Energy Industry Review - March 2019 by Energy Industry Review

COMMENT

EC Country Report Romania 2019 Increased unpredictability of the business environment

n its Country Report Romania 2019, published on February 27, the European Commission (EC) shows that the economic boom that began in Romania in 2017 eased in 2018. Real GDP growth eased from 7% in 2017 to 4.3% annualised in the first three quarters of 2018. For the year as a whole it is estimated at 4%. The slower pace of growth was due to private consumption, as the effects of tax cuts implemented in 2017 faded away and inflation weighed more heavily on real disposable income. Nonetheless, private consumption growth remained strong as a result of the tight labour market and rising wages.

Lavinia Iancu CEO and Publisher

Investment growth is likely to show a significant decrease in 2018, following contractions in the second and third quarters. According to preliminary data, inventories contributed 2.8 pps. to GDP growth in the first half of 2018. If confirmed, this build-up of inventories may explain the subdued level of private investment in 2018. Net exports contribution to GDP growth turned more negative in 2018, with both imports and exports declining. Consumption goods were the main drivers of import developments. Exports decelerated on the back of more sluggish external demand and an appreciation of the real effective exchange rate. Real GDP growth is forecast to further decrease to 3.8% in 2019 and 3.6% in 2020. The composition 3

of growth is expected to remain fairly stable, with private consumption still the main driver. The evolution of investment in 2019 will largely depend on the impact of policies introduced in December 2018 concerning the banking, energy and telecommunications sectors. The contribution of net exports is expected to remain negative but progressively less so in 2019 and 2020. The annual headline inflation, reached 4.5% in September 2018, the highest level since 2013, and averaged 4.1% in 2018 overall. The deceleration towards the end of 2018 was mainly on account of decreasing food and, above all, energy prices. Over the forecast horizon, headline inflation is forecast to decelerate further to 3.3% in 2019 and 3.1% in 2020, driven by base effects and falling oil prices. However, a further depreciation of the currency vis-Ă -vis the euro poses an upward risk to price levels. Underlying inflation remained broadly stable in 2018, growing at 2.7% but it is expected to decrease further in 2019 and 2020, in line with headline inflation. Risks to the forecast are clearly on the downside. Besides a potential negative impact on credit, the impact of the Governmentâ&#x20AC;&#x2122;s Emergency Ordinance in December (GEO 114) could have a much broader effect. For example, significantly increased unpredictability of the business environment in Romania may have a negative knock-on effect on investment decisions.

Content First European Solutions Accelerator

Opinion A latest European report shows that CEE countries have ‘High’ to ‘Extreme’ levels of energy poverty.

Germany to phase out coal only in 2038!

Opinion Germany of the 4th Merkel Government seems to make the decision to completely eliminate coal use no earlier than 2038.

Acute issues in energy

Opinion Romania’s business environment rallied in recent years around the phrase ‘stability and predictability’. It is our most frequent request, raised in meetings, conferences, letters and press releases.

Past and prospects in Romania’s petrochemical industry

Opinion The author reviews the major events affecting the petrochemical industry in Romania starting with the 1850 decade.

Focusing on production and employees’ well-being

Interview The new President of the Directorate and General Manager of PETROTELLUKOIL Aleksey Kovalenko talks about the company’s latest developments, modernization programs to meet growing demand for high-quality fuels and this year anniversary of the refinery.

Prospects of Romania’s joining the Southern Gas Corridor

Oil & Gas Romania reiterates support for the successful implementation of the Southern Gas Corridor project and the active involvement of our country by adding new infrastructure elements.

Involving in the community

Oil & Gas Energy companies in Romania have been leading for years the top of sponsorships in fields such as environment, community, health, education, culture or sports.

BRUA on the agenda of the TTE Council

Oil & Gas Romania’s Energy Minister attended a meeting with representatives of Austria, Bulgaria and Hungary on the evolution of works on BRUA gas pipeline.

Transelectrica accelerates investments to increase the safety of NPS Power

Transelectrica continues the process of retrofitting the 400/220/110/20 kV Domnesti substation, as part of the extensive process of strengthening the power transmission grid in Bucharest area.

LNG market to reach USD 19.73bn by 2026

Energy for heating/ cooling from renewable sources

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Worldwide LNG capacity has increased by 50 percent from 2015 to 2020, with several new projects currently under construction and ready to enter service.

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In 2017, renewable energy accounted for 19.5% of the total energy used for heating and cooling in the European Union, a significant increase from 10.4% in 2004. Increases in industrial sectors, services and households contributed to this growth.

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Who will feed the Balkan Gas Hub?

Oil & Gas Bulgaria is pushing forward the initiative of building the Balkan gas distribution centre on its territory. It is planned that gas will be accumulated and redistributed in Bulgaria owing to further gas connectors with adjacent countries. The project corresponds to the needs of the region identified by the High Level Group on Gas Connectivity in Central and South-Eastern Europe (CESEC).

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Revealing 2018 results

The map presents the number of environmental health hazards or causes of vulnerability for which a given NUTS 2 region was classified in the top 20 % in Europe.

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A European Environment Agency (EEA) report recently published warns that the health of Europe’s most vulnerable citizens remains disproportionately affected by these hazards, despite overall improvements in Europe’s environmental quality. The EEA report entitled ‘Unequal exposure and unequal impacts: social vulnerability to air pollution, noise and extreme temperatures in Europe’ draws attention to the close links between social and environmental problems across Europe. 5

Analysis 2018 was a difficult year for the energy sector, turmoil being felt at all levels. Record electricity prices on the energy exchange, continuation of interim managements at companies where the Romanian state is the majority shareholder, delaying the establishment of the new royalties for hydrocarbon producers and continuation of the profit reduction policy were the reasons that affected the evolutions of the sector.

ROSATOM READY TO ENSURE BULGARIA’S NPP CONSTRUCTION

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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 Digital Manager: Justin Iancu

osatom, the Russian stateowned corporation, is on the same footing with other contenders to participate in the Belene nuclear power plant (photo) renewal competition in Bulgaria and is able to complete the construction of this site in a short time. This was stated before journalists by the first deputy head of the Russian government administration Sergei Prikhodko before the visit of Russian Prime Minister Dmitry Medvedev to Sofia, TASS reported. “Now we see the constructive attitude of the current Bulgarian Government, which intends to restart the Belene nuclear power plant (NPP), and the Russian company is ready to take part in the tender procedures,” Prikhodko said. According to him, Russia owns the world’s best reactors meeting the highest safety requirements, and Rosatom is the leader in building nuclear blocks. Prikhodko also recalled that the plant’s

main technological equipment has already been produced and is located in Bulgaria. Russian specialists have done a lot of work on designing and leasing, he added. “All of this speaks in favour of Rosatom being able to ensure the completion of the plant in a timely manner and to become a partner in all NPP life cycles,” the official mentioned. He concludes that as soon as the necessary decisions are taken in Sofia, it is possible to proceed with the subject consultations, including the financial and economic model of the project and the possible forms of its support. “There are different assessments of the damage caused to the EU countries by the sanctions of Brussels against the Russian Federation and the answer from Russia, but it is obvious that we need to talk about the serious undermined mutual trust,” the first deputy head of the Russian government, quoted by RIA Novosti, underlined. 7

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NEWS

EXXONMOBIL ADDS 4.5B BOE TO RESERVES

xxonMobil announced on February 26 it added 4.5 billion oil-equivalent barrels (BOE) of proved oil and gas reserves in 2018, replacing 313 percent of the year’s production. ExxonMobil’s proved reserves totalled 24.3 billion BOE at year-end 2018. Liquids represented 64 percent of the reserves, up from 57 percent in 2017. “We continue to add high-value, attractive assets to our portfolio that have positioned the company for longterm growth,” said Darren W. Woods, ExxonMobil Chairman and Chief Executive Officer. ExxonMobil’s reserves life at current production rates is 17 years. Over the past 10 years, ExxonMobil has added proved oil and gas reserves totalling approximately 17 billion BOE, replacing 108 percent of produced volumes, including the impact of asset sales. During 2018, proved additions from unconventional plays totalled

approximately 1.2 billion BOE. Significant additions in the Permian Basin are supported by ExxonMobil’s growth plan including increased drilling activity and infrastructure development. A downward revision of approximately 800 million BOE in the Netherlands was a result of an agreement with the Dutch government to curtail production at the Groningen field. Reserves additions reflect new developments as well as revisions,

including price impacts, and extensions of existing fields resulting from drilling, studies and analysis of reservoir performance. ExxonMobil added 1.3 billion BOE to its resource base in 2018 through by-thebit exploration discoveries and strategic acquisitions, primarily in Guyana and Brazil. The resource base includes proved reserves, plus other discovered resources that are expected to be ultimately recovered.

BIGGEST LNG SUPPLIER TO EUROPE IN FEBRUARY

NG Russian deliveries to Europe achieved a record in February leading the path among other suppliers. Novatek-led Yamal LNG project delivered 19 cargoes reaching 1.41 million tons to Europe, international media informs. These volumes reached the highest since the project was launched in December 2017. That results to Russia being the top

supplier to the European LNG import terminal. Mainly, the increase in European deliveries was bound to a lower demand and prices in Asia. Therefore, there were no Yamal LNG cargoes sailing to Asia since May 2018. On the contrary, February’s US deliveries of LNG to Europe reached the lowest point since November with nine cargoes unloading at the European import 10

facilities, reaching an overall of 0.64 million tons. In the meantime, Qatar is a regular supplier with 18-19 cargoes monthly, since October with 18 arriving to Europe in February, totalling 1.33 million tons. This was five cargoes up in comparison to the same time in 2018. Concluding, other notable suppliers to Europe were Nigeria with 16, and Algeria with 18 cargoes.

FIRST INTERNATIONAL MAJOR OIL COMPANY TO INVEST IN SAUDI ARABIA’S FUEL RETAIL NETWORK

audi Aramco and Total on February 14 signed an agreement to develop a network of retail fuel service stations in Saudi Arabia. The 50:50 joint venture (JV) plans to invest around USD 1 billion over the next 6 years in the Saudi retail fuel market to provide motorists with premium fuels and retail services in Saudi Arabia. “This is a major milestone which will help establish a quality retail fuel network in the Kingdom. We look forward to working together with our long-term partner Total and draw on their extensive experience in the retail fuel market,” said Abdulaziz Al-Judaimi, Saudi Aramco’s Senior Vice President of Downstream and Chairman of the JV Board. “With this new business, we aim to enhance the quality of services, as well as create jobs and additional investment opportunities in the Kingdom. This JV aligns with Saudi Vision 2030 and supports the goals of the Infrastructure and Transportation Initiative under the Quality of Life program. This project is designed to also help optimize the total value of our hydrocarbon resources.”

“Total is proud to be the first international major oil company to invest in Saudi Arabia’s fuel retail network. This joint agreement is in line with our strategy to expand in fastgrowing markets worldwide. This new agreement is also reaffirming our longterm partnership with Saudi Aramco. Following our joint investments in SATORP refining and petrochemical complex, we are pleased to bring to the Saudi market our expertise and customer-minded approach in retail and contribute to local employment development,” Momar Nguer, President of Marketing and Services and Executive Committee Member at Total, said. The two companies have also signed an agreement with the owners of Tas’helat Marketing Company (TMC) and Sahel Transport Company (STC) to acquire TMC and STC, thereby jointly acquiring their existing network of 270 service stations and their fuel tanker fleet. Saudi Aramco and Total plan to modernize this network and build high-quality service stations at selected locations. This transaction is subject to approval of regulatory authorities. 11

NEWS

BP RETAINS ODFJELL DRILLING’S PLATFORM DRILLING SERVICES IN UK

dfjell Drilling announced that BP will continue to use its platform drilling services on the UK continental shelf. Oil giant BP has awarded Odfjell Drilling a contract for platform drilling and maintenance services on three of its platforms in the UK North Sea. The contract period is for two years, with an additional two x one year options. The current contract continued until end January 2019 followed by the commencement of the new contract. The firm contract period has an estimated value of up to USD 50 million. “This award from BP to continue our long relationship recognizes Odfjell Drilling as a quality provider of platform drilling and maintenance services with a strong focus on safe and efficient operations. We welcome and appreciate

this new contract award from BP and look forward to a further long and productive working relationship,” Ole Fredrik Maier, EVP Platform Drilling says. BP UK has extended the platform drilling services contract in the UK for a

further 4 years from December 2014, by declaring two 2-year options. Odfjell Drilling currently runs platform drilling operations for Equinor (formerly Statoil), BP, and Wintershall on a total of 16 platforms in Norway and UK. With a prime position in the North Sea, a decade of successful operation in the UK market and, at present, a key involvement in the Equinor’s Mariner project, the largest field development in the UK for a decade, Odfjell Drilling is at the forefront of the contract drilling sector. The company provides production drilling, completions, slot recoveries, P&A, workovers and maintenance activities and has special competencies within subsea, well control, HPHT, MPD, QHSE, and maintenance management.

ENERGY OPERATORS OF BULGARIA, NORTH MACEDONIA, ALBANIA SIGN MOU

he Bulgarian Electricity Sys tem Operator (ESO EAD), the Electricity Trans mission System Operator of Macedonia (MEPSO AD) and the Transmission System Operator of Albania (OST sh.a) signed on March 8 a Memorandum of Understanding (MoU) on the development of the electricity market and the strengthening of regional co-operation in the South Eastern Europe region through mutual assistance, ESO said. The Bulgarian Electricity System

Operator hosted the meeting. With the signing of the memorandum, the three parties declare their willingness to co-operate closely and contribute to the development of the electricity market by bringing together national day-ahead markets and integrating them into the functioning coupled European energy market. The initiative is expected to contribute to creating better opportunities for market participants and enhancing security of supplies in the region, ESO mentioned. The memorandum also provides for 12

the coupling in the ‘day-ahead’ market segment of the common borders between the three countries to be accompanied by an implicit distribution of interconnection capacity allocations in line with the European target model. With the signing of the document, the three electricity transmission operators state their determination to develop regional co-operation through the establishment of a Regional Security Coordination Centre set up in a South-East EU member state, the ESO statement noted.

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OPINION

Energy poverty in Romania First European Solutions Accelerator

Corina Murafa Managing Director of Ashoka Romania

lose to 5 million Ro manians live in energy poverty. This means they are unable to heat their houses and eat at the same time. About 400,000 households either have no connection or have an informal to the electricity grid. Imagine living in 2019 with no light to read a book or with the fear the police may come at any time and open up a criminal file against you for electricity theft. In the latest European report released by the Right to Energy (R2E) Coalition, Central and Eastern European countries show ‘High’ to ‘Extreme’ levels of energy poverty and are known to account for a large share of the estimated more than 50 million EU citizens who cannot afford enough energy to support their health and well-being. Across this region, economic and political changes of the early 1990s are closely linked to rising levels of energy poverty. As energy markets have been liberalised, heavily subsidised pricing has been progressively brought in line with full-cost recovery levels. In parallel, people have little choice but to live in deteriorating residential buildings that lack basic energy efficiency requirements and household incomes are substantially lower than in most parts of the EU. Is there any solution to this conundrum? The Schneider Electric Foundation and Ashoka – the largest and oldest global organisation that identifies and supports social entrepreneurs – have joined hands to identify social innovators in the region that bring bottom-up 14

solutions to this significant social and environmental problem. They are targeting solutions from Romania, Bulgaria, Hungary, Czech Republic and Poland. While recognising the importance of policy action to address this issue over the long term, Social Innovation to Tackle Energy Poverty is Solutions Accelerator which seeks to deliver solutions that help people now. In context of energy poverty, social innovation seeks to identify households that struggle to afford enough energy and understand their specific needs, and then implement actions that will improve their quality of life. The action should, directly or indirectly, help to ensure that they have better access to sufficient energy at affordable prices. In turn, reducing levels of energy poverty should bring about positive impact in society more broadly. The program welcomes approaches to energy poverty from various areas, from energy efficiency, to energy production to innovative funding, awareness raising, health and wellbeing and also cross-sector collaboration. Both mature projects and infant ideas are welcome to apply, with tailored support being offered to each category in a five months acceleration programme, supported by mentors and experts both from Schneider Electric and from Enel Romania, the local partner of the programme. A jury of experts will select three finalists in each participating country, who will benefit from learning trips in Europe, access to a wide community of policy-

OPINION

makers, investors and business leaders, an intensive six-months acceleration programme and cash prizes. The underlying principle of social innovation is to introduce new approaches to seemingly intractable problems while also changing the social institutions that created such problems in the first place. The ultimate goal is to extend and strengthen civil society, and often involves commitment to open source methods and techniques. In many cases, social innovation also aims to involve multiple stakeholders in order to further develop existing—or foster new-cross-sector collaboration. Often, it is applied to tackle social and environmental challenges to improve

things like living/working conditions, access to education, health and community development. Previous participants in the competition have put social innovation in service of energy poverty, through solutions such as an Energy Performance Contract oriented and applied in lowincome housing, particular social housing and elderly houses (Fratello Sole, Italy); a rent – lease system for efficient home appliances, applied successfully in Belgium, where a local social worker works with Bosch to offer heavily discounted rates for efficient home appliances ‘rented’ by poor families for a couple of EUR per month, with maintenance included. Just a Change, from Portugal, mo

bilizes an international network of 3,000 volunteers to refurbish poor houses, with the financial contribution of local authorities (that get a better deal from Just a Change than from regular contractors) and heavily discounted rates for construction suppliers, that thus get rid of their dead stocks; a public – private partnership, financed both by energy suppliers and the state, is able to prevent about 80% of the planned power cuts and support the poor to not face power cuts again, through mediation and counselling, in the German state of North RhineWestphalia. Can such innovations be found or created in Romania! Help us find solutions to this problem!

