Sea, the TOR II development lies in a water depth of 80 meters (262 feet). The Tor field is located 13 kilometres northeast of the Ekofisk Complex at a water depth of 70 meters. Discovered in 1970, the field commenced production in 1978, which was shut in Jan 1, 2016. Tor 2/4 E - a combined accommodation and process platform - was installed in 1975. The living quarters module was replaced in 1982 and has 92 beds. According to the formal disposal resolution, the facility will be 8

removed by the end of 2022. Post removal, the field will undergo redevelopment. A major portion of the field lies in block 2/4 in production license 018 and the rest extends into block 2/5 in PL 006. The reservoir is located at a depth of about 3200 metres. ConocoPhillips, as the operator of the license, has an ownership interest of 30.66%. Recently, ConocoPhillips entered into an agreement to sell two ConocoPhillips United Kingdom subsidiaries to Chrysaor for USD 2.675 billion, in addition to interest and customary adjustments.

NEW POLYFUEL UNIT IN PETROBRAZI REFINERY HAS STARTED PRODUCTION

Based on the PolyFuel® innovative technology developed by the French company Axens, the new unit at Petrobrazi increases the value of the production mix due to a higher share of gasoline and diesel in total refinery output. LPG and lowgrade light gasoline conversion results in approximately 50,000 tons of gasoline and diesel every year, the equivalent of 1 million vehicle refuels. The total capacity of the Petrobrazi refinery of 4.5 million tons per year will remain unchanged. Works at the Polyfuel unit started in 2017 and required an approximately EUR 65 million investment. The project involved building a new unit the size bigger than a football field. The works at the Polyfuel unit involved over 850,000 man-hours free of incidents, with more than 550 OMV Petrom specialists as well as specialized sub-contractors. The new unit has started production in March 2019, as planned. 9

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MV Petrom has comm issioned the new Polyfuel unit within Petrobrazi refinery, using an innovative technology to convert LPG and low-grade light gasoline into high-value petroleum products – gasoline and diesel. This unit is the third of its kind worldwide and the first to convert low-grade light gasoline, as well, not just LPG. “The new Polyfuel unit brings the state-of-the-art technologies used in the petrochemical and refining industry to the Petrobrazi refinery. Due to sustained investments, Petrobrazi continues to rank among the most important refineries in Romania, operating at the highest standards – energy efficiency and environmental standards included – and contributing to the economic development of the area,” said Radu Caprau, member of OMV Petrom Executive Board, responsible for Downstream Oil.

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HEADLINES

CHEVRON TO ACQUIRE ANADARKO

hevron announced on April 12 that it has entered into a definitive agreement with Anadarko Petroleum Corporation (APC) to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at USD 33 billion, or USD 65 per share. Based on Chevron’s closing price on April 11, 2019 and under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and USD 16.25 in cash for each Anadarko share. The total enterprise value of the transaction is USD 50 billion. The acquisition of Anadarko will significantly enhance Chevron’s already advantaged Upstream portfolio and further strengthen its leading positions

in large, attractive shale, deepwater and natural gas resource basins. Furthermore, Western Midstream Partners, LP (WES) is a successful midstream company whose assets are well aligned with the combined companies’ upstream positions, which should further enhance their economics and execution capabilities. “This transaction builds strength on strength for Chevron,” said Chevron’s Chairman and CEO Michael Wirth. “The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business. It creates attractive growth opportunities in areas that play

to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.” “This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately USD 2 billion and will be accretive to free cash flow and earnings one year after close,” Wirth concluded. “The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Anadarko Chairman and CEO Al Walker. “I have tremendous respect for Mike and his leadership team and believe Chevron’s strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets.”

EXXONMOBIL TO EXPAND ULTRA-LOW SULPHUR DIESEL PRODUCTION AT FAWLEY REFINERY

xxonMobil has made a final investment decision to expand the Fawley refinery in the United Kingdom to increase production of ultra-low sulphur diesel by almost 45 percent, or 38,000 barrels per day, along with logistics improvements. “ExxonMobil continues to invest in the Fawley refinery and chemical plant, Britain’s largest integrated facility,” said Bryan Milton, President of ExxonMobil Fuels and Lubricants Company. “This investment will make Fawley refinery the most efficient in the United Kingdom, supporting Esso’s industry-leading logistics

and fuels marketing operations.” The investment will help reduce the need to import diesel into the United Kingdom, which imported about half of its supply in 2017. The more than USD 1 billion investment includes a hydrotreater unit to remove sulphur from fuel, supported by a hydrogen plant, which combined will also help improve the refinery’s overall energy efficiency. Ultra-low sulphur fuels lead to improved air quality when powering the latest technology engines on tractortrailers, buses, marine vessels and offroad equipment. Detailed engineering and design are underway. Construction 10

is scheduled to begin in late 2019, subject to regulatory approval, and start-up is expected in 2021. At its peak, building activity will support up to 1,000 construction jobs. Located on Southampton Water, the Fawley site also has strategic access to distribution logistics across southern England and export access to other markets in Europe and the Atlantic basin. Alongside recent investments at ExxonMobil’s refineries on the U.S. Gulf Coast, Rotterdam, Antwerp, and Singapore, the project will contribute to ExxonMobil’s announced plans to significantly increase the earnings potential of its downstream business by 2025.

HEADLINES

GAZPROM AND CNPC DISCUSS PIPELINE GAS SUPPLIES TO CHINA

working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Wang Yilin, Chairman of the Board of Directors of CNPC (a state-owned oil and gas company), took place on April 25 in Beijing, China. The meeting participants reviewed the development prospects of the Chinese gas market and the strategic aspects of cooperation between Gazprom and CNPC, paying particular attention to gas supplies. It was noted that the preparation of facilities for Russian gas exports to China via the Power of Siberia

gas pipeline from December 1, 2019, is going according to schedule. It is planned to start injecting natural gas into the pipeline in the third quarter of this year. The parties discussed issues related to the planned deliveries of Russian gas to China from the Far East and via the western route. In addition, the meeting touched upon the collaboration between the companies in the areas of gas-fired power generation, use of natural gas as a vehicle fuel, underground gas storage, and science and culture. Gazpromâ&#x20AC;&#x2122;s main partner in China is CNPC. On May 21, 2014, Gazprom

and CNPC signed the 30-year Sales and Purchase Agreement for Russian gas to be supplied via the eastern route (Power of Siberia gas pipeline). The document provides for gas deliveries to China in the amount of 38 billion cubic meters per year. In July 2017, Gazprom and CNPC inked the Supplementary Agreement to the Sales and Purchase Agreement for gas to be supplied via the eastern route signed in 2014. In December 2017, Gazprom and CNPC signed the Heads of Agreement for natural gas to be supplied from Russiaâ&#x20AC;&#x2122;s Far East to China.

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HEADLINES

QATAR PETROLEUM INVITES 3 JVS TO BID FOR NORTH FIELD LNG TRAIN

atar Petroleum (QP) has issued the invitation to tender package for Engineering Procurement and Con struction (EPC) of the 4 Liquefied Natural Gas (LNG) mega-trains of its North Field Expansion (NFE) project, the company announced on April 15. The package has been issued to 3 EPC Joint Ventures: Chiyoda Corporation and Technip France S.A.; JGC Corporation and Hyundai Engineering and Construction Co. Ltd; and Saipem S.p.A, McDermott Middle East Inc. and CTCI Corporation. The tender calls for EPC of the 4 mega-

LNG trains with gas and liquid treating facilities, ethane and LPG production and fractionation, a Helium plant, and utilities and infrastructure to support the processing units. The 4-mega LNG trains are part of QP’s plans to expand the Qatar’s LNG production from 77 million tonnes per annum (mta) to 110mta by 2024. “This tender package comes in line with Qatar Petroleum’s plan to move into the next significant phase of the North Field Expansion project, which will culminate in the award of this EPC contract in January 2020. We are pleased to have the participation of 3 international

joint ventures with outstanding EPC contractors; and we look forward to a highly competitive tender,” Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and the President & CEO of Qatar Petroleum, said. “Issuing this tender package further demonstrates Qatar Petroleum’s commitment to executing this milestone mega-project. It comes at a time when all activities related to the project are progressing well and according to plan at all fronts; and I am pleased to announce that further contract awards related to the project will be announced shortly,” he added.

PLANS TO REVIVE THE MINING INDUSTRY IN ROMANIA

egarding the public political statements on the approval in the Government meeting on April 10 of decisions to grant state aids for the mining sector in Romania, the Ministry of Energy has made some clarifications. “Closure of uncompetitive mines in Romania is a program assumed by our country 8 years ago, i.e. in 2011 and amended by Ciolos Government (2016), by including two new mines in the list of those economically unviable: Lonea and Lupeni,” a press release of the institution shows. Moreover, according to the mentioned document, this plan “is not one aiming at closing mines in Romania; this is a plan aimed to close mines that pose serious environmental and economic efficiency issues.” “Those who state today in an

apocalyptical note the end of the mining industry in our country have approved the same state aids intended to close unviable mines, agreed with the European Commission (EC), in a much larger amount. Specifically, we are talking about granting the amount of RON 74.714mln for closing the mines: Petrila, Paroseni and Uricani in 2017,” the Ministry of Energy also mentioned. Referring to the entire period of this program, the Ministry of Energy highlights that the total amount committed by all Governments that succeeded in 2011-2019 is RON 1.4 billion for the Hunedoara Energy Complex (CEH) and the Jiu Valley National Company for Mine Closures (SNIM), in conditions in which the total amount authorized by the EC for this process is RON 1.6 billion. Regarding coal supply for CEH, 12

it is recalled that two mines remain operational within CEH - Vulcan and Livezeni - which will ensure the coal demand for producing electricity and heat within Hunedoara Energy Complex. “The current Government not only applies the plan for closing uncompetitive mines in Romania, but it also has in progress plans to revive the mining industry. Thus, the Government is preparing for the construction of a new production group within CEH, in Mintia. This combined-cycle investment will stability from an economic, social and energy point of view the entire region and thus Romania. The investment decision regarding the Mintia group was already made by the state-owned company Romgaz, which is already involved in preparing the start of the investment process (feasibility study),” the press release also reads.

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HEADLINES

ARKONA OFFSHORE WIND FARM OPENED

hancellor of Germany Angela Merkel and Norwegian pe troleum and energy minister Kjell-Børge Freiberg opened the Arkona offshore wind farm in the Baltic Sea in Mukran on the German island of Rügen on April 16. Arkona is operated by the Germany company E.ON in collaboration with Equinor, and the formal opening of the project was hosted by the Germany company. Equinor’s chair of the board Jon Erik Reinhardsen participated in the opening ceremony. “The Arkona opening is a key milestone for Equinor. The wind farm has the capacity to supply renewable energy to 400,000 German homes. Equinor is already meeting 25% of Germany’s need for natural gas. Arkona is Equinor’s fourth wind farm coming online since 2012 and is a key contribution to developing Equinor into a broad energy company,” Jon Erik Reinhardsen stated.

Arkona started its power supply to the German national grid in September 2018, and its 60 wind turbines, each producing six megawatts (MW), reached peak production in 2019. The wind farm has a total capacity of 385 MW. “I would like to praise E.ON for its excellent work on the development and currently the operation of Arkona. The project has been delivered on schedule and below budget. Based on our 40 years of experience from offshore operations Equinor has been actively involved in the project development. With Arkona we are well positioned for further growth inn offshore wind in the Baltic Sea,” Pål Eitrheim, Equinor’s executive vice president for New Energy Solutions mentioned. In addition to its share in the Arkona offshore wind farm, Equinor holds a position in the Baltyk I, II and III wind farm projects in the Polish sector of the

Baltic Sea. In the UK Equinor operates the Sheringham Shoal, Dudgeon and Hywind Scotland offshore wind farms. Equinor’s present offshore wind portfolio has the capacity to supply renewable energy to more than one million European homes. Equinor is building a material position in renewable energy, in particular in offshore wind. The company is involved in a number of significant wind projects worldwide, including four in the UK, one in Germany, and one in the US. Three of its UK wind farms employ conventional, bottom-fixed turbines, while Hywind Scotland employs floating wind turbines. The Arkona offshore wind farm is a 385 MW project that is located in the Baltic Sea, 35 kilometres northeast of the Rügen island in Germany, southwest of the Danish island of Bornholm. It consists of 60 six-megawatt turbines mounted on monopile foundations installed at depths of 23 to 37 metres.

‘SMART EDGE’ AT THE ROMANIAN MINISTRY OF ENVIRONMENT

he Romanian Ministry of Environment, as a partner in the INTERREG Project ‘Smart Edge - Sustainable Metropolitan Areas and the Role of the Edge Cities in Mitigating the Impact of Climate Change’, organized a working meeting in Bucharest on April 3-5, according to the calendar of activities. The event was aimed at exchanging experience and best practices in the field of adaptation to climate change, peri-urban transport, the use of renewable energy, innovative tools for urban planning. In the

three days, working meetings took place between the Akershus County Council, from Norway, and the project partners, as well as potential beneficiaries, and urban planning issues were discussed. The participants also made a study visit to the Extreme Light InfrastructureNuclear Physics Research Center (ELINP) - the Laser in Magurele. The meeting was attended by the project teams of the 8 partners from 7 countries, as well as stakeholders on behalf of all partners. ‘Smart Edge’, which runs from 01.06.2018 to 30.11.2022, coordinated as project 14

leader by the Akershus County Council in Norway, has as associate beneficiaries 7 partners: Ministry of Economy and Energy of Brandenburg - Germany, Barcelona Metropolitan Area - Spain, Stockholm County Council - Sweden, Innovhub - Stazioni Sperimentali per L’Industria Italia, Krakow Metropolitan Association - Poland, Ministry of Environment of Romania and Ilfov County Council. The total budget of the Smart Edge project is EUR 1,392,079, of which the Ministry of Environment, as a partner (associated beneficiary), benefits from EUR 104,957.

HEADLINES

U.S. OIL FLOWING FREELY TO CHINA

supertanker laden with U.S. oil is floating off China’s eastern coast, awaiting discharge at one of the Asian nation’s busiest ports. The vessel will soon be joined by more ships that will make the two-month voyage from America as long-simmering trade tensions between Washington and Beijing begin to ease. While refiners in China shunned U.S. oil imports as the nations imposed tit-for-tat tariffs in an escalating trade war, buying interest has resurfaced

on optimism that the world’s top two economies are nearing a resolution to their dispute. With geopolitical turmoil disrupting supply from Iran to Venezuela, buyers are feeling more assured the purchases won’t break government regulations, according to refinery officials and traders in Asia. China International United Petroleum & Chemicals Co. Ltd. (Unipec), the trading arm of state-owned refining giant China Petroleum & Chemical Corp. (Sinopec), provisionally chartered the Coswisdom Lake to pick up crude

from the U.S. Gulf Coast on May 20 for delivery to China, shipping fixtures show. The tanker, with capacity of two million barrels, is just one of many that are being sought by companies such as Occidental Petroleum Corp., Mercuria Energy Group Ltd. Co. Ltd., and Equinor ASA for the same journey. Last year, Chinese refiners gorged on American oil pumped everywhere from inland shale fields to deepwater wells in the Gulf of Mexico, lifting imports to a record high of more than two million metric tons in January 2018.

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OPINION

GEO 114/2018 and its amendments Impact for the energy sector

Daniel Vlasceanu Partner at Vlasceanu, Ene & Partners

Raluca Spinu Senior Associate at Vlasceanu, Ene & Partners

he adoption of the controversial Government Emergency Ordinance no 114/2018 (‘GEO 114’) at the end of 2018 triggered multiple debates; as expected, given the broad range of industry sectors impacted, there were many voices asking for repealing of various measures imposed therein; given the discussions between political representatives and industry associations1 carried out as of its adoption, a better understanding of its potential impact led to the amendments adopted under GEO 19/2019 (‘GEO 19’) published in the Official Gazette on 29 March 2019. For the energy sector, the main measures imposed initially under GEO 114 were: the obligation to pay a 2% tax on revenues from ANRE licensed activities; the obligation of the gas producers to sell their gas at a capped 1 It’s worth mentioning the warning received from the International Association of Oil and Gas Producers (‘IOGP’) that also sent a letter in relation to the GEO 114 measures stating that such measures of limiting the free market in Romania and discouraging the onshore and offshore investments in Romania.

price of 68 RON/MWh; the producers’ obligation to deliver their gas primarily to cover the households’ necessities. GEO 19 brought for certain industry sectors (e.g. the banking sector) obvious ‘sweetening’ measures; at the same time, there are other sectors (e.g. constructions) where no changes to the original GEO 114 were made. For the purpose of the present material, we will focus on the changes relevant for the energy sector (with a preference to the gas domain).

Amendments brought by GEO 19 • The capped price of gas sold by the domestic producers will be applicable only for household consumers and for thermal and cogeneration gas-power plants destined to household consumption. In early March 2019, the European Commission sent a letter to Romania emphasizing that the regulation of wholesale prices goes against the EU framework; at the same time, it stated that such measures “are not adequate to sustainably achieve the objective of protecting household customers from

OPINION

excessive price increases” 2. GEO 19 removed the regulated price for industrial customers which means that (as it was before) Romania will have a partially regulated and a partially liberalized gas market. During the period 1 May 2019 – 28 February 2022 (i.e. it will start one month later than initially envisaged by GEO 114), the gas producers will sell at the capped price (of RON/MWh 68) the quantities used by household consumers and by energy producers using cogeneration and thermal plants destined for population consumption. • A text ambiguity was removed under Art 22 para 11 of Law 123/2012: during the period 1 March 2019 – 28 February 2022 for household consumers, the price of electricity will also be regulated by ANRE. The fundamental underlying problem behind such ‘protective’ measures is the energy poverty and the vulnerable consumer. Romania needs to structurally tackle this phenomenon with long term measurements meant to reduce its spread while protecting the ones in need. But in a year with two rounds of elections this is obviously not on the table. • Exemption of the thermal and electric coal-powered plants from the payment of the 2% turnover tax; a separate level of contribution shall be regulated by ANRE directly. Immediately after enactment of GEO 114, in January 2019, it was mentioned3 that the coal powered plants should be exempted from said burdensome obligation. GEO 19 reflects such exemption applicable for coal powered plants and it also includes the cogeneration plants under the same regime: the annual tax will be established specifically by ANRE (as per the newly introduced Art 31 of the GEO 33/2007). A question mark is raised on the interpretation of this exemption by the European Commission, considering that there are arguments to be perceived as a state aid.

47/2019, published on 29 March 2019). It is without doubt that the sudden adoption of GEO 114 (and, to a certain extent, of its amendments) have caused substantial difficulties for the enactment of a coherent secondary legislation. Potential subsequent amendments are not excluded. • ANRE Order no. 18/2019 - establishing the computation method for the 2% turnover tax ANRE published on 17 April 2019 a draft order5 to modify certain elements of the tax computation (e.g. for the gas producers that also have a supply license, apart from the royalty, it is also excepted from the turnover the cost of operating the upstream pipeline system – Art 17 letter d) of ANRE Order no 18/2019). Also, said draft order proposes (as per Art 1 para 2) a 0,1% tax level (on the revenues) for the cogeneration and coal-powered plants production activities.

Conclusions GEO 114 appeared unexpectedly, without consultation of the business environment and without an impact analysis. Its long term effects are to be observed as there is high temptation to claim that by turning certain projects uneconomic and/ or by triggering the suspension of others, the Romanian gas production will fall (especially the onshore one, where most of the reservoirs are mature and require substantial investments to compensate for the natural decline); consequently, the imports will raise, with all deriving consequences therefrom6. Even though GEO 19 removed part of the negative effects of GEO 114, the adoption of GEO 114 is still fresh in the investors’ recollection. If up to mid last year we would regularly receive inquires of assistance from foreign investors (operators/ service providers etc) interested to enter Romania, such are fewer and fewer in the last period. There is a clear need for the Romanian legislator to build trust on the potential investors by taking clear measures, adopted in a transparent manner and proving a supportive attitude, as many other states interested in raising their FDI levels are currently providing!

Secondary legislation for the gas industry • ANRE Order 52/20194 - computation method for gas to be sold for household consumption On 18 April 2019, ANRE published the Order no 52/2019 (which repelled the ANRE Order 35/2019 published on 1 March 2019, which had already been amended by Order

5 Available at (and accessed on 22 April 2019): https://www.anre. ro/ro/presa/comunicate/proiect-de-ordin-pentru-modificareasi-completarea-ordinului-anre-nr-18-2019-pentru-aprobareametodologiei-privind-calculul-si-stabilirea-contributiei-banestianuale-prevazute-la-art-2-alin-31-din-oug-nr-33-2007-privindorganizarea-si-functionarea-anre-aprobata-cu-modificari-sicompletari-prin-legea-nr-160-2012-astfel-cum-a-fost-introdus-prinoug-nr-114-2018-si-modificarea-ordinului-anre-nr-224-2018-privindaprobarea-tarifelor-si-contributiilor-banesti-percepute-in-anul-2019

2 http://europa.eu/rapid/press-release_MEMO-19-1472_en.htm – as accessed on 22 April 2019. 3 Please see https://energyindustryreview.com/opinion/governmentemergency-ordinance-no-114-2018/ - as accessed on 22 April 2019. 4 regarding the methodology for establishing the computation method for the gas quantity to be sold for household consumers and thermal energy producers and cogeneration producers for population consumption and for the amendment of the Network Code. Available at: https://portal.anre.ro/PublicLists/Ordin, as accessed on 22 April 2019.

6 We are deliberately excluding the hypothesis of initiating the Black Sea production: so far, ExxonMobil and OMV Petrom are under discussions with the authorities to put in place the necessary conditions for taking the final investment decision.

OPINION

Foundation to ensure the long-term success of Romania’s gas sector T

Catalin Nita Executive Director of the Oil and Gas Employers’ Federation (FPPG)

here are some scholars of geopolitics who say that Romania, throughout its history, has never managed to exit the survival phase and enter a construction phase. Sandwiched between greater powers, at the convergence of several types of geographic divisions, the island of Latinity in a sea of Slavism, at the border between Christendom and Islam, between Orthodoxy and Catholicism, a crossroads of physical geographic features in the region, we have constantly been seized, occupied, divided, used as barriers or merely crossed on the way to greater riches. Constantly on the defence, we were forever destined to react, our ongoing struggle was just to continue our existence. Only 100 years ago did we manage, for the first time in millennia, to produce a viable unitary state in this geography - and we haven’t had it easy since then either. This logic uses the cross that we’ve had to bear throughout the centuries as a main explainer of our (still remaining, but declining) development handicap compared to our other European peers. It is a well-established fact that geopolitics and energy are strongly intertwined, given that the latter is so indispensable to so many of our processes as societies and individuals (one could argue it’s so indispensable that it is sometimes 18

taken for granted). But I wanted to draw the parallel to this interpretation of Romania’s geopolitical destiny for another reason. Looking at the extremely rich and often times pioneering history of the Romanian energy industry, I can’t stop myself from being in awe. As a relative newcomer to this industry, however, it is hard for me to shake off the feeling that we are unable to fully exit a survival phase and enter a renewed construction phase. The handicap generated is not in absence of resources, after all, we are still one of the largest hydrocarbon producers in Europe, a net electricity exporter, and so on, but in lack of fulfilment of potential. We have huge untapped potential in renewables, hydropower, grid development, retail markets and, the one closest to my mind, natural gas. Perhaps nowhere is the gap between potential and reality as glaring as in natural gas. We are one of the largest gas producers in the EU but only a third of our households are connected to the network. We have one of the lowest import dependencies in the EU, but one of the highest vulnerabilities to external supply disruption. We sell at a regulated price, but import at a free market price, and pay taxes according to prices on markets where we’re not even physically connected. We have huge untapped reserves, both onshore and offshore, but production is slowly declining.

Construction is difficult when attention is diverted away from developing the potential towards reacting to constant changes to the rules on how we can sell our products, how much taxes we need to pay, how much money we will receive and so on. The constant rule changes generate expectations of more changes and the uncertainty leads to delays for projects which promise kickstarting the drive towards potential fulfilment. Impacts are analysed only after the deed is done and managers scramble to redo long-term plans and minimize those impacts. Construction is difficult when you do not build on a solid foundation and thatâ&#x20AC;&#x2122;s what the legal and regulatory framework represents for our industry. It needs to take into account all the elements of the structure that will sit on top of it, be it upstream, transport, distribution, markets, retail, wholesale or consumers, and its primary role should be to ensure a stable structure. If a crack appears in one element of the structure and you shift part of the foundation, chances are you will end up with several more cracks elsewhere. And if you suddenly shift the foundation, chances are you will negatively affect the long-term viability of the whole structure. This is the debate that we intend to launch in the upcoming period - what should the foundation look like in order to ensure the long-term success of Romaniaâ&#x20AC;&#x2122;s gas sector? This is an endeavour which will need to look at all links in the value chain, understand their dependencies and how they influence one another. We need to see how we can achieve the necessary rules to stimulate upstream production, have liquid markets with fair price formation, ensure proper cost recognition, as well as affordable energy. The success of this endeavour will depend in great part on the active participation of actors from all interested spheres. For it to stand, this foundation will need to be built to last and it needs to be fully understood by all those affected before it is actually laid down. A critical element will be consumers, more specifically the most vulnerable of energy consumers. Statistical indicators continue to place Romania among the poorest of EUâ&#x20AC;&#x2122;s nations, both by real GDP and adjusted by purchasing parity, with one of the highest shares of people falling into the category of severely materially deprived. As such, protection is mandatory. At the same time, statistical indicators also show that Romania has one of the highest income disparities in the EU as well as one of the highest disparities between regions, with the richest region being six times richer than the poorest one. They also tell of widespread use of antiquated heating methods and inefficient building stocks, wasting energy and generating higher costs. This might be the best starting place to lay the first building block of the foundation for the future - how do we ensure that vulnerable consumers are adequately identified and protected? We need to take into account that every dollar mandated towards protecting consumers that are not vulnerable is a dollar less spent on those truly in need. The answer to this question should also tackle how we can ensure that their vulnerability decreases. Failing to do so will make the foundation vulnerable to cracks of its own. 19

OPINION

Oil & gas, new technologies T

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

he theory that renewable energy sources will be increasingly used is undeniable, but we can also be sure of the use of fossil sources for another significant period - until 2035, according to some specialists in the industry or even until 2050 according to others, in a significant percentage. Meaning 80% - 85%. It is obvious that oil and gas will dominate the energy sector. Letâ&#x20AC;&#x2122;s not forget that we should also consider coal, both from mines and especially the â&#x20AC;&#x2DC;cleanâ&#x20AC;&#x2122; one, defined this way following the application of new technologies. We are talking about fossil sources even only as a continuous presence in energy supply, given the mobility of finished products, from fuels and natural gas and their use to produce/generate electricity, even if the fight with pollution is carefully controlled. Moreover, currently, innovative technologies in the development phase allow to quickly bring the fields online, the new fields, in extreme conditions (such as those from deep waters), to make unconventional hydrocarbons usable, currently untapped, such as extra-heavy oil, bituminous or oil shale, gas hydrates, shale gas. Together with all these, coal remaining present. All these new operations and technologies can be the basis of discovery and exploitation of hydrocarbon fields in parallel with oil and gas extraction, coal mining maintaining the base of the energy sector, generically speaking, fossil fuels. The recent evolution of the oil industry has proven with no shadow of doubt the centrality of the technological lever in the way that new technologies can positively contribute, throughout the business chain relating to Upstream: exploration, 20

drilling, field development, exploitation - engineering and production. About technologies, both traditional and new ones, we talk frequently because they depend on the main parameters such as: the success rate of exploration, the recovery factor of fields/coal mines, production efficiency and improving the security of operations, but also, very important today, reducing the environmental impact. Innovation and technological knowhow are decisive in fulfilling the following series of strategic objectives in the entire area of fossil fuels, as follows: - Reducing the risk of mineral resources: the new technologies will be a key factor for increasing mineral reserves, reducing exploration costs, developing production and reducing the time needed to bring old types of hydrocarbons to market, and to the same extent the new ones; - Increasing the recovery factor: the application of the new technologies will bring the recovery factor to 60-65%, a value that will be decisive for the increase in the availability of oil and gas, the more so in hard-to-reach areas, challenging even from a geological and environmental point of view; - Maximizing the efficiency of building and managing wells/mines. The same for all surface installations, for coal, energy efficiency strategy. Talking about the new technologies capable of increasing the efficiency of the entire energy sector as a whole, both on the Upstream and Downstream chains, one must not neglect the technological effort developed in the Midstream field. Natural gas is an abundant and versatile resource, able to cope with various transformations, so a resource of great strategic relevance. It is obviously

OPINION

anticipated that natural gas will be predominant in the world’s energy needs and this for a long time now. Increase in gas demand must be balanced with market demand, with its logistics, which currently has technological and geographical limits. The Midstream segment provides technologies and processes that enable the exploitation and capitalization of resources, of gas associated with extracted oil, for which, as the convenient storage technology is not found (if it cannot be reinjected into the field), could condition the production of crude oil, as well as the proper exploitation of gas resources. I would recall that natural gas can be converted into liquid hydrocarbons

through indirect chemical conversion, highly topical processes of Fischer-Tropsch type. At the same time, natural gas can be converted into methanol or dimethyl ether, also by chemical conversion, with highly advanced conventional technologies. I would also like to recall that natural gas can be converted by petrochemical processing from syngas, with a successive conversion into a mixture of long chain paraffin hydrocarbons (waxes), using the same synthesis processes of Fischer-Tropsch type. Waxes are then subjected to the chain breaking process to obtain lighter, sulphurfree products. The platforms for transforming natural gas into liquid hydrocarbons at the

wellhead will also include transportation to the market of the valuable products thus obtained. As a quasi-new technology, we can also consider the transport of ultraheavy oil, as well as the treatment of unconventional hydrocarbon sources, developed technologies that can be used for the treatment of other heavier fractions, fractions derived from the refining process of traditional crude oil, basically refinery residues processed using standard recipes. It is worth mentioning the chemical processing of coal during the Second World War, obviously using a German technology, obsolete today, but improved by current innovations and continuing to convert coal into diesel.

ENGINEERING EXCELLENCE Oil and Gas

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Pipeline systems

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Underground storage facilities

Climate protection

Tank farms and terminals

Power transmission and distribution systems

Refineries and petrochemical plants

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Transport and Structures Airports Hydropower plants

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Office Ploies‚ ti Romania ILF Consulting Engineers Romania 16 Negru Voda Str. RO-100149 Ploiesti ‚ Tel.: + 40 (344) 401-333 Fax: + 40 (344) 401-334 romania@ilf.com www.ilf.com

Focus on security of supply and cleaner energy at affordable prices OMV Petrom is the largest energy group in South Eastern Europe. The company is active in Upstream, but it is also an important player in the regional fuels, gas and power markets. OMV Petrom is a reliable energy supplier for businesses, providing customized gas and power solutions to over 450 Romanian companies. The company is active on the entire gas value chain in Romania, from production and processing, to marketing and supply. OMV Petrom’s gas production can cover approximately 40% of Romania’s gas demand. OMV Petrom is also active on the power market in Romania, both as a power producer and as a supplier. Franck Neel - Member of the Executive Board, Downstream Gas Division at OMV Petrom, discusses the role of gas in solving the current challenges - increased energy demand and climate change, the most pressing issues in the gas sector in Europe and Romania and Downstream Gas Division’s main objectives for the upcoming years. 22

Dear Mr. Neel, you have extensive international experience – more than 25 years in the energy field. How do you see the European energy market? How do you assess Romania’s place in this scenery? Let me start by saying the energy market is an exciting field to operate in, providing an essential ingredient to human life and development, but definitely not without its challenges. From climate change, to security of supply, to a variety of geopolitical aspects playing an important role, to technology supporting meaningful transformation, the industry is reshaping itself constantly to address the current concerns. Right now, in both Europe and Romania, the focus is on security of supply and providing cleaner energy at affordable prices. While Europe works towards this goal by diversifying energy supply sources and building efficient energy market mechanisms, Romania needs to follow along that same path, taking steps towards achieving meaningful interconnection, encouraging investments and taking steps towards liberalized gas and electricity markets.

Due to own hydrocarbons reserves and a balanced mix of energy sources, Romania has one of the lowest energy dependency rates in Europe. Moreover, the discoveries made in the Black Sea have the potential to secure Romania’s energy independency and to establish the country as a regional key player on the gas market. To turn this potential into reality, large investments are

ROMANIA HAS A UNIQUE STRENGTH IN EUROPE THAT IS IN THE SAME TIME A HUGE OPPORTUNITY FOR THE COUNTRY – NATURAL GAS RESOURCES. 24

required, thus creating new jobs and bringing additional revenues to the state budget. Climate change is also a topic of utmost importance that is being addressed by European Governments and Romania needs to take an active role in these discussions. Within this context, natural gas is the energy carrier of the future, due to lower carbon emissions, affordability, capacity of being stored and availability. In Romania, natural gas is the most important primary energy sources, representing 31% of the primary energy production. This fact should set the scene for encouraging investments in gas projects and for putting in place the right infrastructure.

We see that OMV Petrom grew its sales revenue in 2018. What role did the Downstream Gas Division play in this regard? What is your outlook for the remainder of the year? Downstream Gas Division in OMV Petrom, that ensures electricity production and gas & power sales, contributed significantly to the companyâ&#x20AC;&#x2122;s results in 2018, with approximately 22% share in its consolidated sales totalling RON 22 bn. Our integrated business model allowed us to capture market opportunities along the entire value chain. We successfully placed on the market our entire equity gas production, supplying a variety of customers, both large industrial players in Romania but also an increasing number of small and medium enterprises. Furthermore, the Downstream Gas 2018 result reflects improved performance of the power business, enabled by better market conditions and full availability of the Brazi power plant in the fourth quarter 2018. The Brazi plant generated a record high production in 2018, thus contributing significantly to Romaniaâ&#x20AC;&#x2122;s security of power supply in the context of a colder winter, with higher power consumption and lower production levels. Recently we announced the results for the first quarter of 2019 and again our division has a strong contribution. Our performance over the period included an increased net electrical output of over 1 TWh. The gas sales volume decreased by 14% due to decreasing equity gas production and lower 25

gas volumes available in storage. For 2019, we expect demand for gas and power to remain similar to 2018.

A new energy report reveals European Unionâ&#x20AC;&#x2122;s growing need for gas imports - its own production is declining, around 100bcm of long-term contracts expire by 2025. IEA estimates that the EU will have to seek additional imports by 2025 to cover up to one-third of its

anticipated consumption. What are OMV Petromâ&#x20AC;&#x2122;s plans regarding this situation? Romania has a unique strength in Europe that is in the same time a huge opportunity for the country â&#x20AC;&#x201C; natural gas resources. Still, Romanian natural gas production is declining, due to the natural process of depleting gas fields. As such, in the absence of new gas discoveries being brought on-stream, Romania will become increasingly dependent on import gas. Investments are required in order to mitigate the natural decline in Romania, however investors need predictability and stability, especially in a long investments cycle industry. Moreover, I would mention also here the Neptun Deep project, the opportunity Romania should benefit from on the long term. The Neptun Deep project is a huge opportunity for Romania: to increase revenues to the state budget, create new jobs, secure Romaniaâ&#x20AC;&#x2122;s gas needs. Usually, for such large-scale projects, many pieces of the puzzle need to be aligned: such as regulatory framework, fiscal stability, competitive terms, liberalized gas market and key infrastructure. 26

The intensively debated GEO 114/2018 has sparked a number of controversies and expressions of opinion by companies affected by this ordinance. What are its most important consequences for the activity you carry out? When GEO 114/2018 was made public at the end of 2018, it was very clear that we face substantial, structural shift in the Romanian energy market. After a long, fairlycomplex and not without delays gas market liberalization process, and after barely two years of liberalized gas market, we went back to a regulated status. We understand the approach to protect vulnerable consumers and have expressed our openness to finding solutions.

INTERVIEW

FROM CLIMATE CHANGE, TO SECURITY OF SUPPLY, TO A VARIETY OF GEOPOLITICAL ASPECTS PLAYING AN IMPORTANT ROLE, TO TECHNOLOGY SUPPORTING MEANINGFUL TRANSFORMATION, THE ENERGY INDUSTRY IS RESHAPING ITSELF CONSTANTLY TO ADDRESS THE CURRENT CONCERNS. Amendments brought to the Ordinance answer some of the concerns expressed by the oil & gas industry. Returning to unregulated gas prices for industrial customers represents an important step towards a liberalized gas market. We believe a liberalized gas market can exist with the right mechanisms in place to protect vulnerable customers, in accordance with the existing good European practice. This process should continue. We believe that dialogue can get us closer to a solution and this dialogue must continue. Consultation with the business environment, predictability and legislative and fiscal stability are the foundation for stimulating investment. Our assessment accounts for a net impact on our 2019 Operating Result of around 40 million EUR.

OMV Petrom has announced that due to the unstable fiscal environment the investment activities would focus in 2019 on oil producing fields and not on gas fields, resulting in a lower investment level compared to last year. What will this level be, precisely? OMV Petrom is a high scale investor and we are committed to Romania. However, in the recent period, we have seen high fiscal and legislative volatility and this made us to revisit our investments plans. Our investments are still at a high level, with RON 3.7 bn estimated for 2019, with 75% supporting upstream projects. This is probably the largest budget in the energy sector.

From your viewpoint, what are the most pressing issues in the gas sector in Europe and Romania today? With global population growth, more and more energy is needed to improve lives and living standards, and this stands true for Romania. It is hard to imagine modern life without gas for heating homes, without fuels for cars, without electricity for phones or computers. Our role, as an energy company, is to cover this demand, while lowering costs and reducing the impact on the environment. We are active on all these activities in the energy value chain. The main challenges of our industry are to adapt our business models to low-carbon energy generation, and to ensure access to affordable energy sources. 27

From a Romanian perspective, the country should focus on ensuring its energy security, through a variety of means, reshaping the central market obligation that has not delivered the incentives for investments and market liquidities, working towards a modern transportation system and building systems to facilitate resource interconnection. A well-functioning market with interconnection will attract producers, suppliers and traders which will generate the right signals for investments and market prices for commodities as we can see in many countries. It is also important to put in place a vulnerable customer scheme to protect low-income customers. However, these developments would require significant investments and these cannot happen without a coherent, predictable and stable regulatory environment based on thorough stakeholder consultation.

International energy markets are going through an extensive transition process, which takes place at technological, geopolitical, economic level and at the level of climate change. How do you see the role of gas in solving the current challenges - increased energy demand and climate change? Gas is the energy of the future in a world that needs a climate friendly energy system. Gas is increasingly used in power generation, as it is the cleanest of fossil fuels, with 40% lower carbon emissions than coal, and considerably lower emissions of air pollutants. Also, due to the flexibility of gas-based power generation units, they are complementary to variable RES (wind and solar). Thus, on the road to decarbonization, natural gas has all the prerequisites for being the energy for the future, source of endless possibilities, capable to support the evolution of the energy system towards clean, decentralized and flexible production. Gas has also a high potential to become an alternative fuel for transportation, as CNG (compressed natural gas) solutions can significantly reduce emissions.

OMV PETROM’S INVESTMENTS ARE STILL AT A HIGH LEVEL, WITH RON 3.7 BN ESTIMATED FOR 2019, WITH 75% SUPPORTING UPSTREAM PROJECTS. THIS IS PROBABLY THE LARGEST BUDGET IN THE ENERGY SECTOR. Taking into account the aforementioned, what are in your opinion the priority directions that Romania’s investments should follow to facilitate this transition? In order to ensure Romania’s security of supply, there are several aspects that need to be considered. The first one refers to investments. According to Romania’s energy strategy 2018-2030 the Romanian energy sector requires investments of EUR 25 bn by 2030. If we look to a longer perspective, respectively for the period 2030-2050, the same source indicates a need of investments in amount of EUR 15 bn. This should also target the domestic production. The second one refers to interconnectivity – we need to see progress on projects like BRUA, interconnection of the NTS with the international 28

gas transmission pipelines and reverse flow at Isaccea. Currently Romania has an interconnection capacity of 7% and estimates a 9% target to be achieved by 2020. The target for 2030 is 15% and we support it. The development of the natural gas market depends to a large extent on the quality of energy policies, regulations and institutions. These should stimulate investments in domestic production and essential gas infrastructure (interconnectors, storage deposits, transport and distribution system). Also, the reduction of GHG emissions should be considered.

INTERVIEW

DUE TO OWN HYDROCARBONS RESERVES AND A BALANCED MIX OF ENERGY SOURCES, ROMANIA HAS ONE OF THE LOWEST ENERGY DEPENDENCY RATES IN EUROPE. MOREOVER, THE DISCOVERIES MADE IN THE BLACK SEA HAVE THE POTENTIAL TO SECURE ROMANIA’S ENERGY INDEPENDENCY AND TO ESTABLISH THE COUNTRY AS A REGIONAL KEY PLAYER ON THE GAS MARKET. In creating a better, environmentally sustainable industry, what do you think the way is? How government regulations could be more streamlined but not infringe upon industry competitiveness? The government regulations set the tone for our industry, and not only, of course: market design, fundamentals and rules of the game are following the regulatory framework. As mentioned, there is still a long path ahead of us until reaching a mature and attractive energy market in Romania as several disfunctions are still opposing: limited interconnections to EU gas markets, wholesale market low liquidity, inadequate protection of vulnerable consumers and some others. However, the good news is that there are solutions to all these problems, solutions that proved efficient in other countries facing the same hurdles, it is a matter of joint commitment to implement them. Just to give some examples: implementation of an efficient scheme to protect the vulnerable energy consumers, combining financial, non-financial and energy efficiency measures; the full cancellation of the price cap, transparent household regulated price that can give visibility for competition on retail and freedom of bilateral contracts with defined terms, enabling new product generation for customers; reshape of the central market obligation to create more liquidity and price signal; interconnection development etc.

Environmentally responsible corporate behaviour is definitely a way to give back to society. Now that the oil and gas industry is increasingly looking for greener solutions, where can OMV Petrom add value? There are a number of initiatives that promote environmentally responsible corporate behaviour in the energy industry, both coming from major players but also from promising, innovative start-ups. OMV Petrom has a long tradition of sustainable and responsible behaviour. We see natural gas as part of the solution for cleaner and sustainable access to energy. We conduct our business in a responsible way, respecting the environment and adding value to the communities in which we operate. We support the transition to lower-carbon energy sources and are continuously working on the introduction of innovative technologies and digital solutions to reduce the environmental impact of our activities. 29

For example, the feedstock recovery pilot project at the Schwechat refinery uses plastic waste to produce synthetic crude in a pyrolysis process. This recycled crude can be processed into any desired refinery product, while reducing the dependence on fossil resources and improving carbon intensity. While a number of technological challenges needed to be overcome, currently, at Schwechat, this new ReOil unit can process up to 100 kilograms of waste per hour, thus producing 100 litres of valuable crude.

What are the Downstream Gas Division’s main objectives and vision in the coming years? OMV Petrom is committed to maintaining and strengthening its position as a leading integrated energy player in the region. Thus, our focus is on the opportunities that Romania offers, complemented by selective regional investments, while, at the same time, enhancing customer experience by offering high quality products and services. In Downstream Gas, we have taken steps to increase both the competitiveness in our product portfolio and contribution from end customers, towards achieving the long-term strategic goal of consolidating our leading position in the Romanian gas market. Regarding the strategic direction of Downstream Gas to become a regional player, activities have started for creating an entry into neighbouring gas markets. As the Neptun Deep project will come on stream, subject to the confirmation of commercial viability, regional expansion will become an important element of monetizing gas from the offshore Black Sea.

Where would you like to see OMV Petrom positioned, let’s say, five years from now? In five years, I see OMV Petrom fully delivering on our strategy of providing sustainable access to energy for everyday modern life.

OIL & GAS

Modern solutions from INCDT COMOTI to upgrade screw compressor stations Since their Joint Statement of 25 July 2018 in Washington D.C., when President Juncker and President Trump agreed to strengthen EU-U.S. strategic cooperation including in the area of energy, EU imports of liquefied natural gas (LNG) from the U.S. have increased by 181%. The first EU-U.S. Energy Council High-Level Forum will take place on 2 May 2019 in Brussels.

Text by Valentin Petrescu, Sorin Tomescu, Alexandru Serban

n the country, INCDT COMOTI is the only manufacturer of screw compressors and natural gas compression groups equipped with oil-injected screw compressors and in time has become an important competitor on the market of such equipment. It maintains the market position by improving, diversifying and continuously modernizing its products

in order to meet the requirements of the various requested applications and to raise the technical level of the products from other partners on the market with which itâ&#x20AC;&#x2122;s in direct competition. Research has been specifically geared towards optimizing energy consumption in the compression process, improving compressed gas characteristics and lowering oil consumption by reducing the residual oil content of compressed 30

gas, increasing the reliability and operating life of installations. Continuous concern has been directed toward the development of efficient and safe solutions for the use of compression equipment to reduce the amount of gas evacuated to the atmosphere when the plant is shut down, in regard to the economic and environmental protection. Specific research has been undertaken to develop booster gas compression

OIL & GAS

equipment for the purpose of supplying gas fuel to turbine engine power units or technological plants to match the compressor operating characteristics with the engine or technological equipment working characteristic on which it feeds. Outdoor ECS equipment is built to operate without restrictions at ambient temperatures from -30Â°C to +40Â°C under the conditions of the continental temperate climate. The architecture of the compression assembly has been continually improved, evolved to a compact skid on which complex suction and discharge gas conditioning systems are installed, efficient filtering equipment to reduce the residual oil content in the compressed gas to about 2ppm. ECS screw compressor is a complex installation designed to compress a natural gas flow at the parameters requested by the beneficiaries. The compression unit is an oil-injected screw compressor driven by an electric motor. The screw compressor assembly consists of a separator vessel, lubricating oil pump system, oil cooler, gas and oil filters, command and shut-off valves, measuring and protection devices. This equipment is designed to work outdoors. Following the requirements from the beneficiary, who was pleased with the operation of the compressors (each having over 80,000 operating hours), four compressor assemblies were overhauled according to new working parameters in the stations. According to the data from the compressor station, provided by the beneficiary, a calculation of the compression unit selection was made. From the design data, single stage compression results in an efficient operation with an oil injection screw compressor. The selection calculation determined the type of compressor, driver power, the flow rate of oil required for compressor cooling and lubrication, the amount of heat that has to dissipate from the oil to maintain the thermal regime in operation within the prescribed limits.