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OPINION

Politics and environment Germany to phase out coal only in 2038!

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

etâ&#x20AC;&#x2122;s start with a general explanation, which could be considered downright axiomatic, that electricity generation in coal-fired power plants is starting to be abandoned as a process. So, as known, according to the Paris Agreement, coal will be less and less used. Specialists in the global energy sector, as well as those in the Environmental sector, have advanced, during the various debates, three stages: 2020, 2035 and even 2050, as an end that cannot be exceeded. Germany of the 4th Merkel Government seems to make the decision to completely eliminate coal use no earlier than 2038. The decision comes as a result of recommendations formulated by Commission on Growth, Structural Change and Employment in 2016. This Commission aims to define the exit strategy for everything that represents carbon, minimizing the impact on the extractive and electricity industries. Germany has displayed, especially lately, a â&#x20AC;&#x2DC;greenâ&#x20AC;&#x2122; reputation, managing to impose on Europe, through Brussels, its own strategy in this direction. The work done has made Germany gain an important leadership position in the cleantech industry, knowing that Germany has its energy system based on coal, after making the decision in 2011 16

to quit all nuclear programs. In fact, coal has fed the German economic miracle, with the development started after the destructions caused during the Second World War. In parallel, it has developed its steel industry, basically the main driver of the German economy. In 2018, coal fed 84 power plants in Germany, providing 36% of the electricity quantity and thus covering 21% of total primary energy consumption. Of the total energy produced by Germany in 2018, coal - with 36%, ranked first anyway, 35% was obtained from renewables, 12% in nuclear power plants, 13% in gasfired power plants and 4% from other sources. The fact that renewables were advantaged by the great percentage of coal used to generate electricity should be seen and understood as a paradox, but energy produced from renewables (35%) led to a decrease in the price of the energy mix, giving the possibility to increase exports; exports which, in 2018, reached 8% of the entire production. Returning to coal, it should be reminded that coal reserves are estimated at around 86 billion tons, of which 36 billion are seen as subject to affordable extraction in terms of cost, EUR 180/ton, but higher than those on the international market. It remains that Germany continues to be at the forefront of global production of lignite,

a lower calorific fuel and, unfortunately, with high carbon content. So far, 180 thousand hectares have been sacrificed in Germany for coal mining. In this context, Germany has decided to close coal-fired power plants in successive phases by 2038, i.e. within approximately 20 years. It is more than clear that coal phase out together with the closure of nuclear power plants will penalize the German economy and industry, which already register the highest final electricity prices. This will lead to important problems in terms of fighting against climate change. Remembering, Angela Merkel, when signing the Paris Agreement, promised that in the future Germany would take care to ensure living conditions for billions of people. As a reflection on the exit from everything that is coal and nuclear, the increase in final prices does not come from the production of electricity that is made at low prices, but only because of the very high taxes practiced. The issue of using/eventually not using coal in states outside Europe is slightly more complex. China, for example, extracts coal covering 55% of the worldâ&#x20AC;&#x2122;s total. Coal consumption in India and China accounts for 62% of global consumption. Russia exports coal, also having a record production. India has programs providing for doubling its own coal consumption by 2040, i.e. around one billion tons. From a simple calculation it can be stated that the Chinese state consumes coal about half of the global consumption, abundantly fuelling the amount of carbon dioxide emissions in the atmosphere. Regarding renewable energy, there is an increase in the use of these sources in electricity generation, but insufficient compared to fossil sources consumption. Bloomberg report on investment in renewable energy shows that in 2018 it recorded a decrease at global level by 8%, of which the so-called Chinese collapse covers 32%, although 15%-20% of the installed power in solar and wind power plants in China is the largest in the world, but insufficiently used due to the power transmission grid, which does not cover the necessary capacity. It can be concluded that the fate of our Planet depends largely on China. Let us remember that in 2014, the Prime Minister of China declared war on pollution in parallel with the declaration of stepping up the fight against poverty. Anyway, China has decided to start reducing carbon dioxide emissions by 2030, but not the use of coal. After three years from the Paris Agreement, total global investments to reduce emissions stood at USD 478 billion for the 120 coal-fired power plants, investments largely supported by China, which provided funding even for Japan. The Chinese companies in the energy system have projects to support about 200 coal-fired power plants, which will be built in less developed countries. 17

OPINION

Acute issues in energy Stability and predictability

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

e need stability and predictability like we need air. How can we catch a breath? Romania’s business environment rallied in recent years around the phrase ‘stability and predictability’. It is our most frequent request, raised in meetings, conferences, letters and press releases. Like any word which gets repeated too much, it risks losing any meaning up to the point of being just a noise for both the speaker and the listener. Compounding to that risk are the inherent competing calls arising from a zero-sum paradigm. The problem, however, is real. An analysis by the colleagues from the National Council of Private Small and Medium Enterprises in Romania (CNIPMMR) published late 2018 shows that in less than a year, just the Fiscal Code saw changes to over 100 articles. Speaking generally, over the same period over 900 laws, ordinances and government decisions were issued, of which CNIPMMR estimates more than half impact the business environment. This 18

translates to more than one normative act per calendar day, without counting the hundreds and thousands of orders issued directly by ministries, agencies and authorities. And this does not take into account GEO 114, probably the most notable law of last year, introducing radical changes for a large number of complex sectors. This year does not look to be any different. We already have 38 new laws promulgated, 10 emergency ordinances issued since the start of the Parliament session and the Senate already has more than 100 new bills on its table for debate. Facing this huge volume, we need to spend energy and attention, which we don’t always have enough of, just to track and identify relevant drafts, before understanding them and, if time still allows, putting forward an opinion. In energy, the acute problem of stability and predictability can best be exemplified by supplementary taxations introduced in 2013 and by the process of liberalization, issues which cast a long shadow on two key questions any investor needs to have an answer for before committing to long

OPINION

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after that is anyone’s guess and will be subject to heated debate in the current paradigm. What we can all agree on is that three years is a minute timespan for the investments that Romania requires to fulfil its huge (and as-of-yet untapped) potential in energy. By means of extreme oversimplification, investing can be likened to a car journey. You need to decide where you are going and you need to figure out how to get there. Without stability and predictability, we never know how much fuel we have in our tanks and the road we are travelling is constantly forking, shifting, turning into dead-ends or even throwing us into incoming traffic. We need a regulatory highway network and we need to be able to collectively produce a path proposal for that network so we may all travel safely and efficiently to our destinations. In my view, we should tackle this first at sector level. If one’s stability and predictability mean a mandated negative lock-in for the other then the overall business environment call will be stifled by individual calls for pain relief. We need an overall approach. Our role as associative structures could be just that - to create a structured and open dialogue with actors from all energy segments to identify all the segment and sector legislative, regulatory and market design barriers which seem to exist in Romania’s vast legislative collections and which seem to hinder the achievement of a win-win-...-win paradigm via market forces, a paradigm crucial for everyone’s long-term success. We need to obtain a collective honest view of how we got here to see how we can improve. This is one of the topics that we intend to discuss at the upcoming Romanian International Gas Conference on the 13th of March in Bucharest, a topic to which FPPG declares its full commitment and openness and one that we hope will find resonance across all actors. Only after such discussions can we figure out, at business-environment level, how we can bring back meaning to the phrase ‘stability and predictability’.

PREDICTIVE MAINTENANCE

term investments - how much do I have to pay and how can I sell my goods? The famous 60% supplementary taxation from liberalization windfalls was introduced for a limited period, extended several times shortly (days) before its expiry, made permanent and saw multiple radical changes to the taxation base and to the taxation percentage. If discussions last year in Parliament committees are an indicator, new changes are possible. A similar story took place with the tax on natural monopolies in energy successively extended and with the added unpredictability of divergent opinions from the state over the tax’s status - is it a cost or is it a tax on profits? When adding the 2% tax from GEO 114 and recent discussions on it, everyone in energy is scrambling to answer how much we will have to pay to the state next year, in 2 years, in 5 years or in 20 years. Things get more complicated when it comes to liberalization. Originally, its implementation was agreed by all political actors in Romania and with treaty partners and the calendar was set. The calendar saw changes, then various and evershifting obligations to trade on certain markets were introduced. For gas, heated discussions took place over whether it should be allowed to kick, before it did. And GEO 114 reversed that, as well as the more advanced liberalization for power. But unlike taxation, liberalization raises different questions. For producers it’s how can I sell my goods, while further along the value chain it adds the question of how much will my cost be, turning it into a very dangerous zero-sum game. With GEO 114 and its de-liberalization measures, we have a double conundrum. Firstly, instead of ensuring protection for the most vulnerable consumers including for possible peaks caused by short term supply and demand issues and adequate cost recognition for regulated suppliers, the market price for domestic gas is completely eliminated, imposing the zero-sum paradigm throughout the value chain. Secondly, the answer is apparent in the current framework only for the next three years. What will happen

OPINION

Past and prospects in Romaniaâ&#x20AC;&#x2122;s petrochemical industry T

Professor Gheorghe Ivanus PhD. Eng. Member of the Academy of Technical Sciences of Romania

he 1850 decade marks the beginning of the industrial oil age, a stage in which Romania recorded three world premieres in 1857: recording the first oil production - 257 tons, mentioned by the prestigious magazine The Science of Petroleum published by Oxford University Press; the first oil refinery built by the Mehedinteanu brothers in Ploiesti and the first oil-lighted city Bucharest, Capital of the country. Between 1857 and 1916 oil refining capacity in Romania grew slowly but surely from 257 tons per year to about 4.6 million tons. The period we refer to has been marked by three major political events, domestic and international, that have decisively influenced Romaniaâ&#x20AC;&#x2122;s 20

development and consequently the evolution and fate of the oil industry: The Crimean War 1853-1856, Union of Principalities on 24 January 1859 and State Independence of Romania on 9 May 1877. The Crimean War led to the defeat of Russia by the coalition of Turkey, England, France and Sardinia, and the Treaty of Paris in March 1856, among others, removed the Russian protectorate over the Romanian Principalities, which remained under Turkish suzerainty but under the guarantee of European powers. The Union Act of 24 January 1859 led to the election of Alexandru Ioan Cuza as Ruler of the two Principalities of Walachia and Moldavia, and the war with Turkey led to the Proclamation of

OPINION

State Independence of 9 May 1877 and its consecration through the San Stefano and Berlin peace treaties in 1878. Between 1857 and 1916, 61 oil refineries operated in Romania, with processing capacities between less than 1,000 t/year and over 100,000 t/year. Foreign capital entered Romania since 1895, through the Austrian concern Offenheim & Singer, which owned Steaua Romana refinery in Campina, followed by the Belgian-Romanian Company with Plopeni refinery, the US company Standard Oil with the Teleajen refinery, Germany’s Disconto Gesellschaft with Vega Ploiesti, Astra Ploiesti with Dutch capital, Orion Ploiesti with British capital, Helios from Cernavoda with Hagianoff & Campeanu capital. In Transylvania, there were kerosene units as early as 1914, supplied with crude oil from Bacau area, and some oil quantities extracted from Prahova Valley, mainly from the area of oilfields in Campina, were sold to the Brasovbased oil plant owned by Iuliu Gmeiner. As the German troops were advancing rapidly towards Bucharest, the Romanian Government headed by Ion I.C. Bratianu (4 January 1914 - 10 December 1916) gave in to pressures exerted by France and England and signed the agreement to destroy the oil industry in Romania, so as not to fall into the hands of the occupants. The arson operation began on 26 November 1916 and ended on 15 December 1916, a few hours earlier than the arrival of German occupants in Ploiesti. Thus, 1,500 oil wells were plugged, 1,000 wells were set on fire, tanks with 150,000 cu m of oil were blown up; 70 refineries in Wallachia were destroyed and a huge quantity of gasoline and petrol was set on fire, about 830,000 tons. 600,000 tons of fuels were set on fire at the refineries in Ploiesti alone, and Prahova, Buzau and Dambovita counties were turned into a sea of flames, with losses estimated at 600 million golden lei. The Preliminary Peace Treaty of Bucharest, also known as the Peace of

Buftea, signed by Romania on 7 May 1918 with the German Empire and Austria-Hungary, contained immense sacrifices for Romania, including a 90-year concession to Germany of all petroleum reserves and exploitations and oil refineries. The Peace Treaty of Bucharest was ratified by the Romanian Parliament (15/28 June 1918), but was never promulgated by King Ferdinand I, and was cancelled within 6 months by Prime Minister Alexandru Marghiloman, with the defeat of the Central Powers. In the period between the two world wars (1918-1940) oil extraction and processing witnessed a rapid development, reaching 8.5 million tons per year. The efforts of Greater Romania after the end of the First World War were directed to the restoration and restart of oil extraction and refineries: Steaua Romana, Orion, Vega, Astra Romana, Petrol Block, Standard, Lumina, Saturn etc. 51 refineries were already operational in 1920, located as follows: 14 in Prahova, 15 in Bacau, 7 in Dambovita, 4 in Constanta, 3 in Buzau, 2 in Neamt and one in each of the following areas: Iasi, Ilfov, Putna, Ramnicu-Sarat, Braila and Vlasca. The development of refineries meant the introduction of tubular systems (heating furnace - column for atmospheric distillation and vacuum), thermal cracking of fuel oil, diversification of products: gasoline, oil, diesel, liquefied gases, coke, lubricating oils, paraffin and bitumen, recovery of gasoline from oil extraction fields. At the same time, the transport of crude oil and petroleum products by rail, through national underground pipelines, by river and sea was developed. On 23 August 1939, Nazi Germany and the USSR signed the MolotovRibbentrop Pact, which envisaged the division of Poland and Romania between the two great aggressor powers, and on 22 June 1941 Romania entered the war with Nazi Germany. As in the First World War, in the 21

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OPINION

Second World War, the Nazi Germany was planning to reach the oil reserves of Romania that it needed in order to reach the Russian reserves in the Caucasus. The choice made by Marshal Antonescu to join Germany to recover Bessarabia and Northern Bukovina, welcomed by the politicians of the time, proved tragic after the Romanian army crossed the Dniester River alongside the Nazi Germany. At a total crude oil extraction of Romania during 1940-1944 of 25.8 million tons, about 16 million tons of petroleum products were exported, of which: to Germany 10.5 million tons, to Italy 2.3 million tons and to the USSR 0.75 million tons; the rest of 2.45 million tons - to other countries, i.e. about 78% to the AXIS countries, at prices practiced on the global free market. The remaining petroleum products resulting from the processing of 25.8 million tons of crude oil during 5 years were used in the country for civil and military consumption. The oil industry was deeply affected during the war due to intensive exploitation of oil reserves, with negative effects on the petroleum fields, as well as by the destructions caused by the AngloAmerican air strikes in 1943-1944, resulting in material damage and many human casualties in cities and areas that had nothing to do with the front line. Left by the United Kingdom and the United States in the influence zone of the USSR, Romania was forced to accept the terms of the Armistice Convention with the Allies, in fact, with Stalin’s Russia, which came into force on 12 September 1944, days after 23 August 1944, with Romania paying 300 million dollars of war compensation, staggered over only six years, through deliveries of goods (petroleum products, cereals, wood, marine and river vessels etc.). The barbarian exploitation of oil fields in the communist era led to an accelerated increase in crude oil production from 3 million tons in 1944 to 14.7 million in 1978, after which we witnessed a steep decline until 1990

when it reached to about 6.5 million tons, and after 1990 the decline rose, reaching about 5 million tons in 2018. The current global oil reserves amount to around 142 billion tons, of which 92.5 billion are in the Middle East and the rest are scattered in other geographic areas. Holding oil reserves in Europe are only Norway, UK and Romania. Thus, the European Union has only one country with significant oil reserves, namely Romania, after the Brexit. Of the 195 known countries, only 93 have significant oil reserves and Romania ranks the 42nd, after Russia (8th), Norway (21st) and UK (30th). Of the six integrated oilpetrochemical complexes existing in 1990, none is left in Romania. The last integrated petrochemical plant Oltchim Ramnicu Valcea and Arpechim refinery were destructured in 2009 by OMV Petrom, with the shutdown of Arpechim refinery and the demolition of 13 functional petrochemical units. Only four plants ‘survived’: pyrolysis 2, low density polyethylene, high density polyethylene and ethylene oxide, units purchased, repaired and prepared for restart by Oltchim Ramnicu Valcea in 2009, but after the refinery had been closed, Oltchim’s insolvency took place, in 2012. Romania processed 35 million tons of oil in 1990, and in 2018 only 13.7 million tons, meaning a decrease in production by around 58%, while all the other former socialist countries in Eastern Europe, as well as Germany doubled or tripled the capacity of their oil refineries, although they don’t benefit from own oil production. Regarding the production of ethylene and propylene, the bricks without which the petrochemical industry cannot exist, the situation of Romania is downright catastrophic: Romania has no pyrolysis operational, while all the other former socialist countries and Germany doubled their production. Pessimists say that in 2018 world oil consumption amounted to about 80 billion barrels per day, while global 22

reserves proven or under exploitation amount to 1.7 trillion barrels, and the estimated or geological ones are about 0.9 trillion barrels. If we add proven reserves with estimated reserves, we get 2.6 trillion barrels which, if we split to the above-mentioned daily consumption, we get about 33 years, which added to 2017 lead to the oil depletion date estimated to be 2050. Optimists say the progress made in field research with supercomputers that provide three-dimensional images, the application of horizontal drilling techniques and deepwater drilling in areas such as West Africa, the Gulf of Mexico, Brazil, Canada, Greenland, Norway, Siberia and the Arctic area as well as oil recovery from sandy deposits are just as many reasons to prolong the date of oil reserves depletion beyond 2040. After 1990, but especially after 1996, the effects of deindustrialization were visible. I published numerous papers on the economic risk to which Romania would be exposed if our politicians failed to adopt a strategy based on the priority of national interest. The problem is that a country cannot grow without a medium and long-term strategy to which all governments temporarily in power contribute, resulting from consultation with representative personalities from environments such as academia, university, economics, business, research and development, civil society etc., proposing certain targets to be achieved in several electoral cycles. I personally tried and studied them patiently, with the pencil and paper sheet beside me, and I confess that some ideas of development can be extracted from the endless amount of data, figures and quotes included in the previous strategies, but possible solutions are still missing or the realities and prospects are presented in a confusing manner. We must stop denigrating our entire past, admit what was good, not repeat its mistakes and focus on the reconstruction of welfare, starting with the basic pillar - INDUSTRY.

clean energy since 1909

For more than one century we, ROMGAZ, have been pushing the boundaries and ourselves, thus building both a bright future and a legacy on sound foundations of work and Romanian ingenuity. We celebrate together the Centenary of the Great Unification and 110 years of energy written by ROMGAZ!

S.N.G.N. ROMGAZ S.A. 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. 23

www.romgaz.ro

Focusing on production and employees’ well-being The LUKOIL Group, one of the world’s largest international oil and gas companies with businesses located in over 30 countries worldwide, integrates four refineries in Russia along with three refineries in Europe. In Romania, PETROTEL-LUKOIL - located in Ploiesti, Prahova County, is one of the country’s largest oil refineries and also one of the largest in Eastern Europe. We talked to Mr. Aleksey Kovalenko – the new President of the Directorate and General Manager of PETROTEL-LUKOIL, about the company’s latest developments, modernization programs to meet growing demand for high-quality fuels and this year anniversary of the refinery.

Dear Mr. Kovalenko, you have been quite recently appointed General Manager of PETROTEL-LUKOIL - on 1 December 2018. Yet your business experience covers more than 25 years in the refining industry. What is your perspective on the status and latest developments of this long-standing facility in Ploiesti? What is the refineryâ&#x20AC;&#x2122;s market positioning on national and regional level today? PETROTEL-LUKOIL holds a top position on the domestic and regional market, with a market share of around 20%, delivers its high-quality products on the domestic and foreign markets (produces gasoline, diesel, liquefied petroleum gas, propylene, MTBE, as well as and coke and sulphur, according to European standards). It is the third largest refinery in terms of production volume, but from the point of view of its complexity, it holds a leading place among refineries. LUKOIL has a constant investment program for the PETROTEL refinery, one of the top refineries of the group, with BAT (Best Available Techniques) either American of French, which have basically recreated an old traditional refinery, leading to a refinery with maximum efficiency (today the processing depth is somewhere at 99.5%). LUKOIL Group President awarded a prize to the PETROTEL refinery in 2015, for its segment of activity and for the use of these innovative technologies. At group

level, we have even formed an elite body of specialists, with whom we manage to implement these technologies that are effective at PETROTEL, at the Russian refineries of our company. We continue to develop the PETROTEL refinery, with a special focus on environmental technologies and constantly improving what we have today, because this is the current trend, you need to keep up with the ever-changing technologies or which bring other innovations. For me personally, starting from a large-

FOR THE NEXT STAGE, BESIDES THE CURRENT REEQUIPPING AND THE TURNAROUND, THE REFINERY HAS PLANNED TO INVEST IN TWO MAJOR PROJECTS THAT WILL HAVE A POSITIVE IMPACT ON AMBIENT AIR. 26

capacity refinery in Russia (LUKOIL Nizhegorodnefteorgsintez Refinery), PETROTEL-LUKOIL is, however, a challenge for these changes: how to make it more innovative, more energy efficient, more cost effective, more competitive in the market... We want a refinery that responds at the moment to some of the highest European and, why not, international standards. Thus, during the reconstruction period (2005-2016) the total investment in technologies was about USD 600 million.

In February 2018, PETROTEL-LUKOIL announced major investments exceeding USD 30 million by 2020, in order to improve environmental performance. On 11 December 2018, you also made public the most important investment decisions of the company for the following period. Thus, by 2021, the refinery will benefit from other approximately USD 100 million, amount allocated to projects aimed at reducing operating costs and optimizing technological processes, with a positive impact on the environment. Could you please tell us more about the upgrading process to reduce emissions to zero? The zero emissions concept cannot be applied to a refinery because of the existing technological level. At the level of the European Union, the legislative framework for emissions minimization is created by implementing Best Available Technologies - BAT. These technologies are also implemented at PETROTEL-LUKOIL, and beneficial environmental results have been seen each time. The further minimization of pollutant emissions depends on the evolution of refining technologies, as well as on the applicable legislation regulating the competitive environment. The refinery is making efforts to continuously minimize emissions from technological processes, and also remain competitive on the market. The investments underway are currently focused on the Coking Plant and the Sulphur Recovery Complex. Both projects have a positive impact on the environment. Modernization of the Coking plant will reduce the emissions of volatile organic compounds to zero, which at the refinery level will mean a decrease by 2-3%. Even if at first glance it does not seem to be significant, we should mention that these emissions mean a significant reduction in the degree of olfactory discomfort of the population. Also, the new Sulphur Recovery Complex, in addition to eliminating the 27

emission potential of sulphur compounds in case of technical incidents, will also reduce fugitive emissions. By working alternately with two plants, it is much easier to carry out the maintenance activity, with a direct effect on the reduction of diffuse emissions of sulphur compounds. At this time, PETROTEL-LUKOIL is in the process of mounting two air quality monitoring stations in the area of influence, in order to develop procedures regulating the activities on the platform, so as to minimize the impact on the population, even in the most unfavourable weather conditions.

What benefits has the modernization of installations brought, both economically and by providing a cleaner environment for the community? Any technological modernization has positive effects on the environment as well. As mentioned above, investments that are underway will reduce emissions of volatile organic compounds by 2-3% and will exclude the risk of accidental emissions of sulphur compounds. The economic effects will result from the possibility of diversification of raw materials resulting after the completion of projects.

In order to produce petroleum products in line with European standards and to improve the issues related to industrial safety and energy efficiency, PETROTELLUKOIL reported a 6% reduction of greenhouse gas emissions in 2015. What is the current situation? Investments in recent years have been less focused less on energy efficiency and more on the environment, so the level of specific carbon dioxide emissions has only slightly declined (0.3-0.5% per year). In general, the reduction in greenhouse gas emissions has been correlated with the Solomon Energy Efficiency Index, which, from 98.9 in 2015, fell to 96.4 in 28

2018. This does not mean that we have reached the lower decrease limit. We still have the potential to improve energy efficiency, which will eventually also be seen in reducing carbon dioxide emissions.

What do you believe each refinery priority objectives should be? What are your main focus areas for the upcoming years? I think safety is a priority of any refinery. Industrial safety, environmental safety, human safety. Practically, they all converge from the professionalism of our teams and observing the cumulative rules for the technologies used, for security and health at work, for the environment. The PETROTEL-LUKOIL refinery, for example,

INTERVIEW

LUKOIL IS PRIMARILY A COMPANY FOCUSED NOT ONLY ON PRODUCTION BUT ALSO ON ITS EMPLOYEES AND THEIR FAMILIES. THE COMPANY RUNS ANNUAL PROFESSIONAL TRAINING PROGRAMS, EMPLOYEE ROTATION, AS WELL AS PROGRAMS FOR EMPLOYEES’ FAMILIES, COMPETITIONS AND CHANCES FOR A SAFE FUTURE FOR THEIR CHILDREN. has more than 115 years of existence, in the past it was somewhere far from the city, today the city, due to the increase in population, has changed its size and has come with its neighbourhoods very close to the refinery. For this reason, the refinery permanently makes investments in environmental technologies (such as the BELCO plant, for example, dedicated to the reduction of SOx, NOx, such as the investments we have already mentioned above); it also maintains permanent communication with the direct factors involved in what the environment means, because we are not separated from this reality, but we are part of it - we live here, we work here, so we want the same thing, that this refinery be ‘a friendly environment’ from all points of view: environment, industries, to be socially oriented towards the community with which I believe we have good relationships through everything that has been done over time. And we want a ‘home’ as clean and comfortable as possible and, frankly speaking, we are part of this community, so we cannot afford to ‘play’ with safety and with all that can result from here, due to a lack of focus on this segment.

What are the strategic directions of the refinery development in the next period of time? Although the refinery fulfils all the conditions imposed by the BREFs and Decision 2013/84/EU establishing Best Available Techniques (BAT) conclusions under Directive 2010/75/EU of the European Parliament, investment in technology, and, in particular, environmental investments will continue and we will make them public every time. For the next stage, besides the current re-equipping, besides the turnaround this spring, the refinery has planned to invest in two major projects that will have a positive impact on ambient air: • Upgrading the Coking plant - Stage I, a project that will reduce process emissions to zero (deadline: 2020); • Construction of a new sulphur recovery complex, which will virtually reduce to zero accidental emissions of sulphur oxides in the event of technical incidents or failure (deadline: Q1/2020). As a future action, everything that is being invested and all that is done is aimed at industrial and environmental safety, the reliability and efficiency of processes, and social responsibility is what we want to maintain not necessarily in terms of numbers and statistics, but as real involvement in community life and respecting its needs. We will soon implement grants, 29

an improvement in the sponsorship program we have previously used to build playgrounds and to support education. Until now, this involvement has been materialized through financial support for some colleges and the Petroleum-Gas University of Ploiesti, funding competitions or talented young people without great financial possibilities, environmental programs - ecological education: ‘Eco-Attitude’, ‘Think green, think clean’, afforestation of areas for which perhaps there was no interest at some point. We are considering grants that will bring opportunities for the local and national community.

This year PETROTEL-LUKOIL marks 115 years of existence. What would be your message for the employees and business partners on the occasion of this anniversary? 115 years means an entire history. First of all, the employees of PETROTEL-LUKOIL refinery should feel proud to be part of this history book; moreover, today we have one of the most modern refineries, its Nelson index is 10, which is justified not only through the high volume of investments, but first of all through the effort of the employee teams, which keep the refinery in the optimal parameters. I would like, first of all, to thank the employees and partners of the refinery for continuously supporting the refinery’s goals, for trusting in its development prospects, because technology without people is worthless. I want to assure them of the company’s openness and support for all aspects - professional or personal, of their lives. LUKOIL is primarily a company focused not only on production but also on its employees and their families. The company runs annual professional training programs, employee rotation, as well as programs for employees’ families, competitions and chances for a safe future for their children. We want people to come to the refinery not from the need to have an income, but also out of pleasure, this being like a second home, as it is for many of us.

OIL & GAS

Prospects of Romania’s joining the Southern Gas Corridor The 5th Ministerial Meeting of the Southern Gas Corridor (SGC) Advisory Council was held on 20 February, in Baku, the Republic of Azerbaijan. The Romanian delegation, at the second participation to this important event, is led by Iulian-Robert Tudorache, Secretary of State within the Ministry of Energy. The event marks the significant progress made by this important infrastructure project for Europe’s energy security, since the last meeting, organized in February 2018. In his speech, Secretary of State Tudorache highlighted Romania’s support for the successful implementation of the Southern Gas Corridor project and the active involvement of our country by adding new infrastructure elements, such as the GiurgiuRuse Interconnector and the BRUA gas pipeline, which can be an efficient and secure transmission link, in the future expansion stages of the Southern Corridor to the Balkans and Central Europe.

OIL & GAS

he event brought together European Commissio ner for Budget and Hu man Resources Gun ther Oettinger, Turkish Minister of Energy and Natural Resources Fatih Donmez, UK Prime Minister’s Trade Envoy to Azerbaijan Baroness Emma Nicholson, US Deputy Assistant Secretary of State in the Bureau of energy resources Sandra Oudkirk and others. Large delegations of a number of companies, including BP, TANAP, TAP, Snam, Fluxys, LNG Croatia, Plinarco, ICGB AD, Romgaz and Transgaz attended the Advisory Council meeting. During the meeting, the prospects of Romania’s joining the Southern Gas Corridor were discussed. The delegation of the Romanian Mi nistry of Energy, representatives of the Romanian companies Transgaz and Romgaz visited Azerbaijan’s Energy Ministry. Iulian-Robert Tudorache mentioned that he is participating in the ministerial meeting as part of the Southern Gas Corridor Advisory Council for the second time, and highlighted his country’s support for this project. He also added that the Interconnector Bulgaria-Romania and the BRUA project will play an important role in the expansion of the Southern Gas Corridor to Central Asia in the future. Romania is interested in becoming part of the Southern Gas Corridor in the future through these projects. According to AzerNews Energy Minister of Azerbaijan Parviz Shahbazov highly appreciated this position of Romania and spoke about the prospects for expanding the Southern Gas Corridor by increasing its capacity in the future. The minister said that the project being implemented by Azerbaijan will allow diversifying the main export directions for producing and importing countries - for consumers in the future. During the conversation, confidence was expressed that the strategic partnership relations between Azerbaijan and Romania will serve the interests of both countries in the energy sector.

At the same meeting, the sides also discussed the possibility of cooperation of the Romanian energy companies with Azerbaijan’s state oil company SOCAR. Azerbaijan’s state oil company SOCAR has played an important role in the Romanian distribution market since 2011 through its subsidiary SOCAR Petroleum. The company has 40 filling stations in 18 Romanian regions. Romgaz and Transgaz, two of the most important Romanian companies in the natural gas sector, have long-standing cooperation relationships with SOCAR. Recently, SOCAR has expressed its interest in cooperation with Romgaz in exploration and production of gas in the Black Sea, while Romanian company voiced its intention to cooperate with SOCAR both on the onshore area of Azerbaijan and on the offshore area in the Caspian Sea as well. Romania and Azerbaijan also cooperate in the implementation of AGRI (Azerbaijan-Georgia-Romania Intercon nector) energy project which is aimed at diversifying the energy supply sources of the European Union and involves the transport of Azerbaijani natural gas to Romania and Central Europe. AGRI project envisages transportation of Azerbaijani gas to the Black Sea coast of Georgia via gas pipelines. Azerbaijani gas delivered to Georgia’s Black Sea coast will be liquefied at a special terminal and following this, it will be delivered in tankers to a terminal at the Romanian port of Constanta. AGRI highlights the important contribution that liquefied natural gas (LNG) could bring to the EU’s energy security in line with the objectives of the European Commission Strategy for LNG and natural gas deposits. Furthermore, AGRI may be considered as additional supply route for the BRUA interconnector (which is expected to connect the natural gas transmission systems between Bulgaria, Romania, Hungary and Austria) currently under execution. The countries, engaged in the BRUA project may take over some of the gas volumes that could be available 31

through the Southern Corridor’s infra structure. Earlier, Transgaz and SOCAR signed a memorandum of understanding (MoU) that envisages strengthening cooperation in the gas transportation, studying opportunities to use Romania’s potential in the gas transit and distribution at the expense of gas supplies from Azerbaijan, the Caspian region and other promising directions, jointly studying the possibilities of cooperation in the supply and trading of natural gas and LNG in the Romanian market on the basis of longterm contracts and spot trading as part of the AGRI project. Once the link between the Southern Gas Corridor and the Vertical Gas Corridor will be physically established, Caspian gas volumes could be delivered to the Romanian, to the neighbouring and to the Central European gas markets. Romania has been the first EU Member State to establish a Strategic Partnership with Azerbaijan in 2009 that provided both countries with a solid framework to develop the bilateral contacts and cooperation in various fields.

ROMGAZ supports completion of the Southern Corridor as a first step of national strategic intentions Romgaz restated its support for the development of the Southern Gas Corridor, while considering to continue the transmission infrastructure by finalising the Bulgarian-Romanian Interconnector and BRUA project, in the context of developing the relationship with Azerbaijan and the potential partnership with SOCAR. Romgaz CEO, Adrian Volintiru signed the ‘Letter of Intent’ addressed to SGC Advisory Council, chaired by the President of Azerbaijan, Ilham Aliyev. Romgaz expressed in this formal letter the interest to analyse the opportunity to use the Southern Corridor infrastructure to secure natural gas supply safety and the possibility to diversify the gas sources both for our country and for neighbouring countries as well.