First two compressor assemblies (Fig. 1) installed at Tasbuga compressor station are an ECS 10/10 (CF128G compressor) that was modified to ECS 20/10 (flow rate increased from 10,000 Nm3/day to 20,000 Nm3/day), an ECS 20/10 (compressor CF180G) that was modified ECS 30/10 (flow rate increased from 20,000 Nm3/day to 30,000 Nm3/day). Under normal operating conditions, the suction pressure of 0.2 barg may vary during the working process and thus the automation system must adapt the operating mode to the variation of this parameter to maintain it at a constant value, imposed by the station. To meet this requirement, the main drive motors were equipped with frequency converters. Increasing the flow rate is mainly based on increasing the speed of the screw compressor by increasing the ratio of the multiplication of gears from the electric motor to the screw shaft. Thus, to increase the flow of natural gas circulated by the two skids, the gear ratio for the two compression units has been modified. In order to guarantee safe operation and discharge pressures lower than 4.5 bar, the oil circulation in the installation is made by a special pump, which has high suction pressures. Two pumps are mounted on the oil injection system, one is in operation and the other in standby mode, ready to operate automatically in case of failure of the first pump. The last 2 compressor assemblies (Fig. 2) installed at Tintea compressor station are two ECS 30/10 with a 30,000 Nm3/ day flow rate. To reduce the residual oil content in the compressed gas to about 2 ppm, a coalescent filter was installed. In order to guarantee safe operation and discharge pressures lower than 4.5 bar, the oil circulation in the installation is made by a special pump, which has high suction pressure. To protect the installation during operation, a soft starter is used which reduce the load and torque on the motor during the start-up. The automation system is designed to follow the latest OMV standards and is enhanced by the use of a large capacity 31

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Fig. 1 ECS 20/10 and ECS 30/10 Tasbuga

Fig.2 ECS 30/10 Tintea

PLC and versatile operating software to manage different working conditions and safety regulations in a safe manner. Other technical solutions implemen ted on all for compressors: • Effective filtering of compressed gas

to reduce the oil content of compressed gas from the compressor skid by installing demisters in the oil-gas separation vessel; • Installation of the aspiration dis charge system which significantly reduces the emissions of gases into the atmosphere; 32

• Installation of check valves and electric valves on the suction and discharge of the compressor for automatic and safe operation of the compressor assembly; • Additional parameters are monitored to ensure safe operation and minimize the number of staff required to operate them at the station, with the possibility of data transmission and remote control; • A new generation of PLC and a touch display ensures an easy to use interface to view all the functional parameters, alarms and eventual errors during the operation of the equipment; • Monitoring the electric motor pa rameters (temperature and absorbed current intensity) to protect him from overheating and overload; • When the discharge pressure in creases above 4.5 bar, the oil pump stops automatically, the oil circulation is maintained by the gas pressure in the separator vessel. This reduces electricity consumption and the oil system is designed to operate in the mixed regime-lubrication pump or forced oil circulation due to the pressure in the separator vessel. The long-term strategy of INCDT COMOTI is to capitalize, under conditions of efficiency and high profitability, the original, technological and constructive solutions applied in the construction of aviation engines, systems and screw compressors - in which the institute has a tradition of over 15 years - through the development of new, high performance products and technologies that have a wide field of applicability in the industry. The quality of human resources, coupled with an adequate managerial strategy, has allowed INCDT COMOTI products to be constantly present in the most diverse sectors represented by more and more beneficiaries in the machine building, oil and gas extraction, petrochemical, national defence, renewable energy, construction materials and metallurgical industry, as well as environmental protection and industrial ecological systems.

Kraftanlagen Romania S.R.L. was founded in 2007 as a subsidiary of the German company Kraftanlagen MĂźnchen GmbH and expanded its local services successfully in 2014 with KAROM Servicii Profesionale in Industrie S.R.L. and in 2016 with IPIP S.A. We engineer, design and build complex piping and plant systems for the chemical and petrochemical industry. Our technical competence covers also requirements for new plants and maintenance for refinery, extraction & production and industrial plants. The range of our solutions: Feasibility, process studies Basic design and front end engineering design Multidisciplinary detailed engineering Technical documentation for authorities Project management Technical assistance for commission, start-up, test run, guarantee test Supply and installation of all pipelines and brackets Basic and precision installation of all components, such as devices, columns, pumps and compressors Steel construction Installation of cracking and reaction furnaces Tank farm construction System integration, operating checks and commissioning Plant revisions Pipeline and bracket corrosion protection Insulation Scaffolding

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“This 3D seismic campaign has enabled OMV to generate data of around 700 terabytes – which puts us in the running as a digital frontrunner and forms a basis for future discoveries” - Johann Pleininger, Executive Board member responsible for Upstream and Deputy Chairman of OMV

OMV concluded Europe’s largest seismic survey OMV, the international, integrated oil and gas company headquartered in Vienna, has successfully concluded the largest 3D seismic survey in European history. It was searching for natural gas. Specifically, the measurements probe the geologic subsurface to depths of up to 6,000 meters and provide information on the composition of structures that may contain gas. 34

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large-scale area of 1,500 km2 was examined, stretching from the northeast of Vienna to Weinviertel, Lower Austria, and southwest of the Danube. The survey spanned nine months in the period from December 2017 to March 2019 – natural protection laws and consideration of farming activities meant that the seismic acquisition was carried out exclusively in the winter months. The survey involved a total of 140,000 geophone stations with two million individual geophones overall. Geophones register and record sound waves reflected by geologic boundaries. This nodal system was paired with another technology, newly applied in Austria and known as the Slip-Sweep

method, which made this highly efficient operation possible. During the 3D seismic acquisition, four fleets of three seismic vibrators were in action. These vehicles produce waves that are reflected by geologic boundaries and captured by geophones back on the surface. On earlier seismic projects, around 150 vibration points were measured each day, i.e. vibrations were generated at 150 points. During this survey, a maximum of 1,200 of these points was achieved. “This 3D seismic campaign has enabled OMV to generate data of around 700 terabytes – which puts us in the running as a digital frontrunner and forms a basis for future discoveries. A total of around 250 people were involved in the project. Together they put in more than 500,000 working hours, all without a single

incident. Safety is the top priority within OMV as every employee needs to get home safe and sound,” Johann Pleininger, Executive Board member responsible for Upstream and Deputy Chairman of OMV, stated. Now the seismic survey has been successfully completed, it’s time to evaluate the data. This will result in a threedimensional picture of the subsurface, which helps the OMV experts to discover possible gas reservoirs. At present OMV produces around 10% of the gas consumed in Austria. OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. With Group sales of EUR 23 bn and a workforce of more than 20,000 employees in 2018, OMV Aktiengesellschaft is one of Austria’s largest listed industrial companies.

Steder Group in Romania is Your link to the world of Energy sector in the Black Sea Region for Transport, Logistics & Storage

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BSOG receives approval from the Romanian Government for the Ana and Doina gas fields B

lack Sea Oil & Gas SRL (BSOG) together with its co-venture partners, Petro Ventures Resources SRL and Gas Plus International B.V. announced on April 15 that, following the taking of FID on February 6, 2019, they have now received the approval from the Romanian Government through the National Agency for Mineral Resources (NAMR) for their Field Development Plan (FDP) for the development of the Ana and Doina natural gas fields which make up the Midia Gas Development Project (MGD Project), offshore Black Sea. The MGD Project, which is the 1st new offshore gas development project in the Romanian Black Sea to be built after 1989, consists of 5 offshore production wells (1 subsea well at Doina field and 4 platform wells at Ana field) a subsea gas production system over the Doina well which will be connected through an 18 km pipeline with a new unmanned production platform located over Ana field. A 126 km gas pipeline will link the Ana platform to the shore and to a new onshore gas treatment plant (GTP) in Corbu commune, Constanta County, with a capacity of 1 BCM per

year representing 10% of Romania’s consumption. The processed gas will be delivered into the National Transmission System operated by SNTGN Transgaz SA at the gas metering station to be found within the GTP. In 2019, BSOG anticipates having completed the detailed engineering for the MGD Project, commenced the fabrication of the Ana Wellhead Platform at the shipyard in Agigea, commenced the civil constructions at the GTP site in Corbu and have purchased & delivered a number of company items. “This approval from ANRM provides the official acknowledgement from the Romanian state that the MGD project is an approved project. We very much appreciate the swift handling of our FDP application by the Agency,” Mark Beacom, BSOG CEO, stated. “The Development of the Ana and Doina gas fields offshore Romania is a top priority for NAMR, which supports the implementation of the Romanian Offshore Project that could lead to the diversification of the supply sources in Romania,” Gigi Dragomir, NAMR President, mentioned. BSOG, owned by Carlyle International Energy Partners and the 36

European Bank for Reconstruction and Development, is a Romanian based independent oil and gas company, targeting exploration and development of conventional oil & gas resources. The company’s current portfolio is made up of XV Midia Shallow Block and XIII Pelican Block concession in the Romanian Black Sea where it is the operator and holds a 65% interest. Gas Plus is the fourth largest producer of natural gas in Italy active in the main sectors of natural gas industry, particularly in exploration, production, purchase, distribution and sale to retail customers. At 31 December 2017, the Group had 45 exploitation concessions located throughout Italy, a total of approximately 1,600 kilometres of distribution network in 39 municipalities, serving a total of more than 72,000 end users, with a staff of 181 employees. Gas Plus holds 15% interest in the XV Midia Shallow Block and XIII Pelican Block concession in the Romanian Black Sea. Petro Ventures, a private investment group, holds 20% interest in the XV Midia Shallow Block and XIII Pelican Block concession in the Romanian Black Sea.

S.N.G.N. ROMGAZ S.A.

clean energy since 1909

The company is listed on Bucharest Stock Exchange and GDRs are transacted on London Stock Exchange. Romgaz undertakes geological exploration in order to discover new gas reserves, produces methane by exploiting the reservoirs included in the company portfolio, stores natural gas (link is external) in the underground deposits, interventions, workover and special operations on wells and technological transport.

Romgaz is the largest natural gas producer and the main supplier in Romania.

Romgaz Group in figures Romgaz Group posted in 2018 a turnover of RON 5,004.2mln, climbing by 9.14% (RON 419.0mln) compared to the turnover achieved in 2017.

www.romgaz.ro

The net profit of RON 1,366.2mln was lower than the net profit recorded in 2017 by RON 480.7mln, year when the net profit was by 81.03% higher compared to 2016. In 2018 Romgaz Group made investments worth RON 1,188.5mln, the achievement being by 52% (RON 406.8mln) higher than those related to 2017 and accounting for about 77% of the value of investments scheduled. The gas production of the company increased for the second consecutive year, being higher than the one related to 2017 by 3.39%, i.e. 175 million cubic meters (mcm) - 5,333mcm in 2018 vs. 5,158mcm in 2017. With this production, according to estimated data, Romgaz had a market share of 50.67% in terms of gas supplies from domestic production and a 45.98% share of deliveries in Romaniaâ&#x20AC;&#x2122;s total consumption. Romgazâ&#x20AC;&#x2122;s power production in 2018 amounted to 1,165.2 GW, by 37.48% lower than production achieved in 2017, following the periods of unavailability of the groups following works at the new power plant and increased demand for gas for consumption and storage. The market share held by Romgaz, according to Transelectrica, is 1.83%. 37

We celebrate together the Centenary of the Great Unification and 110 years of energy written by ROMGAZ!

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Investment program of RON 86mln at Conpet C

onpet shareholders on April 9 approved an investment program worth RON 86mln, for 2019, according to a report submitted to the Bucharest Stock Exchange. According to the explanatory memorandum, in 2017 Conpet launched procurement to conduct a study in view of finding the optimal solution for the design and execution of new crude oil transmission lines, considering the new mounting technologies (directional drilling), the quantity of crude oil transported, the use of the same diameter as the tubular goods upstream/downstream, waiver of the manifold system C1, C2, C3 and C4 - other areas with maximum potential of environmental impact, correlation with the new technical and legislative requirements. From a financial point of view, the estimated value for the replacement of the 20 and 28 connection lines on the transmission pipelines for imported crude oil is EUR 19.557 million, i.e. RON 94.852 million at an EUR/RON exchange rate of 4.85. Given that works must be approached simultaneously (they cannot be staggered on several years of budget execution), the financial effort of Conpet in a short term (between 6 and 12 months) is very high, to be able to ensure the funding source necessary to make this investment with major environmental impact and other

upgrade works to maintain in conditions of safety the national system for crude oil transmission through pipelines, Conpet proposes to contract a bank loan. In order to continue the investment objective of replacement of connection lines Danube undercrossing C1-C2 and Borcea arm undercrossing C3-C4, after the completion of the feasibility study Conpet will initiate the steps for contracting a bank loan, necessary to settle the design and execution works. Also, during 2019, Conpet plans that the procurement of vehicles be made in leasing system. On April 9, the Shareholders General Meeting also approved the budget for 2019, which provides for a turnover of RON 386.25mln for this year. The budget provides for ending the financial year of 2019 with a gross profit of RON 52,824 thousand, recorded a decrease by 24.8% compared to the preliminary achievements for 2018. Subsequently, on April 11, Conpet concluded a cooperation protocol with NIS Petrol for the provision of services involving crude oil takeover in the Biled loading ramp, in Timis County, for shipment to the recipient established by the beneficiary. The protocol is concluded for a 30day period and is a step preceding the conclusion of a contract between the two companies. Conpet ended 2018 with a net profit of RON 59.466mln, by 20.1% lower compared to the result in the previous 38

year, and the companyâ&#x20AC;&#x2122;s turnover amounted to RON 385.140mln, after an increase by 2.2% versus 2017, according to the preliminary report of the company submitted to the Bucharest Stock Exchange. The core business of Conpet is the transport through pipelines and by rail of the domestic and import crude, rich gas, condensate and liquid ethane to the refineries in Romania. In compliance with the provisions of Law no. 238/2004 (Oil Law), the National Pipeline Transport System is State public property. S.C. Conpet S.A. is the concessionaire of the National Transport System, quality acquired pursuant to the conclusion, with NAMR, in 2002, of the Oil Concession Agreement for a period of 30 years, approved pursuant to GD no. 793/25.07.2002. Upon the requests of its clients, CONPET has the organisational, technical and human capacity to provide transport to other destinations too, such as Oil Terminal, in case the crude oil is to be exported by the sea, or directly to other external destinations. With an existence of more than 110 years, under different names and organizational structures, Conpet S.A. carries on the activity of its crude forerunner in Romania, operating a pipeline network covering most of the Romanian territory. The company operates a pipeline network of 3800 km in length, covering 22 Romanian counties.

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Ungheni-Chisinau pipeline enters final stage The National Gas Transmission Company (SNTGN) Transgaz SA, company in the portfolio of the Ministry of Economy, has signed all the procurement contracts for the execution of works related to the Ungheni-Chisinau gas pipeline, for the 7 lots of the investment. Transgaz carries out this investment through Vestmoldtransgaz, the gas operator in the Republic of Moldova that was privatized in 2018 to Eurotransgaz, the Moldovan subsidiary of Transgaz.

he Ungheni-Chisinau project, declared of national interest in the Republic of Moldova, involves the construction of a gas transmission pipeline with a length of 120km, three gas delivery stations (two in Chisinau and one in Ungheni) and equipping the steering and dispatching centre in Ghidighici. The gas transmission network on UngheniChișinău route represents the second stage of the Iasi-Ungheni-Chisinau interconnection project. “Through Transgaz’s activity in the Republic of Moldova, we prove that we firmly support the pro-European path of this state and the joint investment projects, these being safe solutions for the welfare of Moldovan citizens. Transgaz already has a pronounced role in ensuring the energy security of the European Union,

through BRUA works, and through the acquisition of Vestmoldtransgaz it has become a Romanian multinational company in the energy field. These are important evolutions, with long-term impact in terms of energy development of the region. I wish that the schedule of execution of these works will be observed, precisely to contribute to energy security,” Economy Minister Niculae Badalau said. At the same time, the Economy Minister mentioned that he had had several meetings with Transgaz management, during which he requested the supplementation of investments necessary to develop the Romanian gas transmission network. “BRUA and the investment in the Republic of Moldova are important, but national infrastructure is equally important. I have requested, during the repeated meetings I have had 40

with Transgaz management, to make the works for the development of the Romanian gas network a priority. I have requested additional investment, as without serious investment we cannot develop the gas transmission network, we cannot support local communities, we cannot properly help the Romanian economy and we cannot fulfil our obligations to Romanians. Stoves with gas from the pipeline, not from the cylinder are in my opinion, in 2019, a minimum condition of civilization and decent standard of living for Romanians and I have used and I will continue to use the best endeavours in this regard. International projects are very important, but we shouldn’t overlook the obligations we have in Romania,” Niculae Badalau also said. “Transgaz grants direct and consistent support to Vestmoldtransgaz, to

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SIGMA AIR MANAGER 4.0

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

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• The contract related to Lot 4, having as subject ‘Dn 600 gas transmission pipeline with a length of 15.86km and Dn 300 gas transmission pipeline with a length of 2.6km on the territory of the city of Chisinau’, was signed by both parties on March 11, 2019, the contractor has fulfilled all conditions precedent and the contract entered into force on April 12, 2019. On April 16, 2019, the work commencement order was issued and the site was handed over on April 18, 2019. • The contract related to Lot 5, having as subject ‘Semeni RMS, Petricani RMS, Ghidighici RMS, Tohatin RMS, Tohatin bidirectional gas metering node and Automation and security of the objective’ was signed by both parties on April 15, 2019, the contractor has fulfilled all conditions precedent and the contract entered into force. On April 17, 2019, the work commencement order was issued and the site was handed over on April 18, 2019. • The contract related to Lot 6, having as subject ‘Tohatin RMS - CET Chisinau gas distribution pipeline and Tohatin RMS Chisinau distribution; Ghidighici RMS - Petricani RMS connection pipeline and Petricani RMS - Chisinau distribution system connection pipeline’ was assigned on April 23, 2019 and signed on April 25, 2019. The entry into force of the contract is subject to a bank letter of guarantee of proper performance. • The contract related to Lot 7, having as subject ‘Ghidighici administrative complex - consisting of six buildings, the main office building, the industrial premise with mechanical shop and warehouse, gate building, laboratory building, firefighting pumps building, gas regulating and metering station (Ghidighici RMS) and which will be the administrative headquarters of Vestmoldtransgaz SRL’, was signed on January 14, 2019. After the fulfilment of conditions precedent, the contract entered into force on February 6, 2019, the work commencement order being issued on the same day. Currently, works are in progress, in accordance with the execution schedule.

PREDICTIVE MAINTENANCE

implement the contracts in progress and reach the strategic objective undertaken. Implementing the UngheniChisinau project contributes to the sustainable development of the economy of the Republic of Moldova, to the modernization and streamlining of the existing energy infrastructure, to ensuring the energy security of the country, the creation of a transparent and competitive energy market, as well as to integration on the European energy market. Transgaz has the necessary resources to complete this investment, to be able to fulfil the commitments made,” the General Manager of SNTGN Transgaz SA, Ion Sterian, mentioned. Specifically, regarding the 7 lots related to the investment, the up-to-date situation is as follows: • The contract related to Lot 1, having as subject ‘DN 600 gas transmission pipeline with a length of 26.07km located on the territory of Ungheni and Nisporeni districts’, was signed by both parties on April 23, 2019 and entered into force on the same date. Issuing the work commencement order by Vestmoldtransgaz was scheduled for May 2, 2019, after which the site will be handed over. • The contract related to Lot 2, having as subject ‘DN 600 gas transmission pipeline with a length of 35.89km located on the territory of Calarasi district’, was signed by both parties and entered into force on April 23, 2019. Issuing the work commencement order by Vestmoldtransgaz was scheduled for May 2, 2019, after which the site will be handed over. • The contract related to Lot 3, having as subject ‘DN 600 gas transmission pipeline with a length of 32.18km located on the territory of Straseni district’, was signed by both parties and entered into force on April 19, 2019. On April 24, 2019, the contractor fulfilled all conditions precedent and the contract entered into force. Issuing the work commencement order by Vestmoldtransgaz was scheduled for May 2, 2019.

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OMV Petrom to suspend Black Sea production OMV Petrom received from the National Environmental Guard in Romania a sanction for carrying out at the Midia Processing Plant working point the activity of gas and petroleum transportation via pipelines without having a renewed environmental permit. The sanctions applied are a fine amounting to RON 60,000 and the measure to suspend the activity until the environmental permit is obtained.

MV Petrom challenged in court the fine and the respective measure. Until the court’s final decision the measure is suspended. “We are working with the environmental authorities to obtain the renewal of the environmental permit. The environmental permit was up for renewal in December 2018 and had been applied for by OMV Petrom since October 2018, together with the supporting documents, in full compliance with the legal term prescribed by the applicable regulations. The process of the authorization renewal is complex and was prolonged more than expected due to additional requests by the competent environmental authority,” shows a press release issued by the company. At the end of March, following complaints from local residents about land being contaminated with petroleum residues, the National Environmental Guard started an investigation in VaduCorbu. According to the findings report communicated by the National

Environmental Guard, the Vadu spill could not be linked to the activities of OMV Petrom in the area. Midia Processing Plant has been in operation since September 1989 and processes the gas production coming from the Black Sea. An eventual shut down of Midia Processing Plant would lead to a complete halt of the Black Sea production, currently at around 25,000boe per day, OMV Petrom representatives underlined. Stopping Black Sea production has a quite serious effect on OMV Petrom, as well as an adverse effect on the entire country. In Romania, the daily average hydrocarbon production of the company was, in 2018, about 153,000 bpd. Under these circumstances, OMV Petrom would register a reduction in production by 16%, anyway affected by the natural decline of fields. As of December 31, 2018, the total proven oil and gas reserves in OMV Petrom Group’s portfolio amounted to 532mn boe (of which 509mn boe in Romania), while the proven and 42

probable oil and gas reserves amounted to 810mn boe (of which 766mn boe in Romania). About 10% of gas produced in Romania is extracted from the Black Sea, and its absence could also imbalance the national transmission system. Also, another consequence would be a rise in prices, given that consumers would have to be supplied with imported gas, which is more expensive. “The Black Sea is of strategic importance for OMV Petrom, in terms of both current production as well as the resources potential in the deepwater area. The discoveries in the deepwater sector have been in the public eye during the past years and few people know that, presently, the Black Sea – shallow water area – is one of the most important production areas in Romania, ensuring 7% of the crude production and 25% of the gas production at OMV Petrom Group level,” Mariana Gheorghe, former Chief Executive Officer and President of the Executive Board of OMV Petrom, said in 2016.