OIL & GAS

Iasi-Ungheni-Chisinau interconnection project Phase II has started The official inauguration of starting the works on the Iasi-Ungheni-Chisinau interconnection project Phase II, an objective declared of national interest in the Republic of Moldova, took place in Chisinau on 18 February. This is also a strategic project for Romania, for SNTGN Transgaz SA, representing the concrete proof of commitment through which our country supports the Republic of Moldova in achieving the objective of consolidation of energy security and integration into the energy market of the European Union.

he event enjoyed the presence of Ana Birchall, Deputy Prime Minister of the Romanian Government, and that of Pavel Filip, Prime Minister of the Government of the Republic of Moldova. Also attending the event were Chiril Gaburici, Minister of Economy and Infrastructure in the Republic of Moldova, Ion Sterian, General Director of Transgaz, the administrators of EUROTRANSGAZ SRL and Vestmoldtransgaz SRL, the Chairman of the Board of Directors of the constructor ACI CLUJ, representatives of the executive management of Transgaz and other officials from the Republic of Moldova. “Transgaz takes very seriously its role and commitments as regional player in the

energy sector. We have the responsibility of commitments that Romania and our company have assumed. Building this gas pipeline contributes to the modernization and development of the existing energy infrastructure, increasing the efficiency of the energy sector of the Republic of Moldova and ensuring a mechanism of sustainable development of the national economy and connection with the European energy market. The project represents a geopolitical gain, aiming to reduce the energy dependence of the Republic of Moldova through the alternative route it proposes, as well as a contribution to the general strengthening of the country’s pro-European path. To secure financing for the project, we signed in January, in Luxembourg, with the European Investment Bank, the financing 32

agreement worth EUR 38 million for Ungheni-Chisinau interconnection,” the General Director of Transgaz highlighted. A month ago, on 14 January, in the presence of Ion Sterian and the Administrators of EUROTRANSGAZ from the Republic of Moldova, the Administrator of Vestmoldtransgaz signed the work procurement contract with the bidder declared winner, the association consisting of ACI CLUJ (Romania), IMSAT SERVICE (Romania) and ABCONY SERV (Romania). The event marked the start of works for the investment objective regarding the construction of Ungheni-Chisinau gas pipeline and the implementation of measures for the operation and maintenance of the Iasi-UngheniChisinau gas transmission pipeline.

OIL & GAS

A major objective for the Moldovan energy sector The Ungheni-Chisinau project in volves the construction of a new gas transmission pipeline with a length of 120km, three gas delivery stations (two in Chisinau and one in Ungheni, Semeni locality) and equipping the steering and dispatching centre in Ghidighici. The gas transmission network on UngheniChisinau route represents the second stage of the Iasi-Ungheni-Chisinău interconnection project. The first part of the pipeline, corres ponding to Iasi-Ungheni interconnector, was commissioned in 2014 and about 1.5 billion cubic meters of gas can be transported through it annually. The extension of the interconnector from

Ungheni to Chisinau is a major objective for the Moldovan energy sector, as its connection to the gas market in Romania and the European one represents the first step in reducing the energy dependence, by diversifying the sources and routes of energy supply and implicitly strengthening the country’s energy security. Diversification of supply sources is one of the commitments undertaken by the Republic of Moldova with its accession to the Energy Community (in October 2010), assuming the effective transposition of European legislation in the field of energy, especially natural gas, for integration into the European energy market. Efforts to diversify gas supply sources have increased once the Republic

of Moldova pledged to transpose the Third Energy Package, which provides for non-discriminatory third-party access to gas transmission networks. The project ‘Developments of the National Gas Transmission System in the North-East of Romania’, concluded in November 2018 in partnership with the Ministry of European Funds, worth EUR 152 million (of which EUR 46 million representing European funds within the Large Infrastructure Operational Programme), involves developments of the NTS in order to improve gas supply to this region, as well as increasing the transmission capacity in the perspective offered by the new interconnection pipeline between Romania and the Republic of Moldova.

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Involving in the community EUR 10mn record sponsorship Energy companies in Romania have been leading for years the top of sponsorships in fields such as environment, community, health, education, culture or sports. This approach joins initiatives that contribute to sustainable development for the benefit of present and future generations, through partnerships supporting concrete projects.

first Pediatric Oncology and Radiotherapy Hospital in Romania. Of the EUR 10mn, EUR 5mn will be used to purchase the medical equipment necessary to diagnose and treat childhood cancer: a radiotherapy device, a CT (computer-tomography) machine and equipment for the operating area as well as training of the medical and auxiliary staff of the hospital. The other EUR 5mn will be used for electrical and sanitary installations and interior design works. Last year, in OMV and Petrom filling stations all over the country, more than EUR 50,000 was collected via donations from customers. The campaign will continue over the next two years so that anyone who walks into OMV and Petrom filling stations can contribute to the finalization of the hospital. “We, as OMV Petrom, are very proud to support the

MV Petrom announced in February a grant of EUR 100 million for building the first hospital of Pediatric Oncology and Radiotherapy in Romania, a project of the ‘Daruieste Viata’ Association; just a month before, Romgaz allocated RON 1 million, as financial support, to Sibiu County Clinical Emergency Hospital for endowment with performing medical equipment and for supporting medical activity. And the examples could continue, these being the most recent.

First specialized Pediatric Oncology Hospital in Romania OMV Petrom grants EUR 10mn sponsorship to the ‘Daruieste Viata’ Association project for the construction of the 34

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for the Pediatric Oncology Hospital and it helps us finalize the project within the planned schedule,” Carmen Uscatu, cofounder ‘Daruieste Viata’ Association, mentioned. “OMV Petrom’s decision is a real chance for children with cancer in Romania and their families and a confirmation of the investment made by each of our donors and our sponsors. It is a proof of solidarity and of how strong we can all be if we stand together, however big and small. We wish other companies or private donors follow the example given by OMV Petrom, just like OMV Petrom followed the example of hundreds of thousands of Romanians and many other companies,” cofounder Oana Gheorghiu, ‘Daruieste Viata’ Association, added. The Oncology and Pediatric Radiotherapy Hospital will be the first hospital specialized in pediatric oncology in Romania and will function within Marie Curie Hospital in Bucharest. Patients will have access to all the pediatric specialties required for the holistic treatment of children with cancer (surgery, orthopedics, cardiology, neurosurgery, ENT, etc.). The new hospital will be able to treat more than 300 children with cancer each year, as well as to perform over 9,600 oncological and nononcological surgeries. ‘Daruieste Viata’ Association started the hospital construction project in 2017, relying on private funds (private and corporate donations). The construction works began in 2018. The project will continue with the utilities, interior design works as well as the acquisition of special equipment and staff training. The hospital will have 6 floors and a total area of 12,000 square meters with a new operating area with 7 surgery rooms and dedicated departments: surgery, neurosurgery, oncology, hemato-oncology and intensive care. ‘Daruieste Viata’ Association aims to inaugurate the hospital in 2020. It will function as a public hospital within the Marie Curie Hospital, but at Western Europe high standards in terms of administrative and medical procedures. It is estimated that in Romania, 5,000 children are suffering from cancer and that each year 500 other children are diagnosed with this disease. More than half of them are treated in Bucharest, in the two existing centres (Marie Curie and IOB), which cannot fully meet the needs. Over the past ten years, OMV Petrom has taken an important role in supporting health initiatives. In 2011, through OMV Petrom’s social responsibility project ‘Access to life’, OMV Petrom supported the expansion of the emergency telemedicine network in 16 hospitals in the country, with the coordination centre at the Floreasca Emergency Hospital in Bucharest, providing access for 9.5 million Romanians to emergency medical services. The same project has contributed to the training of Romanian doctors through specialized courses in emergency medicine at European level. In 2012, the company provided the SMURD Foundation with 3 fully-equipped ambulances. Between 2014 and 2016, OMV Petrom in partnership with ExxonMobil, supported the design and construction of the

“We, as OMV Petrom, are very proud to support the construction of the first pediatric oncology hospital in Romania. Every child deserves a chance in life and I was truly moved to see so many Romanians supporting the hospital cause with individual donations.” Christina Verchere, CEO OMV Petrom

construction of the first pediatric oncology hospital in Romania. Every child deserves a chance in life and I was truly moved to see so many Romanians supporting the hospital cause with individual donations. There are causes that may seem impossible to accomplish and it takes a lot of courage to get started. However, when they are important to a great number of people, they can come true,” said Christina Verchere, CEO OMV Petrom. “We started this project from zero, but with confidence that the Romanians are able to take lives into their own hands and build a hospital for children suffering from cancer. We’ve built this project brick by brick, thanks to the extraordinary support of people who sent SMS’s and donated online, as well as to the companies that sponsored us. Every contribution, no matter how small, has helped us move forward and reach this moment in which we can get this massive support from OMV Petrom. It is certainly the largest sponsorship received by ‘Daruieste Viata’ 35

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SMURD Aeromedical Base in Constanta, the most modern unit of its kind in the country. The base has increased the capacity and efficiency of emergency operations of the SMURD Constanta in the entire South-East region of Romania. In 2017, OMV Petrom supported the SMURD Foundation by acquiring the first neonatal transport incubator for the Emergency Unit of SMURD Constanta, suitable for both helicopter transport and SMURD ambulances.

Fitting the County Hospital of Sibiu Romgaz allocated the amount of RON 1mn as financial support to County Hospital of Sibiu for fitting with equipment of new generation and for supporting medical activities. The amount was included in two sponsorship contracts, each contract in amount of RON 500,000, representing the modernization with performant equipment of intensive care and Cardiology II units. Among the specialized equipment can be mentioned a multidisciplinary, stationary, performant ultrasound designed to carry out performant cardiological evaluations of vascular system, abdominal and other soft parts. A part of the allocated amount will be used to increase the possibilities of research laboratory in the field of cardiac and vascular pathology. More specifically, it is about cases of patients suffering from acute myocardial infarction or peripheral vascular emergences that require cardiac stent implant. “Romgaz is one of the significant sponsors of the activity of SCJU Sibiu, a reliable partner who is always willing to help. Thank you for the generous sponsorship that increases the quality of the hospital equipment and brings hope especially for patients receiving performant medical services within some departments and services with a high addressability and a complex pathology, for which permanent investigations are required. We appreciate Romgaz’s effort to continuously respond to immediate needs of the community by supporting the hospital of Sibiu over the last years and we hope that this relationship will continue in the future”, Cornel Benchea, the manager of SCJU Sibiu declared. This is the third straight year when Romgaz offers sponsorships to SCJU Sibiu, in 2007 the amount of RON 500,000 was received to procure performant equipment for Ophthalmology Unit and for CVASIC activity was received the amount of RON 300,000 and in 2016 the hospital received a sponsorship in the amount of RON 980,000 for fitting the hospital with high performant medical equipment, procuring 4 modern ultrasounds and a digital radiology performant system. “This kind of actions undertaken by the company aim to increase the community’s life quality. I strongly believe that a profitable company can sustainable develop itself only by involving and supporting the welfare of the community where it performs its activity and learn the communities’ values. One of the most efficient ways of sharing the company’s view with the

“I strongly believe that a profitable company can sustainable develop itself only by involving and supporting the welfare of the community where it performs its activity and learn the communities’ values. One of the most efficient ways of sharing the company’s view with the members of the community is to share with it their common success.” Adrian Volintiru, CEO Romgaz

members of the community is to share with it their common success. This is the reason why the company decided to support the medical system, along with education, culture and sport. This is a way by which Romgaz assumes its social responsibility for the community where it activates and its members, Romgaz CEO Adrian Volintiru stated. 36

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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From left to right: Mr Dominique RISTORI, Director-General of DG Energy of the European Commission; Mr Anton ANTON, Romanian Minister for Energy | Copyright: European Union

BRUA gas pipeline evolution on the agenda of the TTE Council On 4 March, Romaniaâ&#x20AC;&#x2122;s Energy Minister Anton Anton attended, in Brussels, a meeting with representatives of Austria, Bulgaria and Hungary on the evolution of works on BRUA gas pipeline (Bulgaria-Romania-Hungary-Austria). The event was also attended, at the invitation of Minister Anton, by Dominique Ristori, Director General of DG Energy. 38

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he meeting took place at the initiative of Minister Anton, in the context of holding the first formal TTE Council - Transport, Telecommunications and Energy, within the Romanian Presidency of the Council of the European Union. Within this event, Minister Anton reiterated Romania’s firm commitment to the development of this energy corridor extremely important for the energy security of Romania and, thus, of Central and South-Eastern Europe. “BRUA is an extremely important project for South-Eastern Europe, a region where gas transmission infrastructure is in full development. This gas pipeline will allow interconnection to the gas systems of neighbouring countries and thus will create increased energy security in the region. Through BRUA we actually create a true regional energy market, which will also contribute to strengthening the single European market. I believe that the fact that BRUA benefits from the declared support of the European Commission should bring us, the four states involved in the development of this project, to a common pace in completing the gas pipeline, so important for the future of the European energy sector. Romania is unquestionably dedicated to implementing this project. On Romania’s territory works are on schedule, some being completed even earlier than estimated,” Energy Minister Anton Anton said. The TTE Council works towards fulfilling EU objectives in the areas of transport, telecommunications and energy: to establish modern, competitive and efficient markets and infrastructure, and to create trans-European transport, communications and energy networks.

Priorities of the Transport, Telecommunications and Energy Council under the Romanian presidency The Romanian presidency of the Council of the European Union started

on 1 January 2019 and will conclude on 30 June 2019. Transport: The presidency will promote connectivity as a fundamental element for the integration of European markets. As such, it will pursue the Connecting Europe Facility and the so-called mobility packages which group initiatives such as social conditions for drivers, rules for combined transport of goods, and clean and energy efficient road transport. Telecommunications: Digitalisation is also a top priority. In this field, the Romanian presidency will focus on reducing the digital gap between EU regions, economic sectors and citizens. It plans to do so by achieving progress on important proposals such as the Digital Europe programme. The presidency will also start discussions on the post-2020 digital single market strategy. In addition, the Romanian presidency will look to advance key reforms on cybersecurity and ePrivacy. Energy: The presidency will continue the EU’s efforts to implement the Energy union, support the development of the future energy system and strengthen nuclear security. The main objective of the presidency is to establish a safe European energy market, which provides sustainable and affordable energy for European consumers and generates reliable market signals to investors. To achieve this, the Romanian presidency will seek to advance on several legislative files. These include: validation of the political deal with the European Parliament on the market design files; a general approach on the tyres labelling regulation; progress in the negotiations on the natural gas directive and the connecting Europe facility. The Presidency also plans to adopt Council conclusions in June on the future of the energy system in the Energy Union. They will focus on ways of ensuring energy transition and reaching climate objectives. 39

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Atlas Copco delivers 100% oil-free high-pressure air for surface preparation and IGS Europe HVTS Cladding application Smooth HVTS (High Velocity Thermal Spray) Cladding application process of a PC Boiler Czech-based IGS Europe is a client of Atlas Copco Rental in many countries. Many Pulverized Coal Boilers in Power Plants need a highly reliable erosion and corrosion protection system. IGS Europe provides on-site protective cladding applications to arrest erosion during regular outages of boilers. In a first stage, IGS would grit blast the part of the furnace to make sure the surface is properly prepared for the next stage during which it will be clad with high alloy materials. The company frequently rents oil-free air compressors and dryers for a period of 1 to 30 days to execute short-term projects in Europe.

IGS is a provider of innovative surface protection solutions and delivers the most state-of-the-art High Velocity Thermal Spray protective cladding. Grit blasting is a very popular method to remove salts and other impurities to clean a surface before the HVTS cladding process. During a grit blasting process, you blow a mixture of high-pressure air and an abrasive medium onto the surface that needs cleaning with a blast nozzle and ‘shots.’ These shots can be small steel balls, silicon carbide granules, sand, soda, CO2, … depending on the material to be removed, production rate and desired finish. For example, the Mexican colleagues of Atlas Copco Rental have rented out an oil-free air compressor for iceblasting to carefully restore an iconic monument. For the grit blasting of the boiler’s furnace hoppers, alumina grit and oil-free air are used to remove scale and rust from the surface. Two important success factors ensured an optimal result of this process: 1. Correct air pressure and flow are the most important factor in abrasive blasting. 2. Oil-free air is vital because of its purity. It guarantees seamless HVTS process afterwards as there is no chance that oil (even if it is a limited amount of oil) will contaminate the surface and IGS proprietary corrosion resistant alloy. This could affect the bonding of the cladding on the surface which can result in inferior long term performance.

“Atlas Copco Rental provides us with high-quality air like a great and integral part of our HVTS application process. The service technicians are available 24/7 and supported the installation and decommissioning of the installation to the fullest,” Ondřej Jašek, Project Manager at IGS Europe, says. IGS Europe is a subsidiary of Integrated Global Services, IGS. IGS has 35+ years of history delivering on-site protection for PC, Biomass and WtE boilers, Oil and Gas pressurized vessels, emissivity coatings etc. Find more at integratedglobal.com

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Improving the functioning of the EU gas market New rules to ensure that pipelines with third countries comply with EU regulation have been provisionally agreed by negotiators from the European Parliament, the Council and the European Commission on February 12.

n integrated gas market is a cornerstone of the EU’s Energy Union and a key priority of the Juncker Commission. Following the announcement by President Juncker in his 2017 State of the European Union speech, the Commission proposed common rules for gas pipelines entering the European gas market, on 8 November 2017. These rules aim at increasing security of supply and builds upon the solidarity dimension of the Energy Union. The aim of the proposal is to improve the existing Gas Directive (2009/73/ EC) and ensure that the principles of EU energy legislation (third-party access, tariff regulation, ownership unbundling and transparency) apply to all gas pipelines to and from third countries. Exceptions are only possible under strict procedures in which the Commission plays a decisive role. “Today’s agreement meets this aim. It ensures that the provisions of

the Gas Directive are applied on EU territory (land and sea) and provides for effective oversight to ensure the application of EU internal market rules by the national authorities supervised by the Commission. It also enhances transparency and cooperation among competent national authorities. This is a major step towards a well-functioning, transparent and competitive EU internal gas market where all suppliers are acting under the same EU rules,” the press release reads. “This is a major step forward in the creation of a truly integrated internal gas market which is based on solidarity and trust with full involvement of the European Commission. Today, Europe is closing a loophole in the EU legal framework. The new rules ensure that EU law will be applied to pipelines bringing gas to Europe and that everyone interested in selling gas to Europe must respect European energy law. Together with the previously agreed rules on security of gas supply and 42

Intergovernmental Agreements, Europe has given itself a strong set of tools to deal effectively and collectively with our external energy suppliers,” Commissioner for Climate Action and Energy Arias Cañete mentioned. The new rules will increase competition between gas suppliers and increase energy security throughout the EU. Ensuring that all major gas pipelines to and from third countries are operated efficiently under a regime of transparent regulatory oversight will diminish conflicts of interests between infrastructure operators and gas suppliers, guarantee non-discriminatory tariff setting and provide legal certainty for future investment decisions. The Romanian Presidency of the Council of the European Union has advanced in a record time with the revision of the Gas Directive, reaching a provisional political agreement with the European Parliament on February 12. The Romanian Presidency of the

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Council of the EU had a crucial role in these negotiations, which bring guarantees that the rules of the Energy Union will also apply to gas pipelines to and from third states. “I am glad that the Romanian Presidency has reached such an important agreement, compensating for an EU legislative gap in the energy field and ensuring that the rules regulating the internal gas market in the EU are applied uniformly in the Union,” Anton Anton, Romanian Energy Minister said. Coordination of this strategic dossier for the European Union was carried out by Prime Minister Viorica Dancila, who pointed out that this agreement is meant to ensure that the rules governing the internal gas market of the EU are applied uniformly in the EU.

This dossier has been in discussions at European level for over a year. The EU Council, under the Romanian Presidency of the Council of the European Union, reached a common position on 8 February 2019.

Eurogas recognises pragmatism of Gas Directive compromise, but calls for clarity According to a press release issued by the association, Eurogas identifies the compromise text, as agreed by the European Parliament and the Council of the European Union on 12 February, as a pragmatic solution to the negotiations on the Gas Directive Amendment. “Given the agreement of the Member States on the compromise text, Eurogas is pleased that after long

negotiations, all legislators supported this as a practical outcome to extremely complex discussions. Clarity is needed on the application of laws in the case of potential conflict between Member State and the European Union laws, so as to provide investor certainty for all infrastructure projects covered by the amended Directive. It is also important that existing investment decisions are also not negatively impacted by the new amendment and that the principles of the Energy Charter Treaty are upheld,” the document reads. Eurogas is an association representing the European gas wholesale, retail and distribution sectors towards the EU institutions. Founded in 1990, Eurogas currently comprises 44 companies and associations from 21 countries.

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Deloitte Romania analysis GEO 114/2018 negative effects on the natural gas market The Romanian Petroleum Exploration and Production Companies Association (ROPEPCA) brought to public opinion the results of a study analysing the impact of Government Emergency Ordinance no. 114/2018 (GEO 114/2018) on the natural gas sector in Romania.

he study, made by Deloitte Romania, reveals that GEO 114/2018 will have negative effects on the whole economy. These negative effects include the decrease in contributions to the state budget, the disturbance of competition on the natural gas market, the failure protect domestic consumers, as well as the risk of launching certain investigations on a potential state aid for industrial consumer. “Not long ago, ROPEPCA drew the public’s attention to the effects that our members foresee as a result of GEO 114/2018. The Deloitte study analyses the impact of the normative act on the basis of available public data, and confirms the negative consequences for the Romanian economy and for consumers. We want this

instrument to contribute to correct public information on the effects of this Ordinance and hope to facilitate the understanding of the need to revise the measures imposed on the natural gas market through GEO 114/2018,” Saniya Melnicenco, President of ROPEPCA, affirms. The study has confirmed the estimation on the direct negative impact on the state budget of more than 2.2 bn. RON every year, which ROPEPCA has pointed out in its last press release on this topic. According to ROPEPCA, in the same time, the competitive gas market in Romania will eventually cease to exist between April 2019 and March 2022. The obligation to sell natural gas at a regulated price will make competition in gas production decrease, as small independent producers will not be able 44

to finance their operations at a capped price. The Ordinance will affect mostly the small and medium-sized producers in the gas sector, ROPEPCA’s representatives warn. As a result, their investment in exploration and exploitation will fall by 30-50 percent. The Deloitte study also shows that although domestic consumers’ interest was announced to be at the heart of these regulatory measures, their multiple impact on the final price, through the introduction of the 2% turnover tax charged on tariffs, or through the recovery of past suppliers’ losses to consumers, can result in a higher retail price, contrary to the purpose of GEO 114/2018. In order to protect the interest of consumers, Deloitte experts confirm, Romania should carefully evaluate the

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appropriate implementation of the vulnerable consumer concept, provide financial support directly to those who need it, and avoid subsidizing households that exceed the average income at regional/ national level. Moreover, Romanian industrial consumers will benefit from domestic gas prices arbitrarily set at a capped value far below market prices, which will lead to allegations by the European Community regarding the receipt of state aid. The Deloitte analysis was based on data from public sources and on Deloitte’s resources and expertise. With regard to domestic production data, Deloitte has used the National Commission for Strategy and Prognosis data, which indicates an increase in domestic production in the coming years. Therefore, the analysis

shows a more optimistic scenario than the market operators expect. According to an internal analysis of ROPEPCA, due to the reduction of investment projects following GEO 114/2018, as well as to stopping the production from marginal deposits that will not be profitable by applying the new regulated price, domestic production will decrease. Currently, in Romania there are over 400 oil fields and more than 13,000 active wells, which, through the efforts made by the companies in the sector, ensure more than 90% of Romania’s natural gas consumption. ROPEPCA’s representatives underlined once again: “To maintain a constant level of oil and gas production it requires significant investment and a stable fiscal framework, predictable and friendly.” Ever since its incorporation in 2012,

ROPEPCA aims to promote the onshore O&G industry, supporting the development, the diversifying and the competitiveness in the industry. The Association gathers 15 of the most active companies in the onshore industry: ADX Energy, Amromco, Expert Petroleum, Fora Oil & Gas, Hunt Oil, Mazarine Energy, NIS Petrol, Oilfield Exploration Business Solutions, OMV Petrom, Panfora Oil and Gas (MOL Group), Sand Hill, Stratum Energy, Serinus Energy, Vermilion Energy, Zeta Petroleum. Currently ROPEPCA’s members hold a vast majority of the onshore concession blocks in Romania, which for the period 2014-2017 represented a cumulative investment of more than 16.6 billion RON, a tax contribution of 22 billion lei to the state budget and created and maintained 14,000 jobs.

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LNG market to reach USD 19.73 billion by 2026 Top key-players: Gazprom, ExxonMobil, China National Petroleum Corporation, Royal Dutch Shell, BP, Chevron, Total, Statoil, ConocoPhillips, Eni, Freeport Li

lobal demand for natural gas has risen significantly and has experienced a premium annual growth of 1.6 percent between 2015 to 2040, Kenneth Research agency reports. Consumption of natural gas growth is increased from over 3.5 tscm in 2014 to almost 5.2 tscm in 2040. The World Gas Model has

scheduled its production dependent on the lowest cost, accounting the transportation to market through LNG or pipeline as well as cost of production that are subject to contractual obligations. Worldwide LNG capacity has increased by 50 percent from 2015 to 2020, with several new projects currently under construction and ready to enter service influencing the Liquefied Natural Gas 46

(LNG) market. Moreover, another wave of upcoming LNG projects are planned between 2024 to 2030 and the third part from 2035 onwards. The U.S. has been a significant player in increasing demand for this product, with anticipation of hosting six projects up to 2020. Canada is also expected to launch three installation projects for liquefaction all of them in the

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Pacific coast, two after 2020 and one in 2035. Africa is also expected to play an important role in increasing demand of LNG directly increasing the Liquefied Natural Gas (LNG) market. New liquefaction capacities are planned for set up in Cameroon, Angola, Mozambique, Equatorial Guinea and Tanzania by 2025. An offline capacity is projected to re-enter into services by 2023. Power generation industry has been one of the major demands creating sectors in the recent past with several technology developments for using LNG as fuel. It is a direct alternative to diesel for the power generation industry. Replacement of diesel fuel supply with liquefied natural gas is safe, cost effective and an absolutely clean option. Customers either convert the existing units to dual fuel or replace the existing diesel generators with a gas generator. Industrial and mining markets have been yet another potential application sectors in the Liquefied Natural Gas (LNG) market. It is used as major energy source in many power generation stations worldwide in fluid bed dryers, boilers, furnaces and rotary kilns. Another is the transportation sector, including heavy duty vehicles, ships and even rail. All of these types of locomotive means are great sources of LNG applications. Apart from these, it is safe for transportation as in liquid state it not explosive and cannot burn. In order

to ensure safety and the security of all the LNG facilities, safety requirements and industry standards along with the best practices has been designed to mitigate the worst. Liquefied Natural Gas offers the perfect opportunity for the maximum economic transportation and storage of natural gas. As volume of LNG is 600 times smaller than the natural gas state, it can be more efficiently transported over long distances. Hence with such advantages, application segments of the product have been increasing significantly and are projected to continue the growth of Liquefied Natural Gas (LNG) market over the forecast period. The Asia Pacific market is the most potential Liquefied Natural Gas (LNG) market currently with increasing energy demand. Although, the region is a major natural gas consuming market lacks a transparent and liquid LNG pricing benchmark like the one in Henry Hub in the U.S. or the National Balancing Point in the UK. Several projects are under way that will facilitate the price discovery in the Asian market. China, Singapore and Japan are currently the regionâ&#x20AC;&#x2122;s developing trading hubs and have also launched LNG pricing indexes to increase the transparency in price formation. Some of the leading industry participants in the Liquefied Natural 47

Gas (LNG) market include Gazprom, ExxonMobil, China National Petroleum Corporation, Royal Dutch Shell, BP, Chevron, Total, Statoil, ConocoPhillips, Eni, Freeport Liquefaction LLC, INPEX, Kitsault Energy, Next Decade, NIOC, Novatek, Petronas, Rosneft, Sempra Energy, Steelhead LNG, Stewart Energy, Veresen, Woodfibre LNG, and Woodside.

About Kenneth Research Kenneth Research is a reselling agency providing market research solutions in different verticals such as Automotive and Transportation, Chemicals and Materials, Healthcare, Food & Beverage and Consumer Packaged Goods, Semiconductors, Electronics & ICT, Packaging, and Others. Its portfolio includes set of market research insights such as market sizing and market forecasting, market share analysis and key positioning of the players (manufacturers, deals and distributors, etc.), understanding the competitive landscape and their business at a ground level and many more. Kenneth Research experts deliver the offerings efficiently and effectively within a stipulated time. The market study provided by Kenneth Research helps the Industry veterans/ investors to think and to act wisely in their overall strategy formulation.

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Who will feed the Balkan Gas Hub? Bulgaria is pushing forward the initiative of building the Balkan gas distribution centre on its territory. It is planned that gas will be accumulated and redistributed in Bulgaria owing to further gas connectors with adjacent countries. The project corresponds to the needs of the region identified by the High Level Group on Gas Connectivity in Central and South-Eastern Europe (CESEC), the development of the European Energy Union and is actively supported by the European Commission (EC) who allocated about EUR 1mln euro to Bulgaria in 2017 for development of a feasibility study. 48

OIL & GAS

he Balkan Gas Hub is part of Project of Common Interest 6.25.4, which aims to construct a gas distribution centre in Bulgaria. According to the feasibility study: “The concept is based on the idea of bringing significant gas quantities from various sources (conceptual entry/exit capacity of 45.55 – 61.3 bcm/y) to enter a physical point in the region of Varna for further transportation and trade through a gas hub. The Balkan Gas Hub concept includes additional infrastructure with the objective to bring new gas to Central/ Western, South-Eastern and Eastern Europe in order to enhance security of supply.” In November 2018, after the completion of the construction of Russia’s maritime part of the first branch of the TurkStream pipeline, the Bulgarian government announced the start of construction works on the Balkan Gas Hub. On November 30, the Bulgarian Parliament voted to include the project in a new version of ‘Bulgaria’s Energy Strategy 2020’. The project foresees an increase in the capacity of the Bulgarian gas transportation system (GTS) and the use of a part of the Trans-Balkan gas pipeline to provide transit of Russian gas from the TurkStream and gas from the Southern Gas Corridor from Azerbaijan to the countries of the Balkan region and Italy. According to Temenuzhka Petkova, Bulgaria’s Minister of Energy, this will allow the country to address the loss of revenue from the transit of Russian gas in the event that Russia ceases to use the Ukrainian route. The minister said that Bulgaria is expecting Moscow to agree to direct the second branch of the TurkStream through Bulgaria to Serbia, Hungary, Slovakia and Austria – a route that will in fact duplicate the South Stream, the Russian energy project, discontinued in 2014. It should be noted that in the energy balance of Bulgaria (natural gas sector), Russian gas amounts to 98%. The Russian Federation delivered 3.14 billion cubic

meters of gas to Bulgaria through the territory of Ukraine in 2017. At present, Bulgaria has no alternative sources of gas supply, its own capacity for storage of gas reserves is insignificant, and the government of the country has not provided reverse pumping of gas by gas interconnects from Greece and Turkey. “In the medium term, Russian gas will remain the main source of energy security for Bulgaria,” President Rumen Radev said, on December 3, 2018 at the UN climate conference in Katowice. According to Ivan Ivanov, Chairman of the Bulgarian Energy and Water Regulatory Commission, the contract between Bulgartransgaz and Gazprom on transit of 16-17 billion cubic meters of gas per year to Turkey and Greece, which is in force until 2030, provides annual revenues of the Bulgarian gas transportation company at the level of 107 million USD, which is 67% of all revenues of the Bulgarian GTS operator. On 20 December 2018, the Austrian Central European Gas Hub (CEGH) and the Bulgarian TSO Bulgartransgaz EAD (BTG) have signed a Memorandum of Understanding (MoU) to cooperate in developing the Balkan Gas Hub in Bulgaria. The two parties informed that Bulgartransgaz will invest into the expansion of the Bulgarian natural gas transmission pipeline network to make Bulgaria a major natural gas distribution node for the European natural gas markets while CEGH will contribute to the cooperation with the provision of information and know-how on successful operation of gas hubs and liquid gas trading places linked to the major European gas distribution node in Baumgarten, Austria. CEGH will also support Bulgartransgaz to evaluate how to develop the Balkan Gas Hub into an important trading place for natural gas in the region. In order to establish the gas distribution hub mentioned above, Bulgartransgaz registered in January 2019 a subsidiary, Balkan Gas Hub ЕAD. This will establish a liquid gas exchange on the territory of Bulgaria with a bilateral trade 49

segment as well, also offering products and financial services. As a first stage of implementation of the gas exchange, Balkan Gas Hub EAD will provide the participants in the natural gas market in Bulgaria and the region with the opportunity to use a trading platform with all the necessary functionalities. The gas hub project envisages the construction of an EU-funded regional gas distribution centre in Varna region, near the Black Sea coast, that would dispatch deliveries of natural gas to the rest of Europe - to Greece, Romania, Hungary, Croatia, Slovenia and, via those countries, to EU member states in central and western Europe, as well as to nonEU Serbia, Macedonia, and Bosnia and Herzegovina. Gas can be fed into the hub from Russia, from Bulgaria’s potential gas deposits in the Black Sea or, via interconnectors with Greece and Turkey, from the Caspian region or the Eastern Mediterranean, or from the Greek and Turkish LNG terminals, the Bulgarian government has said. The gas hub could also be supplied via an interconnector with Romania, which is estimated to have significant deposits in the Black Sea shelf. “The establishment of a gas distribution centre on the territory of Bulgaria will improve energy security, enable diversification of the natural gas sources and routes for supply and ensure competitive prices for consumers,” Bulgartransgaz said in a press release. According to the Russian News Agency TASS, Gazprom recently announced that it does not plan to participate in the Balkan Gas Hub project. “Gazprom does not take part in this project. All our gas resources in this region are contracted on a long-term basis,” Chief Executive Officer of the Russian gas holding Alexei Miller stated. Sofia’s initiative to create Balkan Gas Hub is also an attempt to compensate for the possible loss of revenue from the transportation of Russian gas through the territory of Bulgaria in the event of the termination of its transit through Ukrainian route.