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ENTSOG Summer Supply Outlook 2019 Possible evolution of the supplies and the injection in the storages The analysis investigates the possible evolution of the supplies and the injection in the storages across the season as well as the ability of the gas infrastructures to meet the demand, the exports and the above-mentioned storage injection needs during Summer 2019. ENTSOG has used a sensitivity analysis to cover different injection targets and to provide flexibility of injection to reach storage levels.

his edition builds on previous Summer Supply Outlooks as well as on the supply assumptions of the TYNDP 2018 Scenario Report. It aims to assess the ability of the European gas network to provide sufficient flexibility to shippers during their storage injection season. The summer months (from April to September) provide shippers the opportunity to refill storages in anticipation of the winter months ahead. The level of injection targeted by shippers varies from one country to the other and from one season to the other due to climatic, price and legal parameters. Modelling has been used to confirm the ability of the European gas network

to provide flexibility of injection under different scenarios around a Reference Case targeting a 90% storage level by 30th September 2019. Additional scenarios cover alternative injection targets, to provide flexibility of injection to reach storage levels between 80% and 100%. Like the previous edition and in order to take into account the latest development since the beginning of the summer, the modelling takes as a starting point the factual storage levels on 1st April 2019. For an accurate consideration of the reduction of injection capacity when a storage reaches high stock levels, ENTSOG uses injection capacity curves provided by GSE members. The simulations consider the existing European gas infrastructure as of 31st 44

March 2019. The modelling tool for the Summer Supply Outlook is the same as the one used in the TYNDP and the Winter Supply Outlook. It considers the existing gas infrastructure and the maintenance plans to be completed during the upcoming summer. The demand data has been provided by TSOs on a monthly level. An average daily demand has been considered within each month. The demand for this Summer is forecasted to increase 3.7%, the highest demand since summer of 2017. The maximum supply potentials of the different sources providing gas to EU (Algeria, Libya, Norway, Russia and LNG) are based on a five years history.

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According to AGSI+, the gas storage platform operated by Gas Infrastructure Europe (GIE), the storage withdrawals reached 9.1 TWh on the 24th January 2019, the highest during the entire winter. This value is not as high as the value from previous year, 11.4 TWh on 28th February 2018, which is still the highest value since 2011 due to the cold spell on March 2018. The conclusions of the study highlight that the European gas network is sufficiently robust in most parts of Europe to enable: • At least 90% stock level in almost all storages in preparation of the upcoming winter; • Planned maintenance with the purpose to ensure infrastructure reliability; • Some flexibility in network users’ supply strategy;

•

Supply gas to Ukraine with volumes comparable to previous summer seasons; • The storage inventory level reached on 1st April (38.4%) is the highest of the last 8 years. To complement the Supply Outlook, ENTSOG also carried out a review of the previous summer to build better knowledge of seasonal dynamics of supply and demand. One of the keys finding of this review was that this last summer Seasonal Gas demand in Europe was lower (at 1,673 TWh, a decrease of 5.6%) than the previous summer, changing a trend of increasing demand of the two previous seasons in a row. “The European gas system offers sufficient flexibility across the season in Europe, reaching at least a 90% stock level in almost all underground gas storages by the end of this Summer. In

fact, the Outlook assessment shows that the storage inventory level this April was the highest in the past eight years,” Jan Ingwersen, ENTSOG General Manager, said. According to the ENTSOG modelling, under the given supply assumptions, this Summer Supply Outlook confirms the capability of the European gas network to enable shippers to reach at least a 90% stock level in all but one underground gas storage by the end of this Summer 2019 while ensuring the proper maintenance of the system. The sensitivity analysis also shows that an 80% and a 100% stock level could be achieved in almost all of the countries. The only exception in the three cases is the storage in Latvia due to the limited entry capacity in the country and the assumption that no gas coming from NW Russia will be injected.

OIL & GAS

OMV Petrom - important decisions Budget of over RON 4bn in 2019

Text by Daniel Lazar

he Ordinary General Meeting of Shareholders of OMV Petrom S.A., which took place on April 19, made two extremely important decisions, referring to the distribution of dividends for 2018, worth a total of approximately RON 1.53bn, and the investment budget of the company for 2019. It amounts to around RON 4.17bn and was drawn up based on an average price of Brent crude oil of USD 70/bbl. It is estimated that this year investments of OMV Petrom will reach approximately RON 4.17bn, a large part of the amount, around RON 3.42bn (82% of the total budget), being allocated to the Upstream segment, and the amount of RON 551mln is earmarked for Downstream Oil. Upstream investments will partially offset the natural decline of production caused by the maturity of fields. Also, it is estimated that the oil and gas production in Romania, excluding the new portfolio optimization initiatives, will drop by 4% in 2019 y/y.

“The investment budget of RON 4.17 billion for 2019 represents sums that will mostly go to Romania’s economy. OMV Petrom is an important player in the economic environment: it provides the necessary energy for millions of Romanians and thousands of local businesses, contributes to business development and provides thousands of jobs for Romanians,” OMV Petrom CEO Christina Verchere said. The Ordinary General Meeting of Shareholders approved the proposal of the Executive Board to distribute dividends of RON 0.027/share for the financial year of 2018, up 35% from the previous year. The total gross value of dividends to be distributed amounts to approximately RON 1.53 billion, representing 38% of the net profit of the group attributable to OMV Petrom SA shareholders, for 2018. Over RON 315mln will go to the Romanian state, which owns, through the Ministry of Energy, a 20.639% stake in the company. 46

OMV Petrom expects revenues of RON 16.7bn, plunging by 5.7% y/y, and a net profit of RON 3.2bn, which means minus 17.5%. Immediately after the publication of GMS decisions, the shares in OMV Petrom (SNP), the only local oil and gas producer, controlled by the Austrian oil group OMV, went up on the stock exchange by 2.2%, only one day after the shareholders approved the budget for 2019, decreasing from the last year. OMV Petrom is the largest contributor to the state budget, with over EUR 27.8 billion paid in taxes, contributions and dividends during 2005-2018. Starting with 2007 OMV Petrom integrated in its business strategy the principles of corporate accountability. During 2007-2018, the company has allocated approximately EUR 52.5 million to develop communities in Romania, focusing on environmental protection, education, health and local development.

OIL & GAS

Simulator facility Boosting safety for the oil and gas industry

ignificant investment in a state-of-the-art simulator training facility is helping to boost skills and improve safety across the Norwegian oil and gas industry. Over the past seven years, Fagskolen i Hordaland, which is located in Bergen city centre, has trained hundreds of students and oil and gas industry professionals in drilling and well control operations at its bespoke simulator facility. The USD multi-million, 180m² facility is one of Norway’s most advanced simulation centres for drilling and has been developed in close consultation with the drilling industry to ensure it meets the sector’s skills and competency demands now and into the future. As well as a large Drilling Systems’ DrillSIM-6000 simulator suite, the centre features two associated rooms where up to 25 students can observe and analyse simulation scenario via immersive displays. These facilities help students learn about drilling and well control operations offshore by enabling them to practise real-life scenarios using the simulator. Students experience all the movement, sounds and operations of a real offshore

rig and this highly immersive training enhances learning and understanding to ensure people are better prepared for the workplace. As well as training the workforce of tomorrow, Fagskolen i Hordaland works with oil and gas companies to ensure crews are fully competent and well prepared for live operations. One of Fagskolen i Hordaland’s clients is Odfjell Drilling which regularly puts its crews through crew resource management (CRM) training to prepare for drilling operations, develop human factors awareness and ensure the highest safety levels. The well-specific training scenarios enable Odfjell’s crews to practise a wide range of advanced drilling operations such as well control, stuck pipe, jarring, managed pressure drilling in a safe and controlled environment so that the field personnel are trained to respond effectively. “Safety is our highest priority so regular team-based training courses where high-risk operational scenarios, that could never be replicated on the job, can be practised in complete safe environment to ensure our personnel are better-prepared for the field. Simulator training at Fagskolen i Hordaland is the 47

most efficient way of keeping crews’ skills at a consistent high standard,” Rune Mesel, Manager Operational Compliance from Odfjell Drilling said. “Following a number of high-profile well control event on the Norwegian continental shelf over the past few years, the focus on crew training and the human risk factor is becoming increasingly important for operators and contractors. We have heavily invested in our simulator facility to ensure workers in the oil and gas industry are trained to the highest possible standards and are fully competent to cope with the challenges of working in the field,” Jørgen Eriksen, Head of Petroleum at Fagskolen, mentioned. “We are delighted to work closely with Fagskolen i Hordaland to provide the Norwegian oil and gas industry with skilled personnel now and in the future. Our simulators create an extremely realistic environment, which mirrors the equipment and conditions faced on a rig. People can train in a risk-free setting which significantly improves their knowledge and helps improve efficiencies and safety levels across the sector,” Clive Battisby, Chief Operating Officer at Drilling Systems, added.

ENVIRONMENT

Carbon capture cheaper than ever According to a new report, many years of research effort have resulted in significant reductions in the cost of full-scale carbon capture and storage. If we are to achieve the two-degree target and meet our commitments as set out in the Paris Agreement, we are entirely dependent on the technology that makes it possible to capture and store CO2. But it is widely assumed that carbon capture and storage (CCS) is expensive. Very expensive.

Text by Mona Sprenger

any technology experts believe that once we start applying CCS, cost reductions will follow a similar trend as those for solar and wind power. According to the new study carried out by SINTEF, carbon capture and storage technology has already started to be less

expensive. The results were recently published in Elsevier International Journal of Greenhouse Gas Control.

CCS â&#x20AC;&#x201C; savings and benefits During the period 2008 to 2017, the Research Council of Norway (RCN) funded energy research to the tune of 48

NOK 4 billion. About a quarter of these funds were allocated to CCS. SINTEF has recently been assessing the potential economic benefits accrued from CCS-related innovations linked to the international research centres BIGCCS (the International Research CCS Centre), NCCS (the Norwegian CCS Research

ENVIRONMENT

Centre) and their antecedents. This work is based on the so-called ‘Effektstudien’ (impact study) that the Norwegian Ministry of Petroleum and Energy has commissioned from the RCN. “We’ve been looking into seven different innovations in the field of the capture, transport and storage of CO2,” says SINTEF researcher Grethe Tangen. There currently exists no mature market for CCS, which means that it is not so easy to measure the value of this research. “Our aim is therefore to document that the research carried out in the last ten to twenty years has led to a significant cost reduction throughout the entire value chain,” says SINTEF researcher Sigmund Størset. “If the CCS market grows to the extent that we are able to achieve our climate change targets, the savings will be enormous, and the potential for wealth generation in the Norwegian industrial sector is very great,” he says.

Ninety different chemical cocktails In order for CCS to succeed, we must meet the pressing need to establish a fullscale value chain including the capture, transport and storage of CO2. The Norwegian parliament has asked the government to secure funding for at least one carbon capture plant. At its plant in Brevik in Telemark, cement manufacturers Norcem, a subsidiary of the German Heidelberg Group, are working to establish a full-scale carbon capture plant. Aker Solutions is planning to install technology based on the SOLVit project at the Norcem plant by 2023. This project has involved the development of new and advanced fluid mixtures that bind the CO2 gas. These mixtures involve relatively low levels of energy consumption and degradation, and are both eco-friendly and noncorrosive. This research was the result of a collaboration between Aker Solutions (formerly Aker Clean Carbon), SINTEF and NTNU.

“We launched the SOLVit project in 2008 with funding from the CLIMIT research programme and from industrial and research sources,” says Oscar Graff, who heads Aker Solutions’ CCUS department. “And a lot has happened since then. Our mobile test facility has verified technology for carbon capture from gas- and coal-powered power stations, refineries, waste combustion facilities and cement manufacturing plants. We have tested six pilot facilities in Germany, Scotland, the USA and Norway, and experimented with 90 different chemical cocktails before we identified the best. We also built a facility at the Mongstad test centre, where we carried out a two-year test programme”, adds Oscar Graff. Graff believes that the knowledge base and research infrastructure established during the SOLVit project will help towards establishing a commercial, full-scale carbon capture plant outside Norway as well. “We have advanced the technology and reduced costs significantly by such means as applying a European industrial standard in preference to standards used in the oil and gas sector,” explains Graff. “The Norcem plant will become even more energy efficient when we go on to exploit waste heat generated by the manufacturing process,” he concludes.

From NOK 50 to 500 million in savings SINTEF’s calculations indicate that potential costs savings resulting from application of the new SOLVit technology in an industrial CCS project will be of the order of between NOK 50 and 500 million. “This is mainly due to reduced energy requirements linked to the cleaning process,” researcher Grethe Tangen affirms. About 40 per cent of global CO2 emissions are derived from just 4,000-point sources. Many of these are located in low-cost countries such as India, China and Russia. “The SOLVit technology can be 49

applied in the cement, steel, and waste disposal industries, and in connection with power generation from natural gas and coal”, explains Johan Einar Hustad, who is Director of NTNU Energy.

CCS must become a university subject Hustad emphasises that research will continue to play a crucial role in the work to build a full-scale CO2 treatment plant. “It will only be when we put a fullscale plant into operation and establish an entire value chain from capture to storage that we will be able to make even greater cost savings”, he says. “We have observed this trend in the solar and onshore wind sectors, and the same is happening now in connection with batteries,” mentions Hustad, who is keen to promote education programmes for those wanting to work in the CCS industry. “We must continue to foster Master’s and Ph.D. students,” he says. “People who want to work in industry and who can help to establish the expertise that the industry needs. If CCS is to become a technology applied on a large scale, we are dependent on educational provision that is sufficient to meet the industry’s future needs”, Hustad also adds.

Facts During the period 2008 to 2017, the Research Council of Norway (RCN) funded energy research to the tune of NOK 4 billion. This funding has been a profitable exercise, according to the impact study commissioned from the Research Council of Norway by the Norwegian Ministry of Petroleum and Energy. A significant portion of these research funds were allocated to CCS. SINTEF has recently published the results of a study assessing the potential economic benefits accrued from CCS-related innovations linked to the international research centres BIGCCS (the International Research CCS Centre), NCCS (the Norwegian CCS Research Centre) and their antecedents.

ENVIRONMENT

Photo by Einar Aslaksen / TRY - Equinor ASA

Equinor strengthens its commitment to climate leadership In a joint statement prepared with investors participating in Climate Action 100+, Equinor announces new steps to demonstrate further industry leadership on climate change and strong support for the goals of the Paris Agreement. 50

ENVIRONMENT

quinor has climate at the core of its business strategy and has set short-, medium- and longterm climate-related targets for the company’s emissions to drive performance. The joint statement builds on this work, and Equinor commits to set out climate-related ambitions also beyond 2030. Equinor will continue to report on climate related risks and opportunities in line with the TCFD recommendations. From 2019 Equinor will assess its portfolio, including new material capital expenditure investments, towards a well below 2°C scenario. If and when a relevant well below 2°C scenario is available, with necessary price assumption, Equinor will include this in its overall stress testing. “Equinor is developing as a broad energy company, with oil and gas, renewable energy and low carbon solutions as integrated parts of our business. We see our low carbon strategy as a competitive advantage which creates long term value for our shareholders. The actions we announce today make us even more competitive in the energy transition, and support the goals of the Paris Agreement. We welcome the constructive engagement and appreciate the collaboration with investors as part of Climate Action 100+,” says Eldar Sætre, President and CEO of Equinor. The company will set out new climate-related ambitions beyond 2030 for its business activities. It will publish its updated targets and ambitions in 2020, and thereafter report annually on the progress to achieve them. Equinor will also regularly review its climate related ambitions, targets and KPIs. Additional steps to be taken include assessing its portfolio against a below 2°C climate scenario and intending to strengthen the link between remuneration and climate-related targets. Equinor will also undertake a review of its membership in industry associations that hold an active position on climate and energy policy. The announcement follows other agreements reached through Climate Action 100+ with Shell and BP, in addition to companies in other sectors. Taken together, the commitments made demonstrate the growing influence of shareholder engagement through the initiative. Climate performance is a key performance indicator in Equinor and part of the basis for executive remuneration. Equinor will further strengthen the link between its climaterelated targets and remuneration for senior executives and employees once the new targets have been defined in 2020. Equinor is committed to continue to play an active and positive role in society’s decarbonisation, beyond its own operational emissions, through its engagement, technology, innovation, operations and investments. Equinor has already been at the forefront by reporting the company’s emissions and carbon intensity, and from next year the company will also report on overall estimated carbon intensity of energy products and services provided. Climate change calls for new solutions and partnerships. 51

Photo by Ole Jørgen Bratland / Equinor ASA

“Equinor is developing as a broad energy company, with oil and gas, renewable energy and low carbon solutions as integrated parts of our business. We see our low carbon strategy as a competitive advantage which creates long term value for our shareholders. The actions we announce today make us even more competitive in the energy transition, and support the goals of the Paris Agreement. We welcome the constructive engagement and appreciate the collaboration with investors as part of Climate Action 100+” Eldar Sætre, President and CEO of Equinor

ENVIRONMENT

by cooperating closely with companies and other investors. The results from the engagement with Equinor has further strengthened our conviction. It’s highly encouraging to see that major companies like Equinor are taking critical steps in the right direction to align their strategy with the Paris Agreement. We are delighted that Equinor are committed to building a low carbon future. We expect other companies in the sector to be inspired and to follow the leadership signal set by Equinor,” Odd Arild Grefstad, Group CEO, Storebrand Group, said. Thomas O’Malley, Global Head of Corporate Governance, HSBC Global Asset Management, added: “We welcome the important commitments Equinor has made as part of our collective engagement. Climate change is a significant challenge and the company’s commitments on scenario analysis, strategy and reporting will help provide transparency to shareholders.”

Equinor promotes transparency and cooperation, and recognises the importance of ensuring that its membership in relevant trade associations does not undermine the company’s support for the goals of the Paris Agreement. Equinor commits to undertake a comprehensive review of its memberships in industry associations that hold an active position on climate and energy policy. In the statement, the institutional investors recognise that: “Equinor has demonstrated leadership on climate change in a number of important areas. Its corporate strategy and recent name change provide clear signals of its intent to develop as a broad energy company and shift towards a greater proportion of low-carbon assets. Equinor has invested in renewables and low-carbon energy technologies, has made positive progress in its approach to emission and resource management and has played an important role in promoting implementation of the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). We acknowledge the efforts made by Equinor to date to embed climate change into its strategy, risk assessments, investment decisions, operating decisions and disclosures.” The investors in question – UBS Asset Management, HSBC Global Asset Management and Storebrand Asset Management – led engagement with Equinor as part of Climate Action 100+. “Equinor is one of an emerging group of oil and gas majors that understand the need to act on climate change to secure their place in a cleaner global economy. Building on the welcome steps it has already taken, investors will continue to work with Equinor on fully aligning its business with the goals of the Paris Agreement. They also expect others in the sector to follow its lead or face the consequences of ignoring some of their largest shareholders,” Stephanie Pfeifer, a member of the global Climate Action 100+ Steering Committee and CEO, Institutional Investors Group on Climate Change (IIGCC), explained. Speaking as one of the leads of the Climate Action 100+ investor dialogue with Equinor, Valeria Piani, Strategic Engagement Lead for UBS Asset Management, mentioned: “We value in depth engagement discussions with companies which help drive both long-term value and sustainable innovation addressing the risks and opportunities presented by climate change. Equinor and investors have together defined an ambitious pathway which will see the company play an even more active role in the transition to a lower carbon economy. We are very pleased to have reached this agreement with the company and will continue our collective engagement with them as they deliver on these crucial commitments.” Storebrand Asset Management, Norway’s largest private asset manager with over USD 80 billion in assets under management, is one of the three investor organisations leading Climate Action 100+ engagement with Equinor. “As an investor, we strongly believe in active ownership

About Climate Action 100+ Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. More than 320 investors with more than USD 33 trillion in assets collectively under management are engaging companies on improving governance, curbing emissions and strengthening climaterelated financial disclosures. The companies include 100 ‘systemically important emitters’, accounting for two-thirds of annual global industrial emissions, alongside more than 60 others with significant opportunity to drive the clean energy transition. Launched in December 2017, Climate Action 100+ is coordinated by five partner organisations: Asia Investor Group on Climate Change (AIGCC); Ceres; Investor Group on Climate Change (IGCC); Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI). These organisations, along with five investor representatives from AustralianSuper, California Public Employees’ Retirement System (CalPERS), HSBC Global Asset Management, Ircantec and Manulife Asset Management, form the global Steering Committee for the initiative.