ENVIRONMENT

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Pollution and noise The daily threats of modern society Text by Adrian Stoica 50

ENVIRONMENT

argeted action is needed to better protect the poor, the elderly and children from environmental hazards like air and noise pollution and extreme temperatures, especially in Europe’s eastern and southern regions. A European Environment Agency (EEA) report recently published warns that the health of Europe’s most vulnerable citizens remains disproportionately affected by these hazards, despite overall improvements in Europe’s environmental quality. The EEA report entitled ‘Unequal exposure and unequal impacts: social vulnerability to air pollution, noise and extreme temperatures in Europe’ draws attention to the close links between social and environmental problems across Europe. The distribution of these environmental threats and the impacts they have on human health closely mirror differences in income, unemployment and education levels across Europe. While EU policy and legislation over past decades have led to significant improvements in living conditions, both economically and in terms of environmental quality, regional inequalities persist. The report stresses that better alignment of social and environment policies and improved local action are needed to successfully tackle environmental justice issues. “The European Commission has consistently emphasised that, on environmental issues, we are a Europe that protects, according to the quoted report. That principle is best tested by examining how we protect the vulnerable, the weak and the defenceless. The European Environment Agency is to be commended for this report that examines how the poor, the old and the very young are those most at risk from poor air quality, excessive noise and extremes of temperatures. It informs our efforts to make sure that we are a Europe that protects all,” said Karmenu Vella, EU Commissioner for Environment, Maritime Affairs and Fisheries.

Most affected regions The most affected areas with regard to air and noise pollution include the following. • Eastern European regions (including Poland, Slovakia, Hungary, Romania and Bulgaria) and regions in Southern Europe (including Spain, Portugal, Italy and Greece), where incomes and education are lower and unemployment rates higher than European averages, were more exposed to air pollutants including particulate matter (PM) and ground level ozone (O3). • Wealthier regions, including large cities, tend to have on average higher levels of nitrogen dioxide (NO2), mostly because of the high concentration of road traffic and economic activities. However, within these regions themselves, it is still the poorer communities that tend to be exposed to higher local levels of NO2. • Exposure to noise is much more localised than exposure to air pollution and ambient levels vary considerably across short distances. The analysis did find a tentative link between noise levels in cities and lower household incomes, suggesting that cities with poorer populations have higher noise levels. • Southern and south-eastern European regions are more affected by higher temperatures. Many regions in Bulgaria, Croatia, Greece, Italy, Portugal and Spain are also characterised by lower incomes and education, higher levels of unemployment and larger elderly populations. These socio-demographic factors can reduce individuals’ ability to respond to and avoid heat and thus result in negative health outcomes. • In parts of Europe a large number of people are unable to keep their homes adequately warm because of poor-quality housing and the price of energy. Illnesses and fatalities associated with exposure to low temperatures continue to occur as a result.

Exposure of vulnerable groups to air pollution There is abundant evidence emerging from various European locations 51

on the associations between socioeconomic status and air pollution. For example, nearly half of the most deprived neighbourhoods in London are exposed to NO2 values exceeding EU limits, compared with just 2% of the least deprived neighbourhoods. Similar observations on exposure to air pollution being higher for groups of lower socioeconomic status were made in Dortmund, Germany, for PM10 and NO2, Ostrava, Czechia, Wales, Lille and Marseille, France (for NO2), Grenoble and Lyon, France, Wallonia, Belgium, Malta and the Netherlands. However, the association between socio-economic status and air pollution levels is highly location and scale specific. For example, research carried out in Sweden found that in some cities socioeconomic status and the levels of NO2 in an area of residence are associated, but the associations vary considerably, even between cities in the same county. In Bristol, England, and Rotterdam, the Netherlands, the most and least deprived neighbourhoods were both exposed to similar concentrations of PM10 and NO2. This may be due to the desirability of city centre living among more affluent people. In Rome, people of higher socioeconomic status were exposed to higher levels of NOx and PM10 because they lived in central city locations with high volumes of traffic. In addition, the type of settlement that vulnerable groups live in is associated with exposure to air pollution. For example, in Czechia, communities with lower levels of education and higher unemployment tended to reside in smaller cities with higher concentration levels of combustion-related air pollutants (SO2 and PM10), whereas those on higher salaries and with higher educational attainments tended to live in larger cities and were exposed to higher levels of NO2. In England, PM concentrations were found to be generally higher in areas of greater socio-economic deprivation; however, the pollution-deprivation relationships varied by urban-rural status. While some general conclusions can be drawn from local studies on the links between socio-economic status and

ENVIRONMENT

air pollution exposure, they may not be equally applicable to all situations across Europe. There is limited and mixed evidence in terms of the exposure of older people and children to air pollution compared with the general population’s exposure. In the Spanish cities of Madrid and Barcelona, areas with higher numbers of children aged 0-4 were less exposed to NO2 compared with the city as a whole, while elderly people were exposed to higher levels of NO2, because of their over-representation in inner city neighbourhoods. A study in London did not find substantial differences in exposure to air pollution between under-19s or over-65s and the general population. Nonetheless, the exposure of children from groups of lower socioeconomic status is particularly concerning on account of cumulative vulnerability factors potentially exacerbating the health impacts of air pollution. In London, over 85% of the schools most affected by poor air quality had pupils who lived in areas more deprived than the London average. In Malmö, Sweden, exposure of children aged 7-15 to NO2 in their place of residence and at school regularly increased as the socio-economic status of a child’s neighbourhood decreased. Thus, socio-economic status tends to be linked to exposure and vulnerability, while age factors, although they affect vulnerability, are not so strongly linked to exposure in the place of residence, the document quoted.

Impacts of noise on health Exposure to environmental noise affects health through complex psychological and physiological pathways and it has been linked to a number of health outcomes, such as cardiovascular and metabolic effects, poor sleep and annoyance in adults, as well as to cognitive impairment in children. Possible explanations for the most severe effects of noise on health, such as those on the heart and circulatory system, are stress and a decrease in sleep quality. According to the World Health Organization (WHO),

lost days due because of noise-induced health outcomes in the western part of Europe are estimated to be equivalent to 903,000 years for sleep disturbance, 654,000 years for annoyance, 61,000 years for ischaemic heart disease and 45,000 years for cognitive impairment in children. It is estimated that noise could contribute to 16,600 premature deaths per year, about two thirds of the burden of disease is related to coronary heart disease and one third to cerebrovascular disease. The analysis carried out for 30 European capitals shows that the highest number of years of life lost (YLL) per 100,000 inhabitants attributable to noise occurs in the new Member States in Eastern Europe.

Exposure to heat in cities The temperatures in European city centres can be higher than in surrounding areas by up to 9 degrees Celsius. Generally, northern European cities seem to develop stronger UHIs (Urban heat island), whereas differences between urban and rural temperatures appear to be lower in southern European cities. As a consequence of the UHI, urban areas may experience twice as many heatwave days compared with their rural surroundings. Generally, in many European countries, more vulnerable communities tend to live in dense, urban environments and, therefore, may be exposed to higher temperatures. In locations such as Rennes, France, and Birmingham, United Kingdom, city centres are characterised by high proportions of the elderly, people in poor health and those living alone. They also have the highest intensity of UHIs. In London and Greater Manchester, United Kingdom, poorer communities are more likely to live within UHIs. In addition, analyses of the distribution of facilities for vulnerable groups, such as hospitals, care homes and schools, found that they were predominantly located in areas up to 2 degrees Celsius warmer than the regional average. However, more affluent people are living centrally in some cities, and thus are potentially more exposed to 52

UHIs. Less is known about the influence of UHIs on mortality related to low temperatures. In England and Wales, coldrelated mortality was higher for more deprived populations in rural settings, while no such relationship was observed in cities. It is suggested that in the cities, which experience low temperatures during winter, UHIs may bring positive effects for human health by increasing temperatures and consequently creating a warmer environment than in the surrounding areas.

Extreme temperatures The extreme temperature indicators in this report have been chosen according to their relevance to the impacts of extreme temperatures on human health, especially taking into account the indicators of social vulnerability, and they include the following indicators based on the E-OBS dataset. • The number of days with a maximum temperature exceeding 30 degrees Celsius and a minimum temperature above 20 degrees Celsius per year, averaged over the period 1987-2016. The combination of hot days and warm nights increases the risk of heat stress; therefore, this indicator is particularly relevant for assessing the proportion of elderly people in the population who are prone to heatrelated impacts. • The number of hot summer days when the temperature exceeds 35 degrees Celsius per year, averaged over the period 1987-2016. This may bear particular relevance to the health of workers in outdoor or high-temperature indoor settings, who tend to have a lower level of education. It has also been estimated that as many as 40% of deaths associated with heat occur on isolated hot days during periods that would not be classified as heatwaves and, consequently, individual hot days may have an impact on the health of sensitive groups, such as the elderly. • The number of cooling degree days (CDDs) per year, averaged over the period 1990-2015. CDD is a measurement designed to quantify

ENVIRONMENT

the demand for energy needed to cool a building in order to keep it at a comfortable temperature. In this report, it is defined as the sum of the difference in degrees between 21 degrees Celsius and the mean temperature over the year, for the days when the mean daily temperature is higher than 21 degrees Celsius. â&#x20AC;˘ The number of heating degree days (HDDs) per year, averaged over the period 1990-2015. HDD is a measurement designed to quantify the demand for energy needed to heat a building in order to keep it at a comfortable temperature. In this report, it is defined as the sum of the difference (in degrees Celsius) between 18 degrees Celsius and the mean daily temperature over the year, for the days when mean daily temperature is lower than 15 degrees Celsius. The number of CDDs and HDDs is useful in differentiating between areas based on the need for heating or cooling homes, and therefore HDDs and CDDs are both relevant to issues of energy affordability and energy poverty. Furthermore, â&#x20AC;&#x2DC;non-extremeâ&#x20AC;&#x2122; temperatures outside a local comfort temperature range are also linked to increased mortality and other adverse health outcomes. Consequently, identifying areas with the greatest deviation from comfort temperatures can help to approximate the places where human health is at risk. Unsurprisingly, the indicators relating to high temperatures have the highest values in Southern and South-Eastern Europe. Their spatial distribution varies slightly: areas with maximum temperatures exceeding 35 degrees Celsius for over 10 days are concentrated in the Iberian Peninsula, while areas with the highest number of combined hot days and tropical nights are also found in Italy and parts of Greece. The highest number of HDDs is present in Northern Europe, the Alpine region and, to a lesser extent, in Central and Eastern Europe.

Levels of regional vulnerability Analysing distribution of high and low temperatures by regional

vulnerability levels generally, the NUTS (Nomenclature of territorial units for statistics regions) classified as more vulnerable as a result of low GDP (Gross Domestic Product) or a high proportion of people of low socioeconomic status correspond to areas affected by high temperature. This is because many regions in Southern and South-Eastern Europe have high levels of unemployment, lower incomes and lower levels of educational attainment than the European average. The areas most affected by both long-term unemployment and high temperatures are located in parts of Bulgaria, Croatia, Greece, Italy and Spain. This is in agreement with the EU-SILC (European Union statistics on income and living conditions) data on the ability of people to keep their houses at comfortable temperatures during winter and summer. The areas in the bottom 20% of NUTS regions regarding the percentage of people with higher education experience, on average, 1.7 times as many days with a maximum temperature over 35 degrees Celsius as the regions in the top 20%. This may mean that the areas where lower levels of education and high temperatures overlap experience more pronounced negative impacts of high temperatures when it comes to the health of people working outside or in already hot environments. According to the EEA report, lower levels of education and substantial average number of hot days overlap spatially in southern Portugal and parts of Bulgaria and, to a lesser extent, in parts of Greece, Hungary, Italy and Romania. The associations between the socioeconomic status aspects of vulnerability and extreme temperatures are much less pronounced for cities than for the NUTS regions. This is similar to the findings for air pollution and it could be linked to the way in which cities usually differ from the regions they are located in, especially in relation to income or levels of education, shows the European Environment Agency report. 53

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ENVIRONMENT

Towards a low carbon economy The European Commission (EC) adopted last year a strategic long-term vision for a prosperous, modern, competitive and climate neutral economy by 2050 – A Clean Planet for all. The purpose of this long-term strategy is not to set targets, but to create a vision and sense of direction, plan for it, and inspire as well as enable stakeholders, researchers, entrepreneurs and citizens alike to develop new and innovative industries, businesses and associated jobs.

he strategy shows how Europe can lead the way to climate neutrality by investing into realistic technological solutions, empowering citizens, and aligning action in key areas such as industrial policy, finance, or research – while ensuring social fairness for a just transition. “We cannot safely live on a planet with the climate that is out of control. But that does not mean that to reduce emissions, we should sacrifice the livelihoods of Europeans. Over the last years, we have shown how to reduce emissions, while creating prosperity, high-quality local jobs, and improving people’s quality of life. Europe will inevitably continue to transform. Our strategy now shows that by 2050, it is realistic to make Europe both climate neutral and prosperous, while leaving no European and no region behind,” the Vice-President responsible for the Energy Union, Maroš Šefčovič says. According to the special Eurobaro meter (November 2018) 93% of

Europeans believe climate change to be caused by human activity and 85% agree that fighting climate change and using energy more efficiently can create economic growth and jobs in Europe. With this vision, we surely can deliver collectively a clean planet and show that transforming our economy is possible and beneficial. The road to a climate neutral economy would require joint action in seven strategic areas: energy efficiency; deployment of renewables; clean, safe and connected mobility; competitive industry and circular economy; infrastructure and interconnections; bio-economy and natural carbon sinks; carbon capture and storage to address remaining emissions. Pursuing all these strategic priorities would contribute to making this vision a reality. In this context, it is also worth mentioning that only sixteen countries out of the 197 that have signed the Paris Agreement have defined national climate action plan ambitious enough to 54

meet their pledges, according to a policy brief released ahead of the crucial UN climate conference COP24 in Katowice (Poland) in December 2018. The 16 countries are: Algeria, Canada, Costa Rica, Ethiopia, Guatemala, Indonesia, Japan, FYR Macedonia, Malaysia, Montenegro, Norway, Papua New Guinea, Peru, Samoa, Singapore and Tonga. “Our analysis reveals that countries are being slow to reproduce their NDC (Nationally Determined Contribution) commitments as targets in national laws and policies,” the report said. Implementing the Paris Agreement relies on countries’ translating their commitments set out in the NDCs into national laws and policies, which in turn define quantified and measurable domestic targets, the policy brief explained. However, it found this translation to be inconsistent with the countries’ climate pledges, a situation that raises doubts about the likelihood of meeting the goals of the Paris Agreement, it warns.

ENVIRONMENT

Cleaner, safer, quieter tyres Labels to become more visible for consumers

he EU is updating its rules on the energy performance labelling of tyres and extending its scope to tyres for heavy-duty vehicles. The labels will be displayed more visibly for consumers and include information on snow and ice grip. The Council adopted on March 4 its negotiating position on the proposed new rules. “The new rules will benefit customers, who can make an informed choice on the safety and fuel efficiency of their tyres. They will also contribute to the reduction of greenhouse gas emissions in the road sector and thereby help the EU meet its commitments under the Paris Agreement,” Anton Anton, Minister for Energy of Romania and chair of the Council stated. The Council’s negotiating position clarifies and extends the scope of the current regulatory framework. It updates the label and mandates the inclusion of information on snow and ice grip. New requirements regarding the display of the label, including for distance selling and sales on the internet, will improve its visibility to customers and ensure that they are fully informed when making purchasing decisions. The regulation also improves enforcement by creating an obligation to register tyres in a product database.

for the future inclusion of re-treaded tyres, once a suitable testing method to measure the performance of such tyres has been developed. A review clause provides the possibility for a future inclusion of mileage and abrasion as a parameter for the label when suitable testing methods are available.

Background

“The new rules will contribute to the reduction of greenhouse gas emissions in the road sector and thereby help the EU meet its commitments under the Paris Agreement” Anton Anton, Minister for Energy of Romania

The scope of the regulation is extended for the first time to tyres for trucks and buses (C3 tyres). Previously, only tyres for cars and vans were included in the rules. The Council position also allows 55

The objective of the tyre labelling system is to reduce greenhouse gas emissions and noise pollution in the transport sector and increase road safety by better informing consumers about the fuel efficiency, noise and safety parameters of the tyres they buy. Road transport is responsible for about 22% of the EU’s total greenhouse gas emissions, and tyres, mainly because of their rolling resistance, account for 5-10% of a vehicle’s fuel consumption. A reduction of the rolling resistance of tyres therefore contributes to lowering emissions while also providing cost savings to consumers thanks to lower fuel consumption. A revision of the rules had become necessary as a review of the current legislative framework showed that the tyre labelling scheme was not fully reaching its objective of reducing greenhouse gas emissions in the transport sector due to low visibility of the labels and a lack of enforcement.

CONSTRUCTION

Next steps towards a climate neutral cement V

attenfall and Cementa are proceeding with the work of reducing Sweden’s carbon dioxide emissions by five per cent by 2030. The results from the pilot study in the CemZero project show that the technical prerequisites exist for electrified cement production. The study gives the green light to investigating how a pilot plant can be built. The climate challenge has proven to be even more urgent; not least after the IPCC’s report, which clearly indicates the need for a transition within industry in order to reduce carbon dioxide emissions. The objective for CemZero is electrified cement production supplied with electricity from a fossil-free Swedish energy system. The first part of CemZero is now concluding and a final report has been submitted to the Swedish Energy Agency which has co-financed the study. The pilot study has examined different technologies for heating in the cement process, with fossil-free electricity used as the energy source instead of conventional fuels. “Achieving radical emissions re ductions requires advances in technology. CemZero opens up an interesting path which we are looking forward to taking further,” says Cementa’s CEO Magnus Ohlsson. “It is very positive that we can proceed

with the work of electrifying the cement industry, it is one of the most important examples of new collaborations for technology development which can make a substantial contribution to the efforts to create a fossil-free future,” says Magnus Hall, President and CEO at Vattenfall. The study draws the following principal conclusions: • Electrification of the heating in the cement process appears to be technically possible. Among other things it has been shown to produce a certain amount of cement clinker based entirely on plasma technology. This possibility needs to be verified through large scale testing. • An electrified solution for cement is competitive compared with other alternatives in order to achieve radical reductions in emissions. The study demonstrates an approximate doubling of the production cost for the cement, but ultimately only entails a cost increase of a couple of per cent of the finished building or infrastructure. • Simulations have indicated that any future electrification of Cementa’s factory on Gotland would work well together with planned expansion of wind energy on Gotland, partly through an improved energy balance, but also through reduction of the maximum surplus capacity to which wind energy would otherwise give rise. 56

Achieving Cementa’s vision of zero carbon dioxide emissions from cement products by 2030 demands a technological shift. For Vattenfall, the industrial project is a crucial part of the strategy of offering all its customers climate-smart energy and enabling a life free of fossil fuels within one generation. Full scale electrified cement pro duction would entail Cementa removing the need for the fuel, at the same time as the need for electricity would be significantly greater. Electrification also facilitates the opportunity to more easily capture the process emissions of carbon dioxide which arise in connection with production, which simultaneously places requirements on a solution to store or use the carbon dioxide, so-called CCS or CCU. The collaboration between industry, the energy sector and the Swedish Energy Agency is important for the project’s success. The research initiative is also being strengthened together with Swedish universities. The continuation of CemZero means that Vattenfall and Cementa will be conducting an in-depth study during 2019 into how a pilot plant can be constructed. It will test the plasma technology in order to reduce technical risks and provide important information prior to scaling up and implementation.

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CONSTRUCTION

Height adjustable valve room Innovative solution for street drains Text by Daniel Lazar

n innovative solution for street drains was recently presented at a business meeting held at the Prahova Chamber of Commerce and Industry (CCIPH) by Jung Hee Kim, Managing Director of Sabit Networks and President of the Overseas Korean Traders Association (OKTA). On this occasion, the Korean guest highlighted the benefits of a modern technology, with which the manhole covers for street drains remain on the same level as the road for a long time. “In Korea we delivered our technical solution for all roads in the cities, this being a problem that we have faced over the years. Now we are in a straight line to conclude contracts for roads in Japan. I notice that this problem is present in

Romania and not only. Practically, the height and inclination of the manhole covers are adjusted both vertically and laterally, or in terms of inclination, and no problems arise. It is true that these covers are more expensive than classical ones, but if maintenance is taken into account, then we are certainly talking about improving economic performance,” Jung Hee Kim said. The main benefits of the new technology include: • Convenient installation; • Efficiency in road re-pavement; • Effectiveness by avoiding additio nal cost in maintenance. Strength of height adjustable valve room consists in simplification of installation based on tailor-made set in the factory; that means fast installation. 58

There is the possibility to extend valve duration due to water-proof between valve room and connecting pipe. Also, height difference between road and manhole by using Height Adjustable Device may be avoided; the effect is accident prevention. The durability is increased with in/ out epoxy; this leads to economical maintenance based on increase of durability. An important advantage of the light weight is the cost saving during installation. Recycling of used steel materials has a key role in the conservation of the environment. Height adjustment possibility in road re-pavement assures long-term maintenance cost saving.

Topping out ceremony J

expanding. Apart from adding assembly space, the project includes a new dryer testing room and an expanded logistics department. In total, it will add 2,300 square metres of usable floor space. Thomas Kaeser, the CEO of Kaeser Kompressoren, is pleased with the progress: “If the work keeps moving ahead at this pace, production could start in the new facility as early as June”. “Gera is an important location for us and the employees here make a big difference in keeping our customers satisfied. The new production facilities will enable them to do that even faster,” he added.

ust three months after breaking ground, Kaeser Kompressoren celebrated the topping out ceremony for its new production hall on January 19. With full order books and growing sales, it was time for the compressor maker and compressed air system provider to expand capacity at its production centre for refrigeration dryers in Gera. The product range was also

Boosting innovation In Gera, Kaeser manufactures blowers and refrigeration dryers with approximately 400 employees. All of the products stand out for their energy efficiency (e.g. energy-saving dryers), reliability and long service life. Thanks to a steady stream of innovations, KAESER is able to offer its customers state-of-theart technologies on an ongoing basis. The expansion will help to maintain and enhance the company’s ability to innovate and continue meeting demand in the refrigeration dryer segment. The total investment amounts to approximately 9 million euros. Kaeser Kompressoren Gera emerged from Geraer Kompressorenwerke, originally established in 1877 as Heinrich Leo Metallwarenfabrik und Eisengiesserei. In 1890, it became Germany’s first manufacturer of compressors and by 1945 was the country’s leading producer, with a 70 percent market share. In 1991, the company was acquired by Kaeser Kompressoren. The compressed air specialist, with its head office in Coburg, in the Upper Franconia district, now employs over 6,000 people in more than 100 countries around the world. The main production sites are in Coburg and Gera.

“If the work keeps moving ahead at this pace, production could start in the new facility as early as June. Gera is an important location for us and the employees here make a big difference in keeping our customers satisfied. The new production facilities will enable them to do that even faster.”

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

Thomas Kaeser, CEO of Kaeser Kompressoren

POWER

EUR 180mln on innovative underground gas storage project On 21 February, Energy Minister Anton Anton travelled to Craiova to prepare the steps to promote in Romania an innovative project in the field of natural gas storage. The feasibility study is being started for the 200MW Craiova project - a new group in combined cycle and high-efficiency cogeneration using gas storage in Ghercesti.

he project involves three essential elements: the power plant in Craiova, the underground natural gas storage facility in Ghercesti and renewable energy. “These three elements must be considered in an integrated manner, starting from the conversion of the power plant in Craiova from coal to natural gas. But the innovation of this process does not refer so much to conversion as to the fact that we will use the wind energy surplus of Romania to store and extract gas from the underground storage facility in Ghercesti. With such a solution, Ghercesti, located very close to the power plant in Craiova, will become one of the largest gas storage facilities in the country. This is an important project, not only for Craiova, but also for the entire country,” Anton Anton said. The project is in the phase of preparation of the feasibility study and is estimated at EUR 180mln, amount which

covers conversion of a new group of 200MW to gas in cogeneration. Financing for the project will be ensured at a rate of 70 percent from European funds and 30 percent from the budget of the Oltenia Energy Complex (Mechanism ETS – Emissions Trading Scheme 10c). Within technical talks with the management of Oltenia Energy Complex, the new investments at Craiova II power station, i.e. mounting two state-of-theart steam boilers of 50t/h, on natural gas, were also analysed. The investment, which will be completed in April 2019, is worth about EUR 4mln and will ensure part of the thermal energy necessary for Craiova, respectively back-up for the current capacities. “I wish there will no longer be dis ruptions in heat supply to the population in Craiova. I believe this investment will be able to ensure the continuity of heat supply to both household consumers and industrial consumers,” Minister Anton also mentioned. 60

About ETS Directive 2003/87/EC The revised Directive 2003/87/EC provides in art. 10c for the possibility of opting for free transitional allocation for the purpose of modernizing electricity production. The derogations refer to the possibility of using free transitional allocation for electricity generation, respectively the exclusion under certain conditions from the full auctioning of greenhouse gas emission allowances for electricity generation. The conditions relate mainly to upgrades in the improvement of technology, retrofitting or the implementation of ‘clean’ technologies. The number of allowances allocated for free decreases gradually until the total free allocation is eliminated in 2020 (for this sector). Bulgaria, Czech Republic, Cyprus, Estonia, Latvia, Lithuania, Malta, Poland, Romania and Hungary may benefit from the transitional derogations.

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First meeting of the RomanianKazakh Energy Investment Fund T

he Board of Adminis tration of the RomanianKazakh Energy Invest ment Fund recently met on their first working meeting since the fund was established in October 2018. During the meeting the main directions for development in the following period were approved. “It was a remarkable day as within just 4 months after its establishment the Board of Directors of the Fund has approved two major investment projects for the amount of almost 230 million USD. It is a major step for the local energy sector, which is testament to the commitment, confidence and willingness of its shareholders to invest in and contribute to Romania’s economic growth. The focus of the Fund will now turn into speedy implementation of the approved investments as well as locating other financially attractive investment opportunities in the energy sector”, said Iskander Abdibaitov, General Manager of the Romanian-Kazakh Energy Investment Fund. The two shareholders of the Romanian-Kazakh Energy Investment Fund are the Ministry of Energy, through the Energy Shareholdings Administration Association (20%) and KMG International (80%), the latter being a party to the memorandum of understanding between the two parties of 2013. Energy Shareholdings Administration Association is present in all the

management and decision-making structures of the Fund – the Board of Administration, the Board of Directors and the Committee for the Initiation of Investments. Moreover, the representatives of the company have equal rights in proposing new projects for funding and have veto power against all investment projects on grounds of national security. In line with best international practices in the field, the Board of Administration is made up of 5 members, reflecting the equity split of its shareholders – 4 persons from KMG International (Daniyar Berlibayev, Azamat Zhangulov, Alexey Golovin, Ionel Popescu) and one person from the Energy Shareholdings Administration Association (Mihai Liviu Mihalache). On February 25, the Board of Administration discussed and approved in principle the main investments to be supported by the Fund in the near future. Thus, through special vehicle-type dedicated entities (SPV or special purpose vehicle), around 230 million USD will be attracted/earmarked for the building of a cogeneration plant on the Petromidia platform and the development of a chain of local filling stations. With an implementation period of 4 years, the cogeneration plant (which generates combined electricity and heating) will provide heating and hot water to the residents of Navodari, as well as electricity and technical steam for the 61

Petromidia platform, which are required to support the petroleum production business. At the same time, it will also play a part in stabilizing the generation and distribution of electricity in the Dobrogea region. The new plant will comply with the highest technological, energy efficiency and environmental standards, and will be built in cooperation with the Midia Power Plant – currently owned by the Ministry of Energy (56.58%) and KMG International (43.42%). It will work with natural gas. Another avenue for investment agreed on February 25 was the development of a number of filling stations in Romania, with an implementation period of around 5 years and will benefit from the supply of fuels produced by Rompetrol Rafinare at the Petromidia Navodari refinery– the largest of its kind in Romania and one of the most advanced in the Black Sea region. The main shareholders of Rompetrol Rafinare SA are KMG International (54.63% - directly and indirectly) and the Romanian Government, through the Ministry of Energy (44.7%). The new filling stations will be operated under the Rompetrol brand and standards and will lead to the creation of more than 1,000 new jobs, with more than 5,000 people being involved in various development stages (design, execution, building) and more than 1,200 commercial partners.

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Opening ceremony From left to right: Dan Morari - Director General of E.ON Energie Romania, Camelia Ene - CEO & Country Chairman MOL Romania and Mihai Chirica - Mayor of the city of Iasi | © MOL

Iasi-Targu Mures ‘electric highway’ E

.ON Energie Romania on 25 February put into operation, in the city of Iasi, in MOL station from Pacurari neighbourhood, the fifth fast charging station for electric vehicles. It is part of the 19 units that the company plans to install in Romania within the NEXT-E project, supported from European funds, through the Connecting Europe Facility (CEF) program. Located within the premises of MOL filling station, the unit has a maximum power of 93 kW. Thus, the average time for charging an electric vehicle will be

approximately 40 minutes for 80% of the battery. Two charging stations have already been put into operation in Iasi County, in the localities of Targu Frumos and Cristesti, adding to those opened in Tasca (Neamt County) and Adjud (Vrancea County). At the same time, it is considered to complete and commission, in March, other stations in the localities of Piatra Neamt and Roman (Neamt County), as well as in the locality of Scheia (Suceava County). A fast charging station of 2×50 kW (DC) + 1×43 (AC) will be installed in each location. Each station will also have at least 2 parking spaces. 62

By the end of 2020, E.ON aims to implement the project on Iasi Gheorghieni - Tg. Mures route, which will thus become an ‘electric highway’, from which all owners of environmentalfriendly vehicles will be able to benefit, having the charging infrastructure ensured on the entire route. Another ‘electric highway’, which will link the city of Iasi to Bucharest, is in full development. “Statistics showing a significant increase year after year in the number of electric vehicles sold in Romania are extremely encouraging, because it shows a clear orientation towards one of the most environmentally friendly and sustainable

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means of transport, as it happens all over the world. In this context, the question is raised whether the charging infrastructure will be able to keep up with this trend. We believe it is essential to meet the wishes and needs of electric car owners and not only, by giving them easy access to the charging stations. In fact, we want to be with them on all their electric trips so that they have the most enjoyable experience,” said Dan Morari, Director General of E.ON Energie Romania. “We are glad to witness today, at the MOL Iasi Pacurari station, the opening of one of the 40 charging stations for electric vehicles that will be installed within the NEXT-E project. The MOL Group adopted the Strategy 2030 three years

ago, a vision that sets the company’s main directions for the next period. One of the foundations behind the development of this Strategy was MOL’s desire to become the first choice for its customers. We are aware that we are experiencing a time of major change, which will be reflected strongly in our customers’ consumption habits, but we are ready to anticipate their needs and provide them with the best solutions,” said Camelia Ene, CEO & Country Chairman MOL Romania. All 40 stations within the NEXT-E project (19 of which will be installed by E.ON and 21 by MOL Romania) will be located on the following routes: Suceava-Bacau-Calarasi, ConstantaBucharest-Timisoara and Iasi-Targu

Mures-Alba Iulia. With this initiative, the infrastructure of charging stations for electric vehicles related to the European strategic road corridors (TEN-T) will be completed with the infrastructure of charging stations for electric vehicles in Romania, facilitating low-emission road transport and reduced environmental impact. Stations will be integrated into a system for monitoring and managing charging sessions. This system provides 24-hour supervision of the unit and has the ability to remotely resolve any incidents occurring during charging. Moreover, any problems encountered at the charging stations can be notified 24/7 by telephone at an E.ON call centre.

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Transelectrica accelerates investments to increase the safety of NPS The National Power Transmission Company (CNTEE) Transelectrica SA continues the process of retrofitting the 400/220/110/20 kV Domnesti substation, as part of the extensive process of strengthening the power transmission grid in Bucharest area. The total value of the project for the retrofitting of the 400/110/20 kV Domnesti substation, started in 2018, is RON 144,447,000. The investment will be completed in 2020.

orks to retrofit the 400/220/110/20 kV Domnesti substation, are in an advanced stage of execution, the company

informs. â&#x20AC;&#x153;Retrofitting of Domnesti substation is one of the most important investment projects carried out by Transelectrica in Bucharest area. The 400/110/20kV Domnesti substation has a particular importance for the Power Transmission Grid, representing an important energy node for supplying a large part of consumers in Bucharest. The investment

involves the retrofitting of the substation at all voltage levels, in order to bring it to a level of safety and reliability corresponding to the importance of the area and objective from an energy point of view, using modern technology,â&#x20AC;? said Marius Danut Carasol, President of the Management Board of Transelectrica. Works at the Domnesti Substation started in June 2018, and now works are being carried out to build the 400 KV GIS substation and to build the command centre. This stage involves switching from the primary outdoor equipment with airborne insulation to primary indoor 64

equipment located in the building of the GIS 400 kV substation. The following stages in the execution of works aimed at Domnesti substation are: Realization of the 400/110 kV transformer units; Realization of the 110 kV GIS unit; Realization of the 110/20 kV transformer units; Retrofitting the 20 kV substation; Implementation of the command, control and metering system, integration into SCADA. At the level of Bucharest Municipality there are three sub-stations, which are important nodes of the National Power System (NPS) in terms of power supply to

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the distribution network and consumers in the Capital, ensuring evacuation of the electricity produced and the transport of energy from the two big energy producing areas, Oltenia and Dobrogea, to the biggest consumer of the country the Capital. The 400/220/110/20kV Domnesti substation is the last one undergoing the upgrading process, being preceded by the retrofitting of the 400/220/110/10kV Bucharest South substation (20062009; 2014-2015) and the upgrade of the 220/110/10 kV Fundeni substation (2006-2007). The 110 kV Domnesti substation was commissioned in 1980, and the 400 kV substation was commissioned in 1982. In early February 2019, Transelectrica started works to fully retrofit the 220/110 kV Craiova Nord substation, an investment worth EUR 9.887mln. The contract was signed in 2018, and the estimated deadline for the completion of works is 2020. The 220/110 kV Craiova Nord substation ensures electricity supply to consumers in Craiova, as well as to industrial consumers in the area. The substation was commissioned in 1974, this being the first full retrofitting. Also, in February, Transelectrica launched the tender for elevating overhead lines in the Nicolae Grigorescu Passage area in Bucharest. The company estimates that the procurement procedure will be completed in late June 2019 at the latest. The estimated value of the contract is RON 6.15mln and its duration is seven months from the start of the works. In order to strengthen the power transmission grid in the Bucharest area, Transelectrica executed last year upgrade works worth RON 2.5 million at the 220/110/20 kV Fundeni substation. The project consisted of equipping the 110 kV UPL North cell and changing the elements in the 110 kV Obor 2 cell. The 220/110/10 kV Fundeni substation is an important node of the National Power system, in terms of electricity supply to the north-east of Bucharest, and ensures power transmission between Bucharest and Ploiesti.