The Joint Statement between investors participating in Climate Action 100+ and Equinor The Institutional Investors and Equinor jointly announce the steps that Equinor will take to demonstrate further industry leadership in support of the goals of the Paris Agreement. 1. Stress testing of the portfolio and new material capital expenditures Equinor is committed to pursuing a resilient business strategy, which it believes is consistent with the goals of the Paris agreement. 52

ENVIRONMENT

Equinor will report in line with the TCFD recommendations through its annual report and sustainability report, as appropriate, disclosing information and metrics to assess and manage material climate-related risks and opportunities. Equinor will continue to stress test its portfolio, including new material capital expenditure investments, against relevant scenarios and explain how exploration is handled in this context. Equinor will from 2019 assess its portfolio, including new material capital expenditure investments, towards a well below 2°C scenario. If and when a relevant well below 2°C scenario is available, with necessary price assumptions, Equinor will include this in its overall stress testing. Equinor will seek to enhance the disclosure on how such analysis informs and impacts its holistic approach to business risk, strategy, portfolio, capital expenditure and climate-related targets and ambitions. 2. Climate-related ambitions, targets and KPIs Equinor has established climaterelated targets for the company’s operated emissions by 2030 covering methane intensity, emission reductions and upstream carbon intensity, as well as a 2020 target for low-carbon R&D expenditures. Equinor will review its climate-related targets up to 2030 and set out climaterelated ambitions beyond 2030 for its business activities, informed by its assessment, stress testing and business strategy. Equinor will regularly review its climate-related ambitions, targets and KPIs. It will publish its updated targets and ambitions in 2020 and thereafter report annually on the progress to achieve them. 3. Targets linked to remuneration Equinor has established climate performance indicators at corporate, business area and site level. Upstream

carbon intensity is one of the KPIs linked to the executive remuneration. Equinor commits to further strengthen the link between its climaterelated targets and remuneration for senior executives and employees. Equinor will seek to align remuneration with its updated short, medium and long-term climate-related targets and ambitions once they have been defined in 2020. 4. Measures to drive decarbonisation Equinor is committed to continue to play an active and positive role in society’s decarbonisation through its engagement, technology, innovation, operations and investments. Equinor will further explore additional approaches and engagements to drive decarbonisation towards the shared ambition of consistency with the goals of the Paris Agreement, including along the company’s value chain and the end use of products. From 2020 Equinor will report overall estimated carbon intensity of energy products and services provided. 5. Climate policy engagement and transparency Equinor promotes transparency and recognises the importance of ensuring that its membership in relevant trade associations does not undermine the company’s support for the goals of the Paris Agreement. Equinor commits to undertake a comprehensive review of its memberships in industry associations that hold an active position on climate and energy policy. Equinor will describe the outcome of the review, including seeking to disclose any material inconsistencies and potential actions taken in that regard, directly on equinor.com by the first quarter of 2020. Equinor will continue to track and provide information about its trade association activities on climate change-related topics, areas of material misalignment and the actions taken in that regard. 53

PETROTEL-LUKOIL

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ENVIRONMENT

Smart village, an environmental initiative Text by Daniel Lazar

he smart city concept has been repeatedly mentioned over the past few years, with Alba Iulia being the national leader in this regard, as it aims to preserve the environment as much as possible. E.ON Energie Romania has thought about the extension of this initiative and aims to develop the smart village concept in Romania’s rural areas. Some of the benefits of this program would be a substantial reduction in electricity consumption as well as in CO2 emissions and, of course, significant savings to the local budget. A new public lighting system was installed in the commune of Frumuseni, Arad County, works to improve the consumption of the public lighting network in the locality aiming at replacing all street luminaires with high performance LEDs, as well as installing surveillance cameras on street poles. The new LED systems will be equipped with sensors that will adjust the intensity of street lighting according to the outside light, as well as with motion sensors so as to adjust the intensity of light depending

on car or pedestrian traffic. In this way, a significant energy saving is achieved, taking into account that at night time when there is no pedestrian or car traffic, the intensity of the light is maintained at a low level. At the same time, by interconnecting them with the video cameras mounted on lighting columns, a benefit will be gained on the part of increasing the safety of the inhabitants on the public domain. “Reducing consumption and network maintenance costs will significantly reduce the bill for public street lighting. Moreover, the smart village project that we launched in 2018 also aims, for the future, at installing photovoltaic panels in order to assure the electricity needed by some buildings of the local public administration,” said Frank Hajdinjak, CEO of E.ON Romania. The ‘smart street lighting’ project marks the second stage of a larger program run by E.ON Energie Romania in the commune of Frumuseni. Thus, in June 2018, the company completed the work on the efficiency of indoor lighting systems in the buildings belonging to the local public administration. The 54

installation of the new lighting system leads to a reduction of pollution resulting from the annual energy consumption from 0.63 t CO2 to 0.19 t CO2. More efficient, the new luminaires have a number of hours of operation over 3 times higher than the conventional ones. In all public administration buildings, including the local school and kindergarten, the light is neutral white, 4000 K (Kelvin), perfectly mimicking natural light perceived during summer time between 11:00 and 15:00. E.ON is considering expanding the smart village concept at national level. The local administrations that will be included in this program will benefit from E.ON Energie Romania from both consultancy in implementing energy efficiency solutions, decentralized energy systems, and facilitating access to finance these initiatives, as well as turnkey projects for objectives identified as feasible. The objectives of the project include hospitals, schools, the related sports facilities, local administration offices, street public lighting systems, as well as other categories of objectives such as water purification stations.

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POWER

Pan-European EV infrastructure charges ahead On April 25, as part of the launch of first High-Power Charging Stations in Belgium, EUROP-E project is announcing its financial closing as the largest EU co-funded EV charging infrastructure project to-date. The EUROP-E network will cover main routes across 13 EU countries, enabling electric vehicles to navigate the vast distances from Poland to Portugal and from Sweden to Italy. The EUROP-E project will be implemented by IONITY, a joint venture between BMW Group, Daimler AG, Ford Motor Company, and Volkswagen group with Audi and Porsche.

he EUROP-E project aims to establish 340 high power chargers (HPCs), each with up to 350 kilowatt (kW), enabling 300 km travel after charging for just 1520 minutes. This project will focus on providing full pan-European coverage along all 9 TEN-T Core Network Corridors and the Core Network and will deploy stations also in remote locations or regions where EV adoption is still low, creating a non-discriminatory and interoperable network. The EUROP-E network is planned to coincide with the launch of new Battery Electric Vehicles (BEVs) by Europeâ&#x20AC;&#x2122;s leading vehicle manufacturers which aims to cover distances of up to 400km

with a single charge. The project also aims to integrate the network in the navigation systems of these new BEVs as well as enabling convenient access to the chargers. Improvements in BEV design and performance, combined with new charging infrastructure and convenient access will significantly increase consumer confidence in e-mobility, and accelerate mass market adoption. By focusing on highway locations, the network will greatly improve the utility of BEVs, bringing them in line with internal combustion engine vehicles (ICEVs). It will be complemented by existing charging infrastructure in metropolitan areas and broadly supported by site partners, ministries and other industrial players. Currently, 38 EUROP-E HPC 56

stations are already established and operational with additional 32 stations that are already in advanced construction stage and will become operational over the next few months. The EUROP-E project is co-financed by the Connecting Europe Facility of the European Union. The European Commission selected this project via the blending call which combines different financial instruments. This project has a total investment of EUR 195.5M including EUR 39.1M EU cofunding. With the recent signing of the loan agreement, the financial backing for the project has been completed and the rapid expansion of the network can begin. â&#x20AC;&#x153;We are delighted EUROP-E was selected by the EU to deliver a high-power

POWER

charging network throughout Europe. IONITY is a European joint venture with a clear mission to make EV travel simple and convenient. The co-funding via the Connecting Europe Facility is a major step towards achieving that goal,” said Michael Hajesch, CEO IONITY. “Congratulations to the EUROP-E project for opening the first UltraFast Charger for electric vehicles in Belgium, bringing zero-emission electric road mobility throughout the EU ever closer. The EUROP-E project, which is supported with EUR39.1 million from the Connecting Europe Facility for Transport EU programme (CEF-T), has managed to successfully mobilise private sector support, thus demonstrating a

high leverage effect. The deployment of the project’s charging infrastructure in 13 EU Member states will contribute to the adoption of electric vehicles in Europe and support to the transition to sustainable transport across the EU,” declared Andreas Boschen, Head of Connecting Europe Facility, Innovation and Networks Executive Agency - INEA, European Commission. IONITY is building 400 charging stations on Europe’s major highways, to make transcontinental EV travel an everyday reality. Working with its strategic partners, IONITY’s network of chargers will make the long-distance journey in an EV as easy and convenient as it is today in cars equipped with the internal

combustion engine.

Building an extensive and reliable 350 kW HPC for electric vehicles in Europe IONITY is based in Munich and was founded in 2017; it is a joint venture of the BMW Group, Daimler AG, Ford Motor Company and the Volkswagen Group with Audi and Porsche. Its goal is to build an extensive and reliable 350 kW High-Power-Charging network (HPC) for electric vehicles in Europe to make comfortable long-distance travel an everyday reality. IONITY has attractive national and international locations through its strong partners. IONITY is an internationally registered trademark.

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POWER

Tackling cybersecurity challenges EC adopts recommendation in the energy sector

he energy infrastructure has been undergoing very rapid changes in recent years in order to increase the share of renewable energy sources such as wind and sun, which are by nature more distributed and variable. Managing the networks to ensure a permanent match between consumption and production requires a continuously increasing degree of digitalisation. This increasing digitalisation has made the energy system smarter and now enables consumers to benefit more from innovative energy services. However, with an increasingly digitised energy system, and more and more home appliances connected to the grid, cybersecurity has become of paramount importance and a concern for all, with an increasing number of incidents in recent times. In cybersecurity, one size does not fit all. What might work in the internet will not be necessarily adequate in the energy sector. For example, there are energy components such as circuit breakers that need to react so fast that they have no time for standard security considerations, like

authenticating a command or encrypting a connection. This makes the new digitised energy grid vulnerable to attacks. In order to address these challenges, the European Commission (EC) has adopted a recommendation that provides guidance on how to address the specific challenges of the energy sector on cybersecurity. It identifies the main actions required to preserve cybersecurity and be prepared to possible cyberattacks in the energy sector, taking into account the characteristics of the sector such as the real-time requirements, the risk of cascading effects, and the combination of legacy systems with new technologies. In addition to the recommendation, the commission promotes information sharing at a higher-level via dedicated events, and fosters best practices among member states, under a dedicated work stream on energy of the cooperation group established by the Network and Information Security Directive. This work stream brings together member state authorities from the cybersecurity and the energy side. Further, cooperation with the specialised entities such as the European 58

Energy Information Sharing and Analysis Centre on cybersecurity (EE-ISAC) has also been enhanced. The recently completed Clean Energy for All European Package also includes several measures that reinforce cybersecurity: â&#x20AC;˘ The new regulation on electricity risk preparedness mandates member states to develop national risk preparedness plans and coordinate their preparation at regional level, including measures to cope with cyber-attacks; â&#x20AC;˘ The recast of the electricity regulation gives a mandate to the commission to develop a network code on cyber security for the electricity sector in order to increase its resilience and protect the grid. Since 2017, a dedicated expert group is working to prepare the ground for such a network code. Finally, the Gas Security of Supply Regulation (Regulation (EU) 2017/1938) requires member states to consider cybersecurity as part of their common (regional) and national risk assessments and to develop measures to address cybersecurity risks.

Compressed air treatment: Future-proof drying A

is climate-friendly and provides users with peace of mind when it comes to future-proof operation. Kaeser is supporting all customers to convert their systems to a more environmentallyfriendly alternative. When planning the purchase of a new dryer, consideration should be given to make sure that the unit uses a refrigerant that complies with the requirements of the directive, not just today, but also in the years to come, and that the refrigerant will be available for future service work. Some manufacturers use materials that are legal today, but which will eventually become prohibited, or which will simply no longer be offered, due to their high global warming potential. This means that those operators who use these materials will soon be faced with the same problem â&#x20AC;&#x201C; Kaeser is aware of this issue and takes early preventative countermeasures accordingly. It rarely makes sense to retrofit older but functional machines to use new refrigerants. Operators are well advised to take note of the currently-used refrigerants in their equipment and to obtain information regarding alternative strategies. Kaeserâ&#x20AC;&#x2122;s experienced and certified personnel are available to assist you. Certified service is advisable for all refrigeration dryers in order to provide different solutions with regards to this subject; this is especially true for older systems where refrigerant conversion is uneconomical. All Kaeser refrigeration dryers are designed to provide maximum efficiency and energy cost savings. Thanks to the new refrigerant, they are also future-proof for their entire service life when it comes to applicable refrigerant legislation. Moreover, they are exceptionally efficient, require minimal maintenance and are easy and quick to service.

nybody using refrigeration drying in compressed air treatment is required to comply with the F-gas regulation. The new EU 517/2014 directive represents the end for certain refrigerants that are still currently used in these dryers. Nearly every compressed air station uses refrigeration dryers, since most applications require these machines to deliver a dependable supply of quality dried compressed air. The F-gas regulation EU 517/2014 has been in force since 2015. It is intended to minimise the emissions of partly-fluorinated greenhouse gases (F-gases) as they significantly contribute to global warming. The effects of this legislation can already be felt by operators of compressed air stations, because F-gases are used as refrigerants in refrigeration dryers. This means that operators have to comply with the directiveâ&#x20AC;&#x2122;s stipulations when they service or repair existing refrigeration dryers, or when new refrigeration dryers are purchased. The refrigerants used up until now are being withdrawn from the market. All refrigerant dryers from Kaeser Kompressoren will therefore use the new R-513A refrigerant by the end of 2019. It

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IDTechEx research Electric vehicles enter phase of fastest growth

Like most other new products, electric vehicles sell in an S curve of a slow start with over supply. Then comes fastest growth with supply sometimes unable to keep up with demand then comes saturation. Take pure electric buses as an example. Here China rapidly deployed 400,000, 99% of the total number in the world, then it collapsed subsidies causing a collapse in deliveries and sadly it mainly makes smoking buses again. Text by Adrian Stoica 60

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he rest of the world is beginning to compensate. For example, recently Qbuzz in the Netherlands has ordered 159 pure electric buses, Helsingborg Sweden 76, Brussels Airport 30 and London 68 pure electric double deckers. Cities across the UK recently placed a total of 263 orders for zero-emission buses. Warsaw will order 130 pure electric buses for delivery by 2021. Kazakhstan is expecting 700 electric buses and Azerbaijan another 500 over the next three years. However, India has the largest potential, with a government plan for an initial 10,000 pure electric buses replacing some of the 1.6 million registered buses there, all of which must go, says the government, sensitive to the deaths they cause. The Indian state of Uttarakhand has ordered 500 electric buses. Now India is responsible for about 25% of the pure electric bus orders outside China. The Chinese - mainly BYD - are behind much of the supply but by no means all. Tata Motors in India has orders from six cities for a total of 255 pure electric buses. Large subsidies are an essential part of the take-off everywhere, China being at the top of the growth curve and everywhere else at the fast growth part, though China may see another S curve based on free market demands

when pure electric has price parity. For more, see the IDTechEx report, ‘Electric Buses 2019-2029’. Battery costs have been a primary impediment. However, in an interesting development, busy bus routes are seeing progress to less or no battery. Eight countries have ten-second charging supercapacitor large buses now and nonstop top-up charging in many forms has arrived from solar bodywork to intermittent catenary, rails, coils in the road. Top-up, including stationary forms with gantries etc at bus stops, typically leads to 80% less battery and this and the reduction in battery prices has led to some projections of the battery being a mere 6% of bus cost in ten years’ time. For more on all that see the IDTechEx Research report, ‘Energy Storage for Electric Buses and Trucks 2019-2029’. That will hasten the day when the up-front price of pureelectric buses is at parity with diesel. The rising cost of diesel powertrains also helps. Consider the extra cost of diesel fume reduction measures such as 48V mild hybridisation and the cost of adding equipment to treat emissions. IDTechEx currently projects price parity around 2030 for large buses but the future can come early. Like buses outside China, pure electric cars are now near to the fastest-growth 61

phase at around 70% increase in numbers sold yearly, with subsidies already less critical because parity is approached earlier with small vehicles. Many now agree with IDTechEx that the smaller pure-electric cars will have lower up-front price than internal combustion equivalents around 2023 – the killer blow. This time China is in synch with the rest of the world: it has the largest pure electric car sales but, as a percentage of the number of cars being made, nothing exceptional. China is expected to dominate global manufacturing of pure electric cars just as it has grown to be the biggest global manufacturer of conventional vehicles. For the untold story of the formidable innovation in China in many types of electric vehicle from pure- electric inland ships and large high-altitude solar drones to robot farm tractors see the IDTechEx Research report, ‘Electric Vehicles in China 2019-2029’. Evidence from Norway - with the largest percentage of pure electric new cars - suggests that the biggest obstacle to speeding up the electrification of road transport could now be a lack of e-vehicles with Kia eNiro on one-year delivery and Tesla 3 still keeping people waiting. Volkswagen even announced that the Passat GTE and Golf GTE have been ‘closed to ordering’, due to the exceptionally long waiting times. It does not help that there is a ready supply of short-range pure-electric cars because you have to be pretty wild eyed to buy one. The range anxiety is compounded by resale value dropping at twice the rate of the others. IDTechEx is hosting a new event in its ‘Business & Technology Insight Forums’ series, this time on Electric Vehicles and Energy Storage, to be held in Novi, Michigan on 10-12 June 2019. The Business & Technology Insight Forums take place across the world and teach global markets and technology on topics of particular interest to the local industry. Emphasis is on current and future trends including many that are typically ignored or under-represented but becoming vitally important.

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The Energy Union From vision to reality

The fourth report on the State of the Energy Union, adopted on April 9, shows that the European Commission has fully delivered on its vision of an Energy Union strategy guaranteeing accessible, affordable, secure, competitive and sustainable energy for all Europeans.

urope is already a global leader in fighting climate change. European policies implemented over the last five years in all policy areas have put the EU on the right track to fully embrace the clean energy transition, seizing the economic opportunities that it offers, creating growth and jobs and a healthier environment for consumers. Beyond modernising European energy and climate policy, the Energy Union boosts the clean energy transition of the European economy in key sectors, in line with its commitments under the Paris Agreement, while ensuring a socially fair transition. Building a resilient Energy Union with a forward-looking climate and energy policy has been one of the political

priorities of the Juncker Commission. “Today we take stock of the successful implementation of what was but a vision in 2014 of a unified, interconnected, secure and sustainable Energy Union,” the document reads. The report is accompanied by two documents showing progress made in renewable energy and energy efficiency. In parallel the Commission is also putting forward a report on the implementation of the strategic action plan on batteries and a communication for more efficient and democratic decision making in EU energy and climate policy. “The Energy Union is Europe at its best: tackling together the big energy security and energy transition we can’t solve within national borders. From 62

the daunting challenge of the energy transition we made an economic opportunity for all Europeans. To do this, we had to truly transform our energy and climate policies: not just tweaks at the margins but systemic change. No Member State could have delivered on its own. Our report shows how all the Energy Union measures combine to make our policy fit for the future. Today, our framework redirects investments into future oriented technologies and solutions. We have also kick-started measures for industry such as battery manufacturing in Europe, while making sure we’re not leaving any European behind in the transition. It is now for each Member State to follow suit and rapidly integrate national measures on energy, climate, mobility and all

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other related areas, so Europe leads the way towards climate neutrality by midcentury,” Vice-President Maroš Šefčovič, in charge of the Energy Union, said. “Europe has now in place the world’s most ambitious and advanced climate and energy framework. We agreed all the legislation to meet our 2030 targets, with higher targets for renewables and energy efficiency. But the Energy Union is more than rules and policies: we mobilised record levels of clean energy investments in Europe, we brokered the Paris Agreement and triggered its quick entry into force, we further integrated the European energy market, and we set a long-term vision for climate neutral Europe by 2050. But we still have a long way to go. We need to keep up the deployment of renewable energy across Europe and step up efforts to save more energy. We must embark in a process of transformation with a much greater sense of urgency than I see today. With our climate-neutral strategy by 2050, we have sketched out how this can be done, and presented a solid analysis of why and how Europe can achieve climate neutrality; why this model can be replicated by other countries in the world; how climate neutrality, economic prosperity and social fairness can and must go together,” Commissioner for Climate Action and Energy Miguel Arias Cañete mentioned. The Energy Union has strengthened the internal energy market and increased the EU’s energy security by investing into new smart infrastructure (including, cross-border), providing a new state-ofthe-art market design and introducing a cooperation mechanism between the Member States based on solidarity to respond to potential crises in a more effective and efficient manner. As the Commission has recently set out in its Communication ‘A Clean Planet for All’, the energy transition requires a comprehensive economic and societal transformation, engaging all sectors of the economy and society to achieve the transition to climate neutrality by 2050. The Energy Union framework puts Europe on the right path to become a

prosperous, modern, competitive and climate neutral economy. The Juncker Commission has put in place a brand-new legislative framework for the Energy Union. The updated legislative framework has enabled the EU to maintain its leadership in climate action by increasing its level of ambition for 2030 in a number of energy related sectors, from increased targets for renewable energy and energy efficiency, to targets on emissions from cars, vans and lorries. In addition to the new legislative framework, the Commission has put in place an enabling framework of supporting measures to ensure a smooth transition for European industries, regions and cities. A number of targeted initiatives have been created to guarantee all regions and citizens benefit equally from the energy transition. One of these initiatives is the European battery alliance. The European battery industry has been identified as a strategic value chain for the EU in the context of a strengthened industrial policy strategy. The Energy Union report is accompanied by a separate report on the implementation of the strategic action plan on batteries. A second Communication published on April 9 calls for a strengthening of the democratic accountability of the decisionmaking process under the Euratom treaty. The European Commission will establish a High-Level Group of Experts to assess the state of play of the Euratom Treaty with a view to considering how, on the basis of the current Treaty, its democratic accountability could be improved. In the same communication, the Commission asks the European Parliament and the Council to reflect on how energy taxation could better contribute to the EU’s energy and climate policy objectives, and how a move to qualified majority voting (QMV) decision-making amongst Member States could help to unlock progress in this area. This strand of work builds on the Commission’s blueprint for a gradual transition to QMV decision-making in all areas of taxation, first published in January. 63

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Investing in low-carbon nuclear generates jobs and economic growth in Europe The European nuclear industry currently sustains more than 1.1 million jobs in the EU and generates more than half a trillion euros in GDP according to a new study by Deloitte released on April 25.

or more than 60 years, nuclear technologies have been providing Europe with a reliable source of low-carbon electricity. The aim of the work undertaken by Deloitte was to assess the contribution of the nuclear sector to the overall economy of the EU28 both today and in 2050. According to the report, each GW of installed nuclear capacity in the EU: • triggers EUR 9.3 billion in annual investments both in the nuclear and connected economic sectors; • provides permanent and local employment to just under 10,000 people; • generates EUR 4.3 Bn in EU GDP.

“As one of the objectives of this study was to provide data on the economic contribution of the European nuclear industry up to 2050, decisionmakers now have at their disposal a reliable forecast of the benefits that would be derived from the deployment of 150 GW of nuclear power capacity throughout the European Union,” said Sorin Elisei, Senior Manager Energy & Resources Industry Practice, Deloitte Consultanta Romania. Looking ahead to 2050, if nuclear were to continue to account for one quarter of the electricity mix in 2050 (150 GW of installed capacity), the authors believe that, on average, the industry would: 64

• • • •

support more than 3 million jobs annually; generate EUR 576 billion per year in GDP; boost tax revenues by EUR 110.2 billion per year; provide households with EUR 490.9 billion in disposable income.

Major impacts GDP Impact: Every Euro of the nuclear industry’s direct contribution to EU GDP generates an indirect contribution of 4 Euro, totalling an impact of 5 Euro in the EU GDP. Job creation: Every job created directly in the nuclear sector sustains another 2.2

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jobs, totalling an impact of 3.2 jobs on the EU labour force market. In 2019, around 70% of direct jobs sustained by the industry are during the operation phase. Disposable household income: Every Euro of disposable household income generated due to the nuclear industry translates into a total impact of 3.6 Euro household income throughout the EU. Public revenues: Every Euro of tax revenues paid by the nuclear industry generates further indirect tax revenues of 2.6 Euro in the EU member states.