Craiova Nord substation

Domnesti substation

Fundeni substation

Elevating overhead lines in the Nicolae Grigorescu Passage area in Bucharest

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Driving Agenda 2030 forward New initiatives on renewable energy With thousands of high-level delegates convening in Dubai for the UAE-led global platform dedicated to shaping the future of governments worldwide, this year’s World Government Summit has set out the agenda for the next generation of governments, focusing on how they can harness innovation and technology to solve universal challenges facing humanity.

ne of the Summit’s main areas of focus is the leveraging of knowledge, technology and international cooperation to accelerate the implementation of UN Sustainable Development Goals (SDGs). Opening WGS 2019, U.N. Deputy-Secretary General Amina J. Mohammed set the agenda by sending an urgent call to delegates, noting that the achievement of the SDGs is not on track, with potentially life-threatening consequences for billions of people, and serious environmental consequences. To overcome these challenges, the Summit convenes Global Councils on the SDGs, a unique interdisciplinary network of decisionmakers from governments, international organizations, academia and the private sector coming together to share innovative practices and creative solutions needed for the implementation of the SDGs at national and global levels. As Chair of the Global Council

on SDG7, the UN goal to ensure access to affordable, reliable and modern energy for all by 2030, the work of IRENA Director-General Adnan Z. Amin supports the development of innovative solutions to harness the potential of renewable energy for energy access, gender equality and the empowerment of women, healthcare, and other goals under the sustainable development agenda. “SDG7 touches on all SDG areas. Through renewable energy solutions we can provide sustainable, low-cost energy to drive the Agenda 2030 forward,” Adnan Amin reiterated to delegates during WGS19. Following a dynamic and highly engaged meeting of the Global Council on SDG7, the Council announced a number of new initiatives aimed at shifting SDG implementation into high gear through renewable energy. These initiatives include: • Set up collaboration platform for electrification of health centres - aimed at exploring how renewable energy can 66

overcome pressing health gaps; • Promote certification schemes for solar PV technicians - focused on expanding training for technicians to meet growing renewable energy demand; • Explore 100% renewable energy pathway - aimed at moving renewable energy penetration far beyond electricity supply into all end use sectors. IRENA’s Director-General, alongside former UN Secretary-General Ban Ki-Moon, French Prime Minister Laurent Fabius, UN General Assembly President Maria Espinosa and many others, took part in a rich round table discussion on the nexus between climate and health issues convened by the Ministry of Climate Change and Environment and hosted Minister Dr Thani Al Zeyoudi. IRENA’s Director-General reminded the panel that this is the time to propose concrete solutions, and that much greater concrete policy action is needed to accelerate the energy revolution.

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Europe’s largest PV roof system Together with E.ON, Audi is building a solar energy park on the roofs of the two logistics centres of its plant in Gyor covering about 160,000 square meters. This will create Europe’s largest photovoltaic system installed on a building at the Audi Hungaria plant in Gyor. It will have a peak output of 12 megawatts. Construction work will start in August 2019 and renewable energy generation will start at the beginning of next year.

s part of the joint project with E.ON Hungaria, Audi is providing the roof areas of the two logistics centres, each with about 80,000 square meters, for the construction of the solar energy park. E.ON will build and put the park it into operation, consisting of 35,000 solar cells, and will continue to operate it, with an annual output of more than 9.5 gigawatt hours (GWh) of electricity. This corresponds to the annual energy requirements of 5,000 households. Thanks to green electricity from regenerative sources, about 6,000 tons less carbon dioxide will be released into the air. “We are committed to the economical use of resources and therefore want to keep the environmental impact of our production as low as possible. Approximately 70 percent of Audi Hungaria’s heat requirements are already

covered by climate-neutral, geothermal energy. Our goal is to have completely CO2-neutral plant operation in the future. With the construction of the solar-cell park, we are now taking a further step to achieve this in terms of power supply,” says Achim Heinfling, Chairman of the Board of Management of Audi Hungaria. “Our company is committed to solutions supporting a sustainable future. The widespread use of solar energy is an integral part of this endeavour. We are pleased that E.ON has gained Audi Hungaria’s trust and a new, nearly 25year partnership has started between the two companies”, Zsolt Jamniczky, E.ON Hungaria’s Board member says. “We are working consistently towards greater sustainability along the entire value chain,” says Peter Kössler, Board of Management Member for Production and Logistics at Audi AG. “By 2030, we want all our production sites to be 67

climate neutral. The use of renewable energies is an important lever for this.” “Intelligent energy management is indispensable for companies that want to achieve their sustainability goals. We help customers like Audi to combine climate protection with their business activity – and thus create value for their customers and our society,” E.ON Board Member Karsten Wildberger adds. In addition, AUDI AG, together with its partners, is committed to feeding resources into closed cycles and reusing them as completely as possible. “We were the first premium manufacturer to have our CO2 footprint measured and certified in 2014. Since then, we have been working constantly to reduce it further,” said Rüdiger Recknagel, Head of Environmental Protection at AUDI AG. “We are also installing new technologies at all our plants to reduce our water consumption, avoid air pollution and improve recycling.”

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Solar PV application in Chisinau | Source: Ministry of Economy and Infrastructure

10-point roadmap to renewable energy growth in the Republic of Moldova The Republic of Moldova may be one of Europeâ&#x20AC;&#x2122;s smaller economies but the country is big on renewable energy potential. According to an International Renewable Energy Agency (IRENA) report in 2017, the cost-competitive potential for solar and wind energy alone across the country totalled more than 22 gigawatts (GW), and wind energy potential is among the most attractive across South East Europe. 68

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he country’s energy policymakers are in creas in gly wise to this opportunity. New sup port measures for variable renewables have been introduced to stimulate further activity in the sector and national objectives to cover at least 17 percent of gross final energy consumption with renewables have been met ahead of time. Recently, an additional 168 megawatts (MW) of renewable energy capacity was announced. In this context IRENA DirectorGeneral Adnan Z. Amin said Republic of Moldova’s policy makers are recognising that renewable energy can be an important means to address the country’s energy challenges and achieve a sustainable future through renewables. Gurbuz Gonul, Director of Country Support and Partnerships at IRENA, shared the view saying renewables can be a central pillar of national energy and economic policy in the country: “The Republic of Moldova has a promising opportunity to improve its domestic energy security and support economic growth by implementing a clear and long-term renewable energy programme,” said Gurbuz Gonul. Despite this, Republic of Moldova remains heavily import dependent for its energy. Today, almost 70 percent of the country’s primary energy supply comes from imports and only 18 per cent of its electricity needs are generated domestically. This presents not only economic challenges but also adversely affects the country’s energy security given its vulnerability to supply disruption. IRENA’s new Renewables Readiness Assessment (RRA): Republic of Moldova report developed in close cooperation with the Government of the Republic of Moldova, in the context of IRENA’s South East Europe Initiative, outlines the steps necessary to set the country on an accelerated path to renewable energy development. It highlights that while the deployment

of renewables – beyond biomass in the heating sector – has so far been limited, recently introduced support schemes for renewable electricity have piqued the interest of the country’s business community. Further measures are required, however, to build on this promise – fact recognised at the highest level in the country. The Minister of Economy and Infrastructure in the Republic of Moldova Chiril Gaburici said the Republic of Moldova is ‘crying out’ for a greater share of renewable energy in its mix, noting that in a country reliant on imports for three quarters of its energy needs, implementation of a renewable energy strategy has ‘tremendous importance.’ The recommendations outlined in IRENA’s report therefore represent an important contribution to national efforts. The report was also instrumental in building cooperation between the country’s public and private sector. With Republic of Moldova’s policy makers and broader energy community working towards an accelerated rampup of renewables, public-private dialogue and partnerships will be critical. “The development of this RRA report, as a process, has established a real platform for communication between the most interested parties, so that the interaction between them is as direct and productive as possible,” said Ministry of Economy and Infrastructure State Secretary Vitalie Iurcu speaking from the launch event. He noted that the process had been “to the benefit of the investor community, the national authorities and not least the consumer” in addition to serving the country’s sustainable development concerns. To build on that platform, concrete steps are required, added IRENA’s Gurbuz Gonul. “IRENA’s analysis outlines that in order to solidify the renewable energy sector’s foundations, an enhanced regulatory environment, improved bankability of renewable energy projects and a greater level of 69

public understanding and support for renewables, is necessary,” he underlined. “These measures will allow the country to put renewables at the heart of energy policymaking and enable a smooth and successful low-carbon transition.”

The report’s 10 key recommendations, are: • Adopt a 2030 renewable energy target in order to provide long-term predictability to the developer and investment community, and reflect the country’s energy vision; • Conduct a production cost modelling study to identify any potential operational constraints that could result in an inability of power supply to meet demand; • Strengthen the enabling regulatory frameworks by building on the established legislation to ensure smooth implementation of renewable energy auctions; • Streamline administrative pro ce dures and facilitate their enforcement to clarify and simplify procedures that are perceived by the private sector as an administrative burden. • Develop a strategy for the bioenergy sector to provide a comprehensive assessment of resource potential and clarity on the most suitable technology options; • Encourage the use of, and further develop, the online platform for biomass trade to facilitate market operations and the entry of new fuel suppliers. Furthermore, provide a bridge between biomass producers and potential customers as a repository of information; • Identify an optimal pathway to increase the role of biofuels in the transport sector; • Improve the bankability of renewable energy projects by increasing confidence of financial institutions in the market; • Enhance the capacity of local banks to facilitate the financing of renewable energy projects; • Develop a national strategy to raise awareness and boost understanding of renewable energy sources and their benefits to the country and its citizens.

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Energy for heating/cooling from renewable sources In 2017, renewable energy accounted for 19.5% of the total energy used for heating and cooling in the European Union, according to a report by the EU statistical office Eurostat. This is a significant increase from 10.4% in 2004. Increases in industrial sectors, services and households contributed to this growth. Aerothermal, geothermal and hydrothermal heat energy captured by heat pumps was also taken into account if reported by countries.

PRIMARY PRODUCTION OF ENERGY FROM RENEWABLE SOURCES, EU-28, 1990-2017

SOURCE: EUROSTAT

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n four EU Member States, more than half of the total energy used for heating and cooling came from renewable energy sources in 2017: Sweden (69.1%), Finland (54.8%), Latvia (54.6%) and Estonia (51.6%). In contrast, the lowest shares were in the Netherlands (5.9%), Ireland (6.9%) and the United Kingdom (7.5%). Renewable energy sources include wind power, solar power (thermal, photovoltaic and concentrated), hydro power, tidal power, geothermal energy, ambient heat captured by heat pumps, biofuels and the renewable part of waste. The use of renewable energy has many potential benefits, including a reduction in greenhouse gas emissions, the diversification of energy supplies and a reduced dependency on fossil fuel markets

(in particular, oil and gas). The growth of renewable energy sources may also have the potential to stimulate employment in the EU, through the creation of jobs in new ‘green’ technologies.

Renewable energy produced in the EU increased by two thirds in 2007-2017 The primary production of renewable energy within the EU-28 in 2017 was 226.5 million tonnes of oil equivalent (toe). The quantity of renewable energy produced within the EU-28 increased overall by 64.0% between 2007 and 2017, equivalent to an average increase of 5.1% per year. Among renewable energies, the most important source in the EU-28 was wood and other solid biofuels, accounting for 42.0% of primary renewables production

in 2017 see Primary production of energy from renewable sources, EU28, 1990-2017. Wind power was, for the first time, the second most important contributor to the renewable energy mix (13.8% of the total), followed by hydro power (11.4 %). Although their levels of production remained relatively low, there was a particularly rapid expansion in the output of biogas, liquid biofuels and solar energy, which accounted respectively for a 7.4%, 6.7% and 6.4% share of the EU28’s renewable energy produced in 2017. Ambient heat (captured by heat pumps) and geothermal energy accounted for 5.0% and 3.0% of the total, respectively, while renewable wastes increased to reach 4.4%. There are currently very low levels of tide, wave and ocean energy production, with these technologies principally found in France and the United Kingdom.

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Consumption of renewable energy more than doubled between 2004 and 2017 The EU seeks to have a 20% share of its gross final energy consumption from renewable sources by 2020; this target is distributed between the EU Member States with national action plans designed to plot a pathway for the development of renewable energies in each of the Member States. Figure 3 shows the latest data available for the share of renewable energies in gross final energy consumption and the targets that have been set for 2020. The share of renewables in gross final energy consumption stood at 17.5% in the EU28 in 2017, compared with 8.5% in 2004. This positive development has been prompted by the legally binding targets for increasing the share of energy from

renewable sources enacted by Directive 2009/28/EC on the promotion of the use of energy from renewable sources. While the EU as a whole is on course to meet its 2020 targets, some Member States will need to make additional efforts to meet their obligations as regards the two main targets: the overall share of energy from renewable sources in the gross final energy consumption see Share of energy from renewable sources, 2017 (in % of gross final energy consumption) and the specific share of energy from renewable sources in transport see Share of renewable energy sources in transport, 2017 (in % of gross final energy consumption). With more than half (54.5%) of energy from renewable sources in its gross final consumption of energy,

Sweden had by far the highest share among the EU Member States in 2017, ahead of Finland (41.0%), Latvia (39.0%), Denmark (35.8%) and Austria (32.6%). At the opposite end of the scale, the lowest proportions of renewables were registered in Luxembourg (6.4%), the Netherlands (6.6%), Malta (both 7.2%), Belgium (9.1%), Cyprus (9.9%) and the United Kingdom (10.2%). Compared with the most recent data available for 2017, the targets for France, the Netherlands and Ireland require each of these Member States to increase their share of renewable energy in final energy consumption by at least 5.0 percentage points. By contrast, eleven of the Member States had already surpassed their target for 2020. The EU member states that have already reached their targets are

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Bulgaria, Czech Republic, Denmark, Estonia, Croatia, Italy, Lithuania, Hungary, Romania, Finland and Sweden. Latvia and Austria are also just 1% away from their 2020 targets. The extent to which the targets have been exceeded was particularly large in Croatia, Sweden, Denmark and Estonia.

Wind power becomes the most important renewable source of electricity In 2017, electricity generation from renewable sources contributed more than one quarter (30.7%) to total EU-28 gross electricity consumption. Wind power

is for the first time the most important source, followed closely by hydro power see Gross electricity generation from renewable sources, EU-28, 19902017. The accounting rules in Directive 2009/28/EC prescribe that electricity generated by hydro power and wind power have to be normalised to account for annual weather variations (hydro is normalised over the last 15 years and wind over the last 5 years). The growth in electricity generated from renewable energy sources during the period 2007 to 2017 largely reflects an expansion in three renewable energy sources across

GROSS ELECTRICITY GENERATION FROM RENEWABLE SOURCES, EU-28, 1990-2017

SOURCE: EUROSTAT

the EU, principally wind power, but also solar power and solid biofuels (including renewable wastes). In 2017 hydro power has been replaced for the first time by wind power as the single largest source for renewable electricity generation in the EU-28. Indeed, the amount of electricity generated from hydro was relatively similar to the level recorded a decade earlier. By contrast, the quantity of electricity generated in the EU-28 from solar and from wind turbines was 31.6 times and 3.5 times as high in 2017 as it had been in 2007. As a result, the shares of wind power and solar power in the total quantity of electricity generated

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GROSS ELECTRICITY GENERATION FROM RENEWABLE SOURCES, EU-28, 1990-2017

SOURCE: EUROSTAT

from renewable energy sources rose to 37.2% and 12.3% in 2017, respectively. The growth in electricity from solar power has been dramatic, rising from just 3.8 TWh in 2007 to overtake geothermal energy in 2008, reaching a level of 119.5 TWh in 2017. Over this 10-year period, the contribution of solar power to all electricity generated in the EU-28 from renewable energy sources rose from 0.7% to 12.3%. There is a significant variation between EU Member States. In Austria (72.2%), Sweden (65.9%) and Denmark (60.4%) at least three fifths