Future impact – High Scenario 2020 – 2050 In a high capacity scenario, the nuclear sector will have a significant impact on the European economy as a whole, creating annually over 1.3 million jobs. GDP Impact: Every Euro of the nuclear industry’s direct contribution to EU GDP will account for an additional contribution of 3.9 Euro, totalling an impact of 4.9 Euro in the EU GDP. Job creation: Every job created directly in the nuclear sector will sustain another 2.8 jobs on the EU labour force market throughout the period. In the future, there will be a nearly equal share of sustained direct jobs in construction and operation phases. Disposable household income: Every Euro disposable household income created due to the nuclear industry will generate further 3.0 Euro household income in the EU throughout the period. Public revenues: Every Euro of tax revenues paid by the nuclear sector will generate indirect tax revenues of 2.5 Euro, totalling 3.5 Euro total public revenues in the EU member states.

Some results In the Medium Scenario, the nuclear sector will have a significantly lower impact on the EU economy, especially in terms of GDP contribution, job creation and investments. The nuclear industry could account for a total of 39.6 million jobs during the

upcoming 30 years, if the High Scenario was deployed. In the High Scenario, overall 18 million highly skilled professionals could be employed by the nuclear industry throughout the period 2020 - 2050. In the High Scenario, the nuclear industry will account for a cumulated impact of 3.3 trillion Euro public revenues throughout the EU during the period 2020 - 2050. Due to the nuclear industry, the trade surplus of the EU could raise by 1 trillion Euro during the upcoming 30 years, if the High Scenario was deployed. The impact of the nuclear industry on GDP and household income in countries without nuclear is still perceivable, due to cross border exchange of labour force. “If Europe is serious about decarbonising its economy by 2050, then one quarter of the electricity produced in the EU will need to continue to come from nuclear,” states Yves Desbazeille, FORATOM Director General. “Not only will this enable the EU to achieve its carbon-free targets, whilst at the same time ensuring it has access to the energy it needs when it needs it, it will also provide a significant contribution in terms of economic growth and job creation.” The economic benefits of maintaining a strong, European nuclear supply chain do not end here, as the industry can positively respond to many of the other challenges which the EU is facing. For example: those currently employed in the coal industry could be retrained in order to fill the skills gap in the nuclear industry; nuclear can help maintain a European industrial base by providing a steady supply of low carbon power at an affordable cost. The European Atomic Forum (FORATOM) is the Brussels-based trade association for the nuclear energy industry in Europe. The membership of FORATOM is made up of 15 national nuclear associations and through these associations, FORATOM represents nearly 3,000 European companies working in the industry and supporting around 1.1 million jobs. 65

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RENEWABLES

Deloitte study Renewable Energy in Romania: Development Potential by 2030 EUR 1 billion spent on wind farms or electricity networks in Romania will lead to an added value in the Romanian economy of at least EUR 2 billion, according to the Report named ‘Renewable Energy in Romania: Development Potential by 2030’, recently presented by the Romanian Wind Energy Association - RWEA and Deloitte Romania.

Four scenarios analysed The potential of the share of renewable energy sources and especially of wind energy in Romania’s energy consumption was determined based on a calculation methodology that has highlighted four possible scenarios on the potential by 2030. The scenarios were named as follows: the Current Scenario - 27.9% in 2030; the Baseline Scenario - 32.4% in 2030; the Potential Scenario A - 35% in 2030; the Potential Scenario B - 35.5% in 2030. According to the Current Scenario, it is estimated that the global share of energy from renewable sources in the final gross consumption, of 27.9%, is maintained by 2030. The other three scenarios aimed to test the feasibility of increasing the renewable energy share to 32.4%, 35% and 35.5% respectively, mainly depending on the evolution of the other production

capacities. The evolution of the renewable energy share during 2020/2021 - 2030 was tracked for each of the three scenarios selected for analysis, with a focus on the intermediary targets 2023, 2025 and 2027. In the increase in the renewable energy share, wind and solar power remain critical, given the estimated evolution of the cost related to these technologies at global level. Net installed wind power capacities will reach 6 GW in the case of the Baseline Scenario, while for the Potential Scenarios A and B it is expected to reach a 7 GW level each of them. In the Current Scenario, the installed capacity in wind farms grows to 4.3 GW (from 3 GW today). Net installed solar power capacity will be 3 GW in the Baseline Scenario, 4.3 GW in the Potential Scenario A and 4.7 GW in the Potential Scenario B. The 66

Current Scenario keeps 3 GW installed in photovoltaic parks. To test the feasibility of the selected scenarios, one of the most important indicators was represented by the electricity price.

Investments of up to EUR 25 billion The study also reveals that, at the level of 2030, electricity price (excluding VAT and excise duties) could be in Romania EUR 112.4/MWh in the Current Scenario - EUR 126.6/MWh in the Baseline Scenario, EUR 113.7/MWh in the Potential Scenario A and EUR 138.2/MWh in the Potential Scenario B. Also, at national level, total investment in the Romanian energy sector, for the analysed period, is expected to exceed EUR 17 billion, in the Potential Scenario A, and EUR 25 billion in the Potential

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Scenario B, in conditions in which in the Baseline Scenario the investment value amounts to EUR 20 billion and in the Current Scenario - to EUR 22 billion. In the case of wind parks, of the investment total about 54% of the capital will be spent domestically, and in the case of electricity transmission and distribution networks - 55%. Regarding the added value of such projects, the results show that EUR 1 billion spent in wind farms or electricity networks will lead to added value in the Romanian economy of at least EUR 2 billion, the report mentions. The specific assumptions for the Potential Scenario A were determined compared to the Baseline Scenario, its main characteristics being the following: extending the life of existing nuclear facilities, and the two additional nuclear reactors (U3 and U4) will not be built. As regards the Potential Scenario B, it is analysed both compared to the Baseline Scenario and the Potential Scenario A, and its main particularities are: extending the life of existing nuclear facilities, the two additional nuclear reactors (U3 and U4) will be commissioned in 2030 and 2031 respectively, while the environmental costs will lead to the elimination of three coal-fired groups. The Baseline Scenario takes into account the common assumptions of all scenarios, plus the particular assumptions of this scenario, as follows: extending the life of existing nuclear facilities, the two additional nuclear reactors (U3 and U4) will be commissioned in 2030 and 2031 respectively, the gradual and natural phasing out of all coal-fired groups by around 2035, installation of additional energy capacities from RES to meet the long-term needs, accumulated earlier, as well as the decrease in the use factor for gas-fired power plants.

Additional investment of EUR 229 billion In addition to direct investment in the energy system, additional investment generated in other economic sectors are expected, totalling EUR 229 billion during 2021 - 2030. In order to reach

the EU energy and climate targets for 2030, additional funding of EUR 270 billion per year is necessary at European level, capital coming mainly from private investors. The share of investment estimated for Romania accounts for about 10% of the EU estimates (EUR 24.5 billion total investment in Romania per year, both in the energy sector and in other economic sectors, in the case of a RES share of 35.5%). Although the estimated investment is significant, EU regulations will support the involvement of private capital in investment. The European Council has announced the initiative of growing from 20% to 25% the share of expenses to fight climate change in the Union’s budget in the following financial year (2021-2027). Besides this initiative, there are some support instruments to fulfil the proposed targets, such as: The European Fund for Strategic Investments (EFSI) and implementation of EU’s Action Plan on funding the sustainable development of the energy sector; Support schemes according to Article 5 of the Renewable Energy Sources (RES) Directive; Funding platform in accordance with Article 27 of the Governance of the Energy Union Regulation; InvestEU Fund, active since 2021 (providing, inter alia, guarantees for developers); The EU ETS Modernization Fund (2021-2030); Statistical transfers etc.

dispatchable wind power plants (DWPP), it was broken down by impact types. The direct impact includes investments and activities of wind power plants developers, and the investment volume can be assessed by measuring the capital and operating expenses during the life cycle of projects. Moreover, a 42% (0.42) multiplier applies, representing the degree of absorption for the Romanian market or, in other words, the share of total investments in the Romanian economy. With a total volume of capital expenses of EUR 4.51 billion, the direct adjusted impact of wind parks in the economy will total EUR 2.52 billion in the analysed period. The second category is that of the indirect impact, representing the sum of all activities carried out by the providers and subcontractors of wind power plants in the industry, including mainly the producers of turbines and other parts, as well as the service providers. Applying the multiplication factor (0.55), these activities will result in an indirect impact of EUR 2.95 billion between 2021 and 2030 in Romania. In conclusion, the total impact generated by both direct and indirect investment in wind parks amounts to a total added value of EUR 5.47 billion in Romania’s economy between 2021 and 2030. In other words, EUR 1 billion invested directly in wind parks will generate a total of EUR 2.17 billion in the economy of the country.

Investment in RES worth EUR 18 billion

EUR 15.6 billion, the impact of investment in The calculations underlying the transmission and distribution networks

impact analysis show that the total value of domestic investment in RES is EUR 18.3 billion for the analysed period. Of total investment in wind farms, 42% will be spent in the Romanian economy, while in the case of electricity transmission and distribution networks the rate is 55%. Thus, in the analysed period (20212030), each billion invested in RES will bring added value to the Romanian economy of EUR 2.17 billion and EUR 2.09 billion respectively. In order to quantify the added value generated in investments in electricity generation in 67

The added value generated by investments in electricity transmission and distribution networks in Romania was broken down by the two impact types, direct and indirect. The direct impact includes investments in electricity transmission and distribution networks, including capital and operating expenses during the life cycle of projects. In the case of networks, a 55% (0.55) multiplier applies, representing the degree of absorption of the Romanian market. Thus, of the total volume of capital expenses, the adjusted direct

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impact of electricity transmission and distribution networks in the economy will total EUR 7.44 billion in the analysed period. The indirect impact represents all activities carried out by providers and subcontractors of services and materials involved in the investment projects in electricity transmission and distribution networks in Romania, and applying the multiplication factor (0.55), the indirect impact amounts to EUR 8.14 billion between 2021 and 2030. In conclusion, the total impact generated by both direct and indirect investment in electricity networks amounts to a total added value of EUR 15.6 billion in Romania’s economy between 2021 and 2030. In other words, EUR 1 billion invested directly in electricity transmission and distribution networks will generate a total of EUR 2.09 billion in the economy of the country.

Additional effects of RES development Transition in the energy sector will benefit all sectors of the economy, facilitating competitiveness, innovation and new investment opportunities. Each EUR invested directly in electricity transmission and distribution networks will generate EUR 2.09 in the Romanian economy. In this study, the impact of domestic investments to be made in the sectors considered to be most relevant for the energy transition on Romania’s Gross Domestic Product has been quantified.

Investment in the respective sectors will total EUR 229 billion and the value of domestic investment made in these sectors of the Romanian economy will be EUR 82.6 billion, having a degree of absorption for the Romanian market of 20-70%. The result of the evaluation shows that the impact of investment in the chosen sectors on Romania’s GDP will amount to EUR 364.6 billion during 2021-2030. Thus, each EUR invested in RES in the relevant sectors will generate EUR 4.4 in the Gross Domestic Product in the analysed period. The highest potential in terms of impact of RES investment on Romania’s GDP rests with the car industry, with a value of over EUR 43 billion in domestic investments in RES and an impact on GDP of EUR 132 billion. RES investment in the transport sector amounts to almost EUR 11 billion, with an impact on GDP of EUR 112 billion, and the construction sector has an impact of EUR 109 billion on GDP, at a RES investment value of over EUR 20 billion.

Installed capacity by production sources After presenting the evolution of the share of renewable energy by 2030, another important aspect analysed in this study is represented by the structure of the net installed capacity, by sources, for 2030. Depending on the assumptions considered for each scenario, the net installed capacity depending on source can be different. For example, the nuclear

capacity in the case of the Potential Scenario A will be replaced with energy from solar and wind sources. In terms of net installed capacity, the values in 2020 are the same in all the 3 scenarios, with differences noticed at the first intermediate step in 2023. Thus, in the Baseline Scenario, at the level of 2030, over 65% of the net installed capacity comes from renewable sources, while fossil fuels and natural gas have a 27% share. The Baseline Scenario captures a 40% increase in the net installed capacity from RES compared to 2020. In the Potential Scenario A, 70% of the net installed capacity comes from renewable sources in 2030. Compared to 2020, the increase in the capacity from RES is by 60% higher in 2030. In the case of the Potential Scenario B, 71% of the installed capacity comes from RES in 2030, the increase being by 64% compared to the installed capacity estimated at the level of 2020. As previously mentioned, in the increase in the RES share emphasis is placed on increasing the wind and solar energy capacity. The figure below shows the capacity requirement that will need to be installed in addition to reach the renewable energy shares in 2030 compared to 2020. Taking into account that in 2020 it is expected to remain about 3 GW of wind power installed, this capacity is expected to double in 2030 for the Baseline Scenario. For the Potential Scenarios A and B, the increase in the wind energy

SHARE OF RES IN THE WIND ENERGY DEVELOPMENT SCENARIOS, 2030, [%] Figure 1 – Share of RES in the wind energy development scenarios, 2030, [%] Current scenario

Reference scenario

Share of RES

Potential scenario A

Share of RES

Source: Deloitte calculations SOURCE: DELOITTE CALCULATIONS

Potential scenario B

Share of RES

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NET INSTALLED CAPACITY FOR THE 3 SCENARIOS, DEPENDING ON THE SOURCE, IN 2030, [MW]

Figure 2 - Net installed capacity for the 3 scenarios, depending on the source, in 2030, [MW] Net installed capacity.

Net installed capacity,

Reference scenario 32.4%, depending on the source [MW]

Potential scenario A 35%, depending on the source [MW]

Potential scenario B 35.5%, depending on the source [MW]

Nuclear

Hydro

Wind

Solar

Biomass

Solid fuel

Natural gas

Fuel oil

Source: Deloitte SOURCE: DELOITTE CALCULATIONScalculations

capacity will be 133% compared to 2020, reaching 7 GW in 2030. In the case of solar energy, in the Baseline Scenario the capacity will also double, from 1.5 GW to 3 GW. In the case of Potential Scenarios A and B, the solar energy capacity will grow from 1.5 GW to 4.3 GW and 4.7 GW respectively. Given the increased share of renewable energy in the net installed capacity, impact on the net electricity production is significant. As shown in the figure above, in all the 3 scenarios, electricity production will reach 73.1 TWh by 2030, being expected to grow gradually from 64 TWh estimated for 2020. In the case of the Baseline Scenario, 51% of the electricity generated will come from renewable sources by 2030, while in the Potential Scenarios A and B this share grows to 57% and 58% respectively. In terms of the other sectors influencing the global share of renewable sources, their estimated evolution considered, inter alia: - Romania’s obligation to reach a 10% share of RES-T in 2020 (14% in 2030), in the context of changes in the multiplication factors associated with the use of RES (e.g. RES in electricity

consumption for rail transport); - the conditionalities imposed by the new Renewable Energy Directive, on the types of RES used and accepted in the calculation of the RES - H&C share.

countries of the European Union (EU) with the highest natural potential in terms of renewable energy sources.

The threat of greenhouse gas emissions

The period covered by the report refers to the 2020/2021 - 2030 timeframe and the development scenarios, the impact and the estimated benefits are based on the situation at the time the document was drawn up. The data was collected from public sources, from Deloitte information, as well as from discussions with experts in the field. At the same time, forecasts were made on the basis of historical data and Deloitte’s assumptions on the evolution of the Romanian energy sector. The scenarios proposed in the document are mainly based on the increased use of wind power (onshore) and solar energy (roofs). The biomass potential was considered insignificant, as there is no universal understanding on its amount and no access to a verifiable data source. In addition, the geothermal potential was not taken into account in the analysis because its value is less than 1GW.

According to the National Climate Change Strategy 2013 - 2020, “in the process of combating climate change, currently considered in the international specialized forums as a potentially irreversible threat to our society and our planet, the adoption of measures to reduce greenhouse gas emissions (...) is a fundamental component of the national policy on climate change.” The authors of the study recall that the strategy also shows that “studies have indicated that global emissions need to be reduced by about 50% by 2050 compared to 1990 levels in order to prevent irreversible effects from climate change.” In the latest Inventory of greenhouse gas (GHG) emissions developed by Romania in 2014, energy-related emissions accounted for about 70% of total GHG emissions at national level. Romania is one of the 69

Bases of the study

METALS & MINING

EU approves Liberty bid for ArcelorMittal European steel assets Following EU approval on April 17 for Liberty to acquire seven major European steel plants from ArcelorMittal, the GFG Alliance has announced its intention to integrate most of its Liberty steel, engineering and mining businesses into a single global entity, spanning assets across the UK, Europe and Australia. 70

METALS & MINING

he consolidated business will include all of the UK steel and engineering assets, the integrated Australian Liberty pri mary steelworks in Whyalla, a number of high-quality Australian iron ore and metallurgical coal mines, and, once completed, the seven European steel plants being acquired from ArcelorMittal. This merged new group would exclude GFG’s recycling and building products businesses in Australia and the USA. Currently these businesses exist separately within the GFG Alliance but, with a steelmaking target of 20Mtpa, the planned merger and integration will catapult Liberty into the world’s top 10 steel producers outside China, creating multiple competitive advantages. The announcements mark a significant step in Liberty’s evolution. “We are delighted that the EU has validated Liberty as a suitable buyer for these European

steel assets. This will make us the third largest steel producer in Europe. We are an ambitious and aspirational group and we keep breaking boundaries. The bringing together of our international integrated steel assets is part of our deliberate, strategic and sustainable expansion,” Executive Chairman of the GFG Alliance, Sanjeev Gupta, said. “We look forward to leveraging Liberty steel and mining’s integrated supply chain to create further value. The business will combine Liberty’s integrated steelworks in Whyalla and its ambitious Australian iron ore and coking coal mining businesses, with Liberty House Group assets in the UK and the planned acquisition of the ArcelorMittal European manufacturing facilities. This combination will form a global champion, with fully integrated capabilities, shipping iron ore and coking coal and semifinished product from Australia to its manufacturing plants and mills globally with the target of becoming one of the largest and most competitive fully integrated steel and mining producers in the world, from raw materials to high value finished goods,” he added. Liberty’s global manufacturing capacity includes a strong position in the UK as a steel producer and an engineering components supplier to the automotive, aviation, defence and renewable energy sectors. Liberty Primary Steel in Australia is a leading producer of rail and structural steel for the growing infrastructure and building industries. In December 2018, the business announced visionary plans to build a state-of-the-art Next Gen manufacturing facility in South Australia with capacity of over 10Mtpa. In addition, the proposed European acquisition from ArcelorMittal will boost Liberty’s production capacity across a full range of flat and long products, setting the Liberty steel and mining group up for rapid growth. As part of the strategic alignment of the international assets, and in order to optimise its significant power purchase, GFG Alliance has completed the first phase in rearranging its energy procurement strategy and associated 71

funding. Accordingly, GFG Alliance has procured the refinancing of approximately one third of its long-term power purchase obligations in the UK and will arrange refinancing of the remainder in or before the third quarter of the calendar year. Also, ArcelorMittal announced that it has received European Commission (EC) approval for the sale of several steelmaking assets to Liberty House Group. The assets form a divestment package the company agreed with the EC during its merger control investigation into the company’s acquisition of Ilva S.p.A. Assets included within the divestment package are ArcelorMittal Ostrava (Czech Republic), ArcelorMittal Galati (Ro mania), ArcelorMittal Skopje (Macedonia), ArcelorMittal Piombino (Italy), ArcelorMittal Dudelange (Luxembourg) and several finishing lines at ArcelorMittal Liège (Belgium). Transaction closing is anticipated to occur before the end of the first half of this year. ArcelorMittal is the world’s leading steel and mining company, with a presence in 60 countries and an industrial footprint in 17 countries. Guided by a philosophy to produce safe, sustainable steel, it is the leading supplier of quality steel in the major global steel markets including automotive, construction, household appliances and packaging, with worldclass research and development and outstanding distribution networks. ArcelorMittal is actively researching and producing steel-based technologies and solutions that make many of the products and components people use in their everyday lives more energy efficient. The company is one of the world’s five largest producers of iron ore and metallurgical coal. With a geographically diversified portfolio of iron ore and coal assets, ArcelorMittal is strategically positioned to serve the network of steel plants and the external global market. In 2018, ArcelorMittal had revenues of USD 76.0 billion and crude steel production of 92.5 million metric tonnes, while own iron ore production reached 58.5 million metric tonnes.

METALS & MINING

Vast Resourcesâ&#x20AC;&#x2122;s primary value drivers Baita Plai in Romania and Heritage Concession in Zimbabwe 72

METALS & MINING

Vast Resources is focussed on the rapid transformation from exploration company to mining company and delivering multiple revenue streams. This will be driven by the advancement of its two primary value drivers, the Baita Plai Polymetallic Mine in Romania, and the Heritage Diamond Concession in Zimbabwe, into production in 2019. The company recently announced the proposed sale of its 50.01% interest in Ronquil Enterprises (pvt) Ltd through which Vast holds its Zimbabwe gold assets, being the remaining 25.01% economic interest in the Pickstone Peerless Gold Mine and associated assets (principally the Eureka Gold Mine).

sale contract has been concluded subject to the approval of shareholders which approval is required as the proposed sale falls within Rule 15 of the AIM Rules relating to fundamental changes of business. In the six months to 30 September 2018, the Pickstone Peerless Gold Mine and associated assets contributed a profit before taxation of USD 3,128,000 on revenue of USD 19,329,000 in the consolidated accounts of Vast. These figures relate to 100% of the results due to the company’s historic controlling interest. The implementation of the proposal will enable the company to focus its activities in Zimbabwe on the Heritage Diamond Concession. It will also result

in a fundamentally less complex balance sheet with much reduced liabilities and which will assist with the future financing of the company. “I am delighted with the results that this transaction will achieve for the company as it will allow management to focus its efforts on the two core focus assets in the company, namely the Heritage Concession in Zimbabwe and Baita Plai in Romania,” Andrew Prelea, Chief Executive Officer of Vast, commented. “The Heritage Concession will require significant investment, not only financial but in human resource to enable near term positive cash flow for the business. The divesting of the gold assets in Zimbabwe allows us to focus all of our Zimbabwe finance and management on this key 73

component of the company’s growth. We have a responsibility not only to our shareholders but to the Chiadzwa and Marange communities as well as the wider Manicaland community to ensure the success of this project as a representation that Zimbabwe is open for business and investor and community can work together in creating a profitable and beneficial project for all the stakeholders,” Andrew Prelea added. The result of the transaction will also open up significant funding opportunities to the company for the Romanian projects that have been delayed due to historic financial structures and arrangements that in turn hampered the company’s ability to progress the near-term goals. “Due to the hard work and dedication

METALS & MINING

of the management teams in the UK, Romania and Zimbabwe, I can now look forward to the company being able to unlock the value of the assets in our portfolio, bringing these two primary focus assets in to production in real time and, most importantly, creating shareholder value,” Andrew Prelea concluded.

Richest alluvial diamond deposits globally The Marange Diamond Fields are widely regarded as the richest alluvial diamond deposits globally. In August 2018, the company announced an agreement between Vast and Red Mercury (Pvt) Ltd, a company owned by the Marange-Zimunya Community Share Ownership Trust. The agreement provides for the formation of a joint venture, subject to legal due diligence, between Vast and Red Mercury to develop, mine and market diamonds produced from the Heritage Concession in the Marange Diamond Fields. The Heritage Concession is close to Vast’s historic Marange Diamond Field claims and is understood to be an extension of the same geological system. The company has also created a special purpose vehicle between AIMlisted Botswana Diamonds plc (13.33% interest) and Vast (86.87% interest) under which Botswana will provide to Vast free of charge the benefit of its knowhow on all aspects of exploration, mining, processing and marketing in relation to the Heritage Concession. It is also intended that Botswana Diamonds will give assistance in interpretation of geological and other information concerning the Heritage Concession site. An independent Competent Person’s preliminary geological assessment has been completed relating to the Heritage Concession. The geological assessment highlights that the property contains several targets for modern alluvial diamond placer deposits. The grades of the known proximal modern alluvial placers draining the Marange Diamond Fields elsewhere range in grade from 50-

500 carats per hundred tons (‘cpht’), most typically 100–200 cpht. There is also potential for remnants of the basal Umkondo unit in the Heritage Concession, which runs at grades from 100-3,000 cpht elsewhere in the Marange Diamond Fields. Just outside the eastern edge of the property is the closest known diamond mine within the Marange Diamond Fields. Situated within Block E2, the deposit was discovered and operated from late 2010 and records indicate that an average stone size of c.5 ct/stn and an average diamond value of c. USD 80/ct was achieved from this block. It is estimated that over 60 million carats have been recovered from the Marange Diamond Fields to date. With input from Botswana Diamonds, the company has prepared base case commercial scenarios and has made the decision, subject to legal due diligence, to proceed to the full joint venture agreement with Red Mercury as outlined in the company’s announcement of 22 August 2018. Subject to that the next steps will be to follow-up field work to investigate the potential of modern alluvial diamond placer deposits and the possibility of the basal Umkondo unit on the Heritage Concession. Upon positive results, the field work will be closely followed by pitting, drilling and bulk sampling which will form part of prefeasibility studies.

Over one billion tonnes of porphyry copper ore 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 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 74

operational tailings facility, which requires some rehabilitation. Following the formal approval by ANRM on 10 October 2018 for the grant of an Association Licence to African Consolidated Resources srl (‘AFCR’) the company’s 80% subsidiary, AFCR and Baita SA, the holder of the head licence, signed a pre-agreed commercial contract on 16 October 2018 giving AFCR the right to mine at Baita Plai. 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 under ground access areas; cleaned the milling and flotation circuits to enable assessment of the remedial work required. A start-up team has now been deployed to Baita Plai to commence the implementation of the re-start programme.

Facts and figures Official mineral resources (NAEN Code) for Baita Plai as recorded are reported as 1.8Mt at grades of 2.19% Cu, 3.07% Pb, 3.46% Zn, 1.41 g/t Au and 128.2 g/t Ag. The mineral resources are classified as 1.27Mt C1 resources and 0.61Mt C2 resources under the Russian Mineral Resource reporting system (the ‘NAEN’ code). In broad terms, a C1 resource is equivalent to the Australian Joint Ore Resources Committee (the ‘JORC’ code) Indicated mineral resource while a C2 is broadly equivalent to an Inferred mineral resource. Of the 1.27Mt C1 resources, 0.64Mt are located within the main Antonio pipe or skarn where production is targeted to recommence. Historical assay data from the mine, assayed at ALS Laboratories in Rosia Montana, Romania, is currently being captured to create an assay sample database suitable for JORC mineral resource estimation in the near future.

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TECH

24M delivers 40 grid-scale battery cells to GPSC for module build and application validation 24M has manufactured and delivered 40, 110 Amp-Hour (Ah) lithium-ion cells to its partner Global Power Synergy Public Company Limited (GPSC), the Power Flagship Company of PTT Group. GPSC, in collaboration with PTT, Thailandâ&#x20AC;&#x2122;s state-owned energy company, will assemble these large format cells into 48V modules for stationary storage projects in Thailand and field them for application validation. 76

TECH

he delivery of these gridscale battery cells based on a lithium iron phosphate cathode follows the recent delivery of high energy density, NMC-based EV cells to the United States Advanced Battery Consortium (USABC) in February. These milestones further validate 24M’s chemistry-agnostic, capital-efficient, lowcost approach to advanced lithium-ion battery manufacturing. The SemiSolid electrode platform provides unique opportunities for costoptimized, application-specific designs in both grid and EV markets. Specifically, for grid-storage, thicker electrodes deliver a significant structural bill of materials advantage via inactive material reduction, while offering robust abuse tolerance, long life, and unique recycling attributes. “We’ve proven the novel 24M SemiSolid battery design is productionready using our semi-automated pilot facility in Cambridge,” said Rick Feldt, President and CEO of 24M. “We look forward to working with our partners to scale this technology further in the coming months.” “We’re excited to take our partnership with 24M into field deployment and

testing,” said GPSC’s representative. “Low-capital, high-performance battery storage will be critical to securing the region’s power supply and advancing the transformation of our energy systems.”

Background On February 26, 24M announced it has developed and delivered commercially viable, high energy density lithium-ion cells. Using its novel SemiSolid lithium-ion battery design in its pilot facility, 24M achieved energy densities exceeding 250 watt-hours per kilogram (Wh/kg), the current stateof-the-art industry benchmark for EV applications. These deliveries represent a significant milestone in the 24M mission to scale its unique, capital-efficient, lowcost approach to advanced lithium-ion battery manufacturing. The development of the high energy density nickel manganese cobalt (NMC) cells is part of a USD 7M three-year contract awarded to 24M in 2016 by the United States Advanced Battery Consortium LLC in cooperation with the U.S. Department of Energy. The program is chartered with developing electrochemical energy 77

storage technologies that support the commercialization of hybrid, plug-in hybrid, electric and fuel cell vehicles. To achieve the final USABC 2020 density target of 350 Wh/kg by the end of 2019, 24M has developed a multi-faceted, labproven approach that includes a novel use of silicon for high energy density anodes. 24M also delivered similar NMC cells with energy densities above 280 Wh/kg to an industrial partner. With these cells, the higher energy densities were achieved by optimizing 24M’s SemiSolid electrode technology, which eliminates the use of a pore-clogging binder, enabling higher active material densities than can be achieved with conventional electrodes. The demonstration of this technology is a major milestone on the 24M roadmap to achieving even higher energy densities (>400 Wh/kg) using its capital-efficient manufacturing process. “It’s very gratifying to see science translated from the lab into innovative new products as 24M has done by developing and delivering these high energy density cells,” said Naoki Ota, CTO of 24M. “Moreover, we were able to leverage our novel electrode, cell and manufacturing approach to exceed 280 Wh/kg, a significant step towards delivering low-cost lithium-ion cells with industry-leading performance to the EV market.”

About 24M 24M answers the world’s need for affordable energy storage by enabling a new, more cost-effective solution– SemiSolid lithium-ion technology. By re-inventing the design of the battery cell as well as the manufacturing method, 24M solves the critical, decades-old challenge associated with the world’s preferred energy storage chemistry: reducing its high cost while improving its performance. Founded and led by some of the battery industry’s foremost inventors, scientists and entrepreneurs, 24M is headquartered in Cambridge, Mass.

TECH

Pilot project for the future of energy V

erbund is building a pilot plant at the thermal power plant site in Mellach, Austria, which can be operated both as an electrolyser and as a fuel cell. Graz University of Technology and the German cleantech specialist Sunfire evaluate the use of climate-neutral hydrogen in power plant operation as a substitute for natural gas. With an electrical output of 838 megawatts the Mellach gas-fired power plant is the most powerful power plant in Austria, which went into operation in 2012. In its use for supra-regional grid support, it contributes significantly to the electricity supply security throughout Austria. The two highly efficient gas turbines are currently operated with natural gas exclusively. As part of the recently launched ‘Hotflex’ research project, energy supplier Verbund will now test the partial substitution of natural gas with hydrogen produced in a climate-neutral way in an industrial power plant operation for the first time.

Excess wind and solar power can be stored as hydrogen The starting point for the new plant is the expansion of renewable energies

all over Europe. Currently, the main type of large-scale storage for wind and solar power is pumped-storage. In Austria alone, hundreds of additional wind power and photovoltaic plants will be built in the coming years on the basis of the energy and climate strategy whose electricity generation is strongly dependent on the weather. With the ‘Hotflex’ pilot plant, excess wind and solar power can be taken from the grid and converted into hydrogen by high-temperature electrolysis. This ‘green’ hydrogen will be mixed with natural gas to drive the two gas turbines in a more climate-neutral manner. The hydrogen is to be produced directly at the power plant site by high-temperature electrolysis with a production capacity of 40 Nm³/h.

In fuel cell mode, pilot plant can supply electricity and heat A special feature of the Mellach pilot plant, whose components are manufactured by the cleantech company Sunfire in Dresden, is that it can operate in reverse mode as a fuel cell. The plant is thus able to produce electricity and heat from natural gas. Verbund will test this fuel cell operating mode primarily as a possibility for self or emergency power supply of its power plant. 78

Three-year research project with Graz University of Technology The research will be carried out by Verbund’s Thermal Power competence centre in cooperation with Graz University of Technology as well as a Sunfire and is scheduled to be completed within the next three years. The research plant in Mellach will then continue to be operated by Verbund in accordance with the requirements of the operating reserve market. The research project is funded by the European Union’s ‘Horizon 2020’ program and the Austrian Research Promotion Agency. Founded in 2010, Sunfire GmbH develops and manufactures hightemperature electrolysers (SOECs) and high-temperature fuel cells (SOFCs). The company employs a workforce of 130. High-temperature electrolysis is a process used to produce valuable hydrogen from water. It is particularly efficient and is powered by renewable electricity. In the latest version, high-temperature electrolysis can reactivate not only water but also CO2 and thereby convert exhaust gases directly back into a clean raw material which can take the place of oil or natural gas. This means that the entire transport sector and many industrial processes which are currently dependent on oil, gas or coal can become uncompromisingly sustainable and CO2-neutral.

TECH

Salzgitter and Sunfire to build world’s most powerful hightemperature electrolyser GrInHy2.0 –Hydrogen for low-CO2 steelmaking

he Salzgitter Group and Sunfire GmbH are engaged with their international partners in building and operating the world’s largest High-Temperature Electrolyser (HTE) for the energyefficient production of hydrogen together with key technological partners. The GrInHy2.0 project has recently been launched at the Salzgitter Flachstahl GmbH steelworks. It leads on seamlessly from the first stage of GrInHy which has already operated successfully in Salzgitter. Together with partners Sunfire GmbH, Paul Wurth S.A., Tenova SpA, French research centre CEA and Salzgitter Mannesmann Forschung GmbH, the world’s most powerful High-Temperature Electrolyser (HTE) is being constructed for the energy-efficient production of hydrogen. The GrInHy2.0 project (Green Industrial Hydrogen via steam electrolysis) has an overall budget of EUR 5.5 million. GrInHy2.0 marks the first implementation of a high-temperature electrolyser with a power rating of 720 kilowatt in an industrial environment. By the end of 2022 it is expected to have been

in operation for at least 13,000 hours, producing a total of around 100 tonnes of high-purity (99.98 %) hydrogen. This will be used for annealing processes in the integrated steel works as a replacement for hydrogen produced from natural gas. Hydrogen as a reduction agent is also a central element in SALCOS (Salzgitter Low CO2 Steelmaking), the revolutionary Salzgitter Group concept for reduced-CO2 steel production, in the course of which hydrogen, ideally produced using renewable energy, is set to replace the carbon previously required to reduce iron ore to metallic iron. SALCOS is based on elements of various proven technologies, allowing the concept to be implemented swiftly at an industrial level. By increasing the scale of the hightemperature electrolyser, the GrInHy2.0 project will have the ability to extensively trial and test the integration of ‘green’ hydrogen into the steelworks processes. To do so, the gaseous product of the Sunfire-HyLink electrolyser will first be compressed and dried in the hydrogen processing unit supplied by Paul Wurth, a technology provider for the steel industry. Salzgitter Flachstahl will be responsible for operating the plant and feeding the 79

gas into the company’s own hydrogen network. In parallel with this, the French research centre CEA will conduct multiyear trials of the electrolyser stacks which form the central elements of HTE technology. Tenova as worldwide partner for innovative solutions in the metals industry, will support the project through a technical and economic study to accompany the decarburization of European steel industry through the conversion at a very low CO2, greenhydrogen-based steel production. Salzgitter Mannesmann Forschung is responsible for project coordination and management. Although economic implementation remains questionable under current energy policy conditions, the project partners have resolved to consistently pursue the development of this significant, climate-friendly technology. The project is supported by the Fuel Cells and Hydrogen 2 Joint Undertaking (JU) under funding agreement no. 826350. The JU in turn receives support from the EU research and innovation program Horizon 2020 as well as from Germany, Luxembourg, Italy and France.

TECH

Aker Solutions and FSubsea to create FASTSubsea to boost subsea oil recovery Aker Solutions and FSubsea have agreed to create FASTSubsea to help operators increase oil recovery in a faster, simpler and more environmentally friendly way.

ultiphase subsea pumping technology has the potential to increase oil recovery rates by more than 20 percent, but cost, space limitations and sometimes complex solutions mean multiphase pumps are installed in fewer than 30 of the world’s 1,500+ offshore fields. With FASTSubsea, this is about to change. The new company combines Aker Solutions’ high-performance multiphase hydraulic technology with FSubsea’s game-changing Hydromag technology to create the world’s first ‘topside-less’ multiphase boosting system. The pump-module solution being developed by FASTSubsea can cut capex by half and enable subsea boosting at fields where there is no available topside space. Getting more out of existing wells reduces CO2-emissions per barrel. “Creating FASTSubsea enables us to increase our speed to the market,

reduce risk and reduce investment in multiphase test facilities,” said Alexander Fuglesang, CEO of FSubsea, who will take on the role of Managing Director of FASTSubsea. “Combining Aker Solutions’ subsea systems expertise and multiphase test facility with FSubsea’s Hydromag technology and lean mindset will benefit both companies, said John Macleod, Aker Solutions’ Chief Technology Officer. “FASTSubsea has the potential to become a valuable addition to our portfolio of boosting recovery solutions.” The agreement is subject to approval from the Norwegian competition authorities.

Boosting Subsea Boosting The spread of subsea boosting technology has been hampered by cost and complexity. Conventional systems require a large amount of topside equipment on a platform or 80

FPSO, including electric variable speed drives and supply systems for barrier fluid hydraulic oils. They also typically require several kilometers of hydraulic umbilicals between the pumps and the platform. This increases cost in the form of engineering and hardware spend. The pump-module solution from FASTSubsea leverages FSubsea’s Hydromag (TM) technology, which is a unique combination of the world’s most powerful Permanent Magnetic coupling with an embedded hydrodynamic variable speed function, and Aker Solutions’ MultiBooster (TM) semi-axial impeller design, which has proven bestin-class pressure generation capabilities. This system has built-in variable speed function and is barrier-fluid-less, which reduces capex cost with up to 50 percent. It unlocks opportunities with platforms that have no additional topside space but still can reap the economic benefits of increased recovery with subsea boosting system.

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ANALYSIS

Investments of EUR 20 billion for electric mobility The EU will need lithium-ion batteries to produce 200 GWh To mitigate climate change, the European Union (EU) has set extremely ambitious targets and objectives to reduce its greenhouse gas emissions, given that energy and its use are responsible for generating 79% of the greenhouse gas emissions in the Community space. Countering this threat represented by climate change involves a fundamental evolution from the current energy system, based on fossil fuels, to an energy system with low carbon emissions, based mainly on renewable energy sources.

Text by Adrian Stoica 82

ANALYSIS

nergy storage techno logies provide a flexible response to imbalances caused by an increased share in the power grid of renewable sources and improving them can support the expansion of the green vehicle fleet. Currently, a number of technologies are available or under development, such as pumped storage of hydropower, various types of batteries, hydrogen storage, compressed air energy storage, thermal energy storage systems and the various types of gas storage. EU policy on energy storage is based on strategic initiatives, such as the European Battery Alliance, support for research and innovation in the field of energy storage technologies and legislation on lowcarbon electricity markets and transport. The EU has taken measures to develop a strategic energy storage framework, in order to accelerate the transformation of the EU’s energy system and bring new, low-carbon technologies to the market. However, there is a risk that the measures taken so far are not sufficient to achieve the EU’s clean energy strategic objectives, an analysis by the European Court of Auditors highlights. The European Battery Alliance focuses to a large extent rather on existing technologies than revolutionary

technologies and risks not to reach its ambitious objectives. The EU is behind its competitors in terms of battery cell production capacity. There is a risk that the current EU strategic framework will not cope with the challenges of energy transition. Between 2014 and October 2018, through Horizon 2020, the European Commission’s main research program, EUR 1.34 billion have been allocated for projects on grid energy storage or low-carbon mobility. The Commission has taken steps to simplify Horizon 2020, but the complexity of EU funding for research can be further reduced and the participation of innovative companies can be increased. There is also the risk that the EU will not sufficiently support the introduction of innovative energy storage solutions on the market, the analysis quoted above reveals.

Establishing a favourable legislative framework Until 2019, investors in grid energy storage solutions faced obstacles, but this will change after the European Commission has regulated most of the issues in the Directive on common rules for the internal market in electricity and in the Regulation on the internal 83

market for electricity, to be adopted. Concerning electric mobility, the late and uneven implementation of the charging infrastructure could delay the widespread adoption of electric vehicles, the mentioned document points out.

Reducing greenhouse gas emissions In 2015, 195 states responsible for 99.75% of global greenhouse gas emissions signed the Paris Agreement. They are committed to maintaining the average global warming in this century ‘well below’ 2°C, above pre-industrial levels, aiming to limit this increase to 1.5°C. The EU has set targets and objectives for reducing its greenhouse gas emissions. Energy and climate change are closely linked: countering the threat posed by climate change requires a radical renunciation of the current energy system, dependent on fossil fuels. Energy production and its use generate 79% of the EU’s greenhouse gas emissions, most of the emissions coming from energy supply and transport. Approximately three quarters of greenhouse gas emissions generated by the EU transport sector come from road transport, especially from passenger cars. After a decrease between 2007 and 2013, emissions from the transport sector

ANALYSIS

increased between 2014 and 2016. The EU has set specific targets for the share of energy from renewable sources used in transport: 10% by 2020 and 14% by 2030, and this will bring new challenges on energy storage. Therefore, it will be necessary to store more energy, both in the power grid and for transport.

In the transport sector In addition to biofuels, renewable fuels such as renewable electricity, renewable hydrogen and synthetic natural gas can reduce greenhouse gas emissions in the transport sector. Expansion of the fleet of vehicles using such fuels is currently limited, inter alia, by the reduced range of these vehicles, by their cost and the lack of recharging

infrastructure. Typically, electric and hybrid vehicles store energy in lithiumion batteries. By the end of 2018, they accounted for 0.4% of all road vehicles in the EU 16. Electric vehicles currently account for around 1% of the global vehicle fleet. According to forecasts by companies operating on this segment, this figure could reach 20% by 2030.

Batteries, Achillesâ&#x20AC;&#x2122; heel in Europe Batteries are an essential part of electric vehicles, accounting for about 50% of the cost of the vehicle. According to an international consultancy company, quoted in the analysis of the European Court of Auditors, the more battery suppliers are closer to car manufacturers, the shorter, cheaper, safer and more

flexible the supply chain, and the easier to innovate by testing battery components. Under these circumstances, the Commission believes that it is important that the EU has its own battery production capacity. Increasing the production of electric vehicles boosts the demand for lithium and cobalt, the basic raw materials needed for the production of lithium-ion batteries. According to CCI InnoEnergy, China owns about 50% of lithium and cobalt mining. The Commission considers it is important to ensure access to raw materials from resource-rich countries outside the EU, facilitate access to European sources of raw materials as well as access to secondary raw materials through a recycling process in a circular economy of batteries. By 2018, the EU accounted

EU GREENHOUSE EMISSIONS TRENDS AND TARGETS Figure 1 â&#x20AC;&#x201C;GASEU greenhouse gas emissions trends and targets 6 000

Million tonnes of CO2-equivalent

5 000

-20 % -22 %

4 000

-40 % 3 000 2 000 -80 % 1 000 -95 % 0 1990

1995

2000

2005

2010

2015

2020

2025

2030

Historic greenhouse gas emissions

2030 target (-40 % vs 1990)

2020 target (-20 % vs 1990)

2050 objective (-80 % vs 1990)

Source: Trends and projections in Europe 2018, EEA, 2018. SOURCE: TRENDS AND PROJECTIONS IN EUROPE 2018, EEA, 2018.

2035

2040

2045

Year 2050

2050 objective (-95 % vs 1990)

ANALYSIS

for around 3% of world battery cell production capacity, compared with 84% Asia Pacific and 12% North America.

priority issue of registration certificates for electric vehicle owners in major cities.

China’s initiatives

European Battery Alliance

China has introduced a credit system for new cars with low carbon emissions. Each hybrid vehicle, fuel cell vehicle or fully electric vehicle is assigned with a number of two to six credits. In 2019, automotive companies with an annual production volume or imports of at least 30,000 vehicles need to obtain a number of credits equivalent to 10% of their total car sales. This percentage will grow to 20% in 2025. China also provides incentives for the production of electric buses, subsidies for consumers purchasing electric vehicles and the

Considering the low battery cells production capacity in the EU, in October 2017 the Commission announced the establishment of the European Battery Alliance, the goal of which is to create a competitive and sustainable value chain for battery production in Europe. It concentrates the Commission’s efforts to bring together industry partners, research and innovation partners and Member States at EU level to make Europe “a world leader in sustainable battery production and use.” The 2018 strategic

action plan on batteries describes measures to facilitate access to raw materials for batteries, support the large-scale production of battery cells, accelerate research and innovation in the field, build high-skilled workforce and secure coherence with the EU regulatory framework. The action plan comprises 37 key actions focusing mainly on increased and more integrated use of existing regulatory and funding instruments.

Investments estimated at EUR 20 billion The Commission considers that, in order to cover only the existing battery demand at EU level, which is estimated to reach a value of EUR 250 billion per year by 2025, at least

EU GREENHOUSE GAS EMISSIONS IN THE TRANSPORT SECTOR IN 2016

Figure 2 – EU greenhouse gas emissions in the transport sector in 2016

Note: Includes international aviation and shipping. SOURCE: EUROPEAN ENVIRONMENT AGENCY, EEA GREENHOUSE GAS – DATA VIEWER, 2018; ECA ANALYSIS. Source: European Environment NOTE: INCLUDES INTERNATIONAL AVIATION AND SHIPPING. Agency, EEA greenhouse gas – data viewer, 2018; ECA analysis. 85

ANALYSIS

10-20 production facilities of gigantic battery cells (gigafactories) would be required, producing about 200 GWh of lithium-ion batteries per year. The Commission estimates that the total value of necessary investments amounts to about 20 billion euros. Between 2018 and 2021, the EU will develop its battery production capacity, but will do so later than other more advanced regions in the world. The Joint Research Centre of the Commission (JRC) expects that after 2021, four other plants will further increase production capacity in the EU. According to CCI InnoEnergy, it takes four years to build a battery cell infrastructure. In total, the

EU’s production capacity could reach 70 GWh in 2023, well below the EU target of 200 GWh set by the European Battery Alliance for 2025. Until then, the EU battery market could already be supplied largely by non-EU factories or car manufacturers could have relocated part of their production outside the EU, closer to battery manufacturers.

EUR 1.34 billion for research and innovation The 2014-2020 Framework Program for Research and Innovation, Horizon 2020, is the EU’s main instrument for funding research and innovation. By October 2018, Horizon 2020 had

allocated EUR 1.34 billion for projects on grid energy storage or low-carbon mobility. This amount represents 3.9% of the total EU contribution (EUR 34 billion) to projects within the Horizon 2020 program by that date. For 2019, the Horizon 2020 program included a call for battery projects worth EUR 114 million and additional funds are foreseen for them in 2020. In addition, to support innovative demonstration projects of energy infrastructure on a commercial scale, involving a high level of risk to private investors, the European Investment Bank (EIB) provides loans, guarantees and capital funding through the InnovFin

OVERVIEW OF MAIN ENERGY STORAGE TECHNOLOGIES AND THEIR USES

Figure 4 – Overview of main energy storage technologies and their uses 9

Source: ECA, informed by Electrical energy storage for mitigating climate change, Imperial College SOURCE: ECA, INFORMED BY ELECTRICAL ENERGY STORAGE FOR MITIGATING CLIMATE CHANGE, IMPERIAL COLLEGE LONDON. London. 86

ANALYSIS

Energy Demonstration Projects facility. By October 2018, the mechanism had granted a EUR 52 million loan to a project in the field of energy storage.

Energy storage technologies The Commission has awarded EUR 1.34 billion in grants for Horizon 2020 for 396 projects related to grid energy storage and low carbon mobility. Thus, 25% of this amount was allocated to battery-related projects and 37% to hydrogen or fuel cells projects. Out of the EUR 315 million contracted for battery research projects, more than half were earmarked for lithium-ion battery projects. The amounts spent

on new battery types, which could be the next generation of batteries, were the following: 7% for lithium-sulphur batteries; 3% for redox batteries; 1% for batteries with solid electrolyte and less than 1% for lead-acid batteries. A 13% share of this amount was used to support the development of other advanced battery technologies, the quoted document reveals.

Implementation of technologies, deficient In several energy-related areas, Europe faces an implementation deficit, facing difficulties in introducing promising innovations in the market. The Commission has conceived the main

funding instruments supporting research and innovation in the field of energy storage technologies so that they cover the different development phases (see the Connecting Europe Facility - CEF), a funding instrument worth EUR 30 billion in transport, energy and telecoms, funding alternative fuel infrastructures. Starting with 2014, it contributed with EUR 270 million to the development of fast-charging networks and hydrogen filling stations. It has also allocated EUR 113 million for energy storage infrastructures. In 2016, CEF awarded EUR 98 million to finance the design and construction of a compressed air energy storage facility. Therefore, these funds also support the implementation

Figure 5 – Projected development of lithium-ion battery cell manufacturing capacity, 2018-2021

PROJECTED DEVELOPMENT OF LITHIUM-ION BATTERY CELL MANUFACTURING CAPACITY, 2018-2021

“Rest of the World” not shown (approximately 0.7% in 2018 and an additional 0.8% in 2021). Source: ECA, adapted from Li-ion batteries for mobility and stationary storage applications, JRC, 2018.

SOURCE: ECA, ADAPTED FROM LI-ION BATTERIES FOR MOBILITY AND STATIONARY STORAGE APPLICATIONS, JRC, 2018.

ANALYSIS

of energy storage technologies. The Commission presents the Horizon 2020 program as a program aimed at “taking great ideas from the lab to the market.”

Obstacles faced by investors So far, the lack of a common regulatory approach has led to differences in how Member States deal with storage in the energy system. This lack has also hindered the development of viable economic models for energy storage facilities. According to the Court’s report, four key obstacles to the growth of private sector investment have been identified, such as the network charges, the combination of revenues from the provision of different services, the ownership of energy storage facilities and not last but not least, the combination of electricity and other forms of energy.

Network charges The current common rules for the internal electricity market, adopted in 2009, require Member States to apply tariffs for access to power grids in a transparent and non-discriminatory manner. However, they do not address the specific case of energy storage. In at least four Member States, storage facilities owners have been obliged to pay network charges, namely electricity charges and/or network use charges, twice, both as consumers and as producers. This has reduced the return on investment in energy storage. The final version of the proposed EU Regulation on the internal market for electricity of December 2018 provides that network operators will not apply charges for access to their networks that “discriminate (either) positively, (or) negatively against energy storage.” This provision allows addressing the

issue of double network charges applied to owners of storage facilities for the use of the power grid both when they are loading the storage facilities and when downloading them. It does not cover cases of double taxation, which remain within the competence of the Member States. The Commission is currently evaluating the Energy Taxation Directive.

Producer and consumer, double taxation Some energy storage facilities have to pay double network charges. Network charges are paid for the use of the electricity network for the purpose of electricity transmission. They are paid by the end-consumer; in some Member States, electricity producers also pay network access charges. In addition, electricity consumers and, in some Member States, electricity producers pay

Figure 7 – Horizon 2020 contributions to projects related to energy HORIZON 2020 CONTRIBUTIONS TO PROJECTS RELATED TO ENERGY STORAGE ON THE GRID OR FOR LOW CARBON MOBILITY storage on the grid or for low carbon mobility

SOURCE: ECA ANALYSIS BASED ON COMMISSION’S DATA. Source: ECA analysis based on Commission’s data.

ANALYSIS

electricity charges. In case of storage, the power network is used twice: when the storage facility is loaded and again when it is downloaded. The actual storage facility is neither a producer nor an end-consumer. Storage facilities do not clearly fall into any of these categories: some Member States require them to pay network use charges and/or electricity charges twice, both as producers and as consumers. Electricity storage facilities have been affected by double taxation in several Member States, including Austria, Germany, Finland and the Netherlands. Finland and the Netherlands are reviewing their regulations to address this issue.

Combining revenues In addition to storing electricity, storage technologies also allow the provision of other network support services, such as frequency response, voltage maintenance, adjustment depending on demand, or electricity trading. As a result, energy storage projects can be funded from multiple revenue streams, thus limiting investment risks. The December 2018 version of the proposed Directive on common rules for the internal market in electricity provides that units holding a storage facility “have the right to provide more services at a time if technically feasible.” The proposed directive applies to customers who store

HORIZON 2020 ENERGY STORAGE PROJECTS

Figure 8 – Horizon 2020 energy storage projects

Source: ECA, based on Commission’s data. SOURCE: ECA, BASED ON COMMISSION’S DATA. 89

electricity generated in their buildings, which sell electricity produced by themselves or participating in flexibility programs, provided that these activities do not constitute their principal commercial or professional activity. The proposed directive does not cover the case of companies whose main activity is the provision of such services.

Ownership According to the proposal for common rules for the internal market in electricity, distribution system operators are not allowed to own, develop, manage or operate energy storage facilities.

ANALYSIS

Combining different forms of energy Electricity can be stored in the form of heat, hydrogen or synthetic natural gas. These cross-sectoral energy combinations can help ensure a competitive flexibility of the EU’s electricity system and can transfer the share of energy from renewable sources originally generated in the electricity sector to other sectors, thus contributing to the ‘decarbonization’ of the latter. Until December 2018, cross-sectoral energy solutions were not regulated in EU law, and this omission made it more difficult to develop a cost-effectiveness analysis for including such combinations in energy storage projects, the EU Court’s report mentions. Double network charges constitute an obstacle to storing electricity under another form of energy, such as green hydrogen. The EU first approached green hydrogen certification in the reform of the Renewable Energy Directive, adopted in December 2018. This directive introduced guarantees of origin for green gas, which demonstrate to end customers that a certain part or amount of energy was produced from renewable sources. As guarantees of origin can be traded, the economic value of green gas could increase.

Storage for the transport sector Currently, the EU has about 160,000 public points for charging electric vehicles. According to the Commission, two million public charging points could be needed by 2025, but this target is difficult to achieve, since the legislative framework in most EU countries is incomplete and incoherent and national targets set by Member States are well below forecasts on demand by 2020. Failure to meet the 2020 target could result in insufficient coverage of the territory by thee charging infrastructure at EU level, and this could discourage consumers from buying electric vehicles. There are already several types of connectors in the EU public charging points. In particular, the EU has three fast-charging connection standards: the

Type 2 Combined Charging System (CCS) (approximately 7,000 charging points) required by the Directive and used by 18 car brands; the CHAdeMO system (approximately 7,400 charging points), used by 13 brands; and a Tesla Supercharger (approximately 3,100 charging points), only available for Tesla cars. Tesla cars can access other charging points via an adapter, but other cars cannot use the Tesla charging points. Therefore, currently an electric car user could need multiple cables, each costing hundreds of euros, in order to have access to the entire charging infrastructure, or at least most of it.

Power grid and transport For the transport and electricity supply sectors to become neutral in terms of carbon emissions, electric vehicles should be efficiently integrated into the power grid. Electric vehicle users require fast charging, which can affect the stability of the power grid. Batteries of electric vehicles connected could also take advantage of price fluctuations to reduce charging costs and provide flexibility services by supplying electricity to the grid. On a large scale, this could significantly contribute to grid flexibility. The Directive on common rules for the internal market in electricity, which will be adopted in 2019, requires Member States to prepare regulations to facilitate the connection of charging points to distribution networks. It provides for cooperation between electricity grid operators and charging points operators and calls on Member States to remove administrative barriers to the implementation of the charging infrastructure for electric vehicles.

Romania, on the map of electric mobility Romania currently has 390 electric and hybrid cars charging stations placed in 150 public and private locations, but they are randomly distributed and pose a risk of overlap or discontinuity. These issues will be solved in the coming years, 90

with the launch of extensive projects for the construction of station networks. One of these is being run this year under the NEXT-E European project. It provides for the construction of a charging network for electric vehicles in six Central and Eastern European countries: Romania, Slovakia, the Czech Republic, Slovenia, Hungary and Croatia, and the installation of ultra-fast stations is planned for 2019. The entire project will be completed by the end of 2020 and will receive a grant of EUR 18.84 million. Also, Enel X Romania, a member of Enel Group Enel X, the Enel Group’s advanced energy services division, launched at the end of last year an infrastructure development plan for electric mobility in the country. The plan aims at the installation of about 2,500 charging points in all regions of Romania, during 2019-2023, following total investments of EUR 15-20mln. The plan covers all areas of Romania, so that the positioning and installation of the charging infrastructure be adapted to increasing the degree of utilization of electric vehicles at the level of households, institutions, as well as among companies, as a result of demand for fleets. About 300 charging points will be installed in 2019. The infrastructure that will be developed in Romania is based on new, smart charging solutions of Enel X global division. These are modular, scalable equipment, which can be delivered ‘turnkey’ to individual consumers, companies and institutions. Installation of stations with powers of 22 kW (Quick), 50 kW (Fast) and over 150 kW (Ultrafast) is provided. In parallel with these projects, the Government, through the Ministry of Environment and Climate Change, launched in March the financing program for the acquisition of charging stations. The aim of the program is to stimulate the use of electric vehicles and plug-in hybrid electric vehicles, so as to install 6,000 recharging stations by 2020. Funding for the ambitious plan is provided by the Environment Fund. The maximum funding is RON 900,000/ applicant, representing up to 80% of the eligible expenses.

June 4th 2019 JW Marriott Bucharest Grand Hotel

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EVENT

Prospects for Cooperation in the Caspian Sea The Embassy of Turkmenistan in Romania, together with the Chamber of Commerce and Industry of the country, organized on April 24 a roundtable entitled ‘Prospects for Cooperation in the Caspian Sea’, dedicated to holding the first Caspian Economic Forum on August 12, 2019 in the Avaza National Tourist Zone.

he event was attended by leaders and employees of foreign diplomatic missions accredited in Bucharest, leaderships and representatives of ministries and departments of Romania, representatives of state-owned companies, the Romanian business community, foreign companies, representatives of Romanian universities, the local public and the media. In their speeches, the participants welcomed the holding of the first Caspian Economic Forum, contributing to ensuring further prosperity, stability and security in the region, and noted the need to develop economic cooperation with the countries of the region in the transport and energy sectors. High-ranking officials delivered speeches at the event. Among them were H.E. Annamammet Annayev, Ambassador of Turkmenistan to Romania; MariaMagdalena Grigore, State Secretary of the Ministry of Foreign Affairs of Romania; Sorin Vasilescu, Director of Foreign

Investment Department of the Ministry of Business Environment, Commerce and Entrepreneurship of Romania; IulianRobert Tudorache, State Secretary of the Ministry of Energy of Romania; Ionel Minea, State Secretary of the Ministry of Transport of Romania; H.E. Huseyn N. Najafov, Ambassador of the Republic of Azerbaijan to Romania; H.E. Nikoloz Nikolozishvili, Ambassador of Georgia to Romania; H.E. Morteza Aboutalebi, Ambassador of the Islamic Republic of Iran to Romania; Nurmuhammet Zhangarayev, Counsellor of the Embassy of Kazakhstan to Romania; Lazar Comanescu, Counsellor for Foreign Affairs to President of Chamber of Commerce and Industry of Romania, former Minister of Foreign Affairs of Romania. “We have strategic energy partnerships with the riparian countries of the Caspian Sea, which grow and gain substance from year after year. The Romanian Presidency of the Council of the European Union constantly analyses the consolidation of 94

connectivity and cooperation between the EU and the Caspian states,” IulianRobert Tudorache pointed out. “Romania has excellent cooperation relations with all states in the Caspian region. One of the key words of the European energy policy is diversification, of both supply sources and transmission routes, and the Caspian region is an important alternative in this respect. We are interested in a more significant presence of Romanian companies in the Caspian area. Romania, as a member of the European Union, through its geographical position and participation in strategic regional energy projects, can offer long-term opportunities for access of Caspian energy resources on the European market. We also want a more active presence in Romania of companies from the riparian states of the Caspian Sea. Therefore, I want to launch an invitation to all the countries in this region to come to invest in Romania, where there are significant investment opportunities, especially in the energy sector,” the State Secretary mentioned.

CONFERENCE DIGITALIZATION OF UTILITIES: BLOCKCHAIN AND OTHER TECHNOLOGIES 20 June 2019, 1000-1300 hrs.

University Politehnica of Bucharest, Conference Center Event organized by:

With the support of:

I Romania Motto: Power & information flow in both directions

DRAFT AGENDA MODERATORS:  Bogdan BELCIU, Partner, Advisory Services, PwC Romania  Virgil MUŞATESCU, Professor University Politehnica of Bucharest, RNC WEC Counselor KEY SPEAKER:  Einari KISEL, Regional Manager, Europe, World Energy Council MOTIVATION It is essential to understand correctly the characteristics of the current transition period and the future of the energy sector, but there are still many uncertainties, as well as progress vectors for new technologies (Internet of Things, Blockchain, Data AI, electricity storage, innovative transport, etc.). It is useful and exciting to discuss these with industry representatives to clarify how these technologies are applied for the benefit of consumers. At the same time, it is important to understand how these things will transform the three dimensions of energy trilemma and will help identify future solutions. This conference conference is ambitious to be the first in a series to discuss the implementation modalities and effects of new IT technologies in the energy sector in Romania.

OBJECTIVE To clarify the barriers that still lie ahead of new technologies and how to remove them in Romania.

TOPICS Blockchain, Other digital technologies, Future utilities, Prosumers, New needed legislation

KEY SPEAKERS & TARGET PARTICIPANTS WEC representative, Romanian Energy Ministry representatives, Regulators, PwC representative, Utilities representatives, Specialists in energy domain, IT field companies, Academic Area Experts

EXPECTED OUTCOMES Change of information, debate, concepts clarification, new technologies promotion, assessment of the impact 95

EVENT

Cooperation in the field of environmental protection, science and technology R

omania and Turkey want to boost cooperation in the environment field, but also in the field of science and technology. Romanian Trade and Entrepreneurship Minister Stefan-Radu Oprea had a meeting with Turkish Trade Minister Ruhsar Pekcan in the last part of April, with the main topics of the discussions being commercial cooperation, investment opportunities and economic cooperation. In 2018, Turkey was Romania’s main non-EU trading partner in terms of export, with a share of 12.6%, and the second in terms of import (after People’s Republic of China), with a share of 17.7%. In the structure of exports, the most important fields are: metallurgical products (EUR 407 million), mechanical equipment, machinery and appliances (EUR 351 million), motor vehicles, P/S (EUR 309 million), plastics (EUR 151 million), plant products (EUR 152 million), chemical equipment and products (EUR 117 million), timber and timber products (EUR 42 million), live animals (EUR 20 million). Instead, the structure of imports includes: base metal products (EUR 945 million), mechanical machinery and appliances (EUR 713 million), motor vehicles, P/S (EUR 511 million), plastics (EUR 309 million),

plant products (EUR 170 million), chemicals (EUR 124 million), food (EUR 179 million). The meeting between the two ministers took place in Istanbul, at Turkey’s Trade and Business Centre, on which occasion there was the first session of the Joint Economic and Trade Committee (JETCO), and a bilateral Business Forum. The forum, organized by the Foreign Economic Relations Board of Turkey (DEIK) and Romania’s Chamber of Commerce and Industry, gathered 220 companies and representatives of the Turkish business environment and 30 companies from Romania. During the event there were discussions on the opportunities for bilateral cooperation in in the institutional and business environment. The session was completed with the signing of a protocol that includes provisions in various fields such as science and technology, the environment, trade promotion, cooperation on third markets, cooperation in construction, customs, transport and SMEs. The decision to establish the JETCO mechanism was made in October 2018 during the visit of Prime Minister Viorica Dancila to Ankara, when discussions with President Recep Erdogan set a target of USD 10 billion for the annual bilateral trade. 96

“Today we opened a new mechanism of dialogue between the two governments, which will bring opportunities for businessmen in Romania. We are looking for solutions for a more balanced trade relationship, because it is in the interest of both sides in the long run. Turkish companies understand that investing in Romania does not mean moving production, but an expansion of business in Europe,” Stefan-Radu Oprea said. On December 31, 2018, the value of Romanian-Turkish trade reached EUR 5.558bn, up 9.23% compared to 2017. Export totalled EUR 1.98bn, down 5.4%, and import amounted to EUR 3.6bn, by 19.3% higher than in the previous year. The trade balance favoured Turkey, with EUR 1.622bn. On December 31, 2018, 15,433 companies with Turkish capital were registered in Romania, the value of the subscribed share capital being the equivalent of USD 728.7mln, accounting for 1.18% of total capital subscribed by foreign investors. In terms of value of the share capital, Turkey ranks 16th in the top of countries of residence of investors in companies with foreign ownership, during December 1990 - December 2018, and 3rd in the top of countries of residence in terms of the number of companies registered in Romania.

MAY’S READING

Views on a competitive energy & climate strategy O

n April 29, Business Europe published its two new strategy papers on energy and climate policies and on trade policy, proposing adjustments to current EU policies. BusinessEurope stands behind the EU ambition of net-zero greenhouse gas emissions (climate neutrality) to reach the objectives of the Paris Agreement. This ambition needs to be closely connected to Europe’s agenda on competitiveness and security of supply, in order to reinforce each pillar in this ‘triangle’. Reaching climate neutrality by around mid-century, as the IPCC Special Report and the European Commission’s 2050 climate strategy consider is necessary to limit average global temperature increases to 1.5°C, will fully depend on meeting a set of crucial framework conditions and related actions on both European and global level. CONDITION 1: Recognition of different conditions and starting points for EU member states. CONDITION 2: Development and deployment of innovative technologies to support the decarbonisation of value chains in Europe in a cost-effective way. CONDITION 3: Large-scale availability of affordable, low-carbon energy. CONDITION 4: Adaptation of consumer behaviour and public acceptance for the low-carbon energy

transition. CONDITION 5: Convergence of global climate ambitions, with G20 countries in particular working together on updating their Nationally Determined Contributions (NDCs) and developing common carbon market mechanisms to reach the Paris Agreement goals. Achieving collectively all these framework conditions and actions, without cherry picking, is absolutely essential. European businesses are committed to help reach these conditions, but it is clear that the key to success lies with societal-wide actions. Therefore, policymakers during the next EU political cycle should collaborate with business and other stakeholders to discuss the aforementioned framework conditions and related actions. This should be done in the context of the EU’s inputs on its long-term GHG emissions reduction strategy to the UNFCCC secretariat by 2020, the UNFCCC global stocktake exercise in 2023, and the EU’s energy and climate legislation reviews. European businesses are fully committed to climate change mitigation and stand behind the EU ambition of net-zero GHG emissions (climate neutrality) as prescribed in the Paris Agreement. This landmark agreement was brokered in 2015, where almost 200 countries agreed on serious efforts to limit the world’s average warming to well below 2°C compared with preindustrial levels, and making efforts to limit this 98

to 1.5°C. As stated under Article 4 of the Paris Agreement, all signatory parties aim to achieve climate neutrality in their economies by undertaking “rapid reductions in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases”. Following the adoption of the Paris Agreement, parties invited the Intergovernmental Panel on Climate Change (IPCC) to conduct a Special Report to assess the ambition needed to keep global warming to 1.5°C. The IPCC’s model pathways conclude that limiting the increase to 1.5°C would significantly reduce the risks and impacts of climate change, such as less exposure to extreme weather events, water shortages and crop yield reductions. This requires countries around the world to reach net zero CO2 emissions in their economies by around mid-century. It is an urgent call to the international community to act accordingly. In light of this and the European Commission’s ‘strategic long-term vision for a prosperous, modern, competitive and climate neutral economy’, BusinessEurope stands ready to engage in the debate to contribute to this objective. To support the transition, more and more companies throughout Europe have either made significant investments in low-emission technologies or have pledged to do so in the coming years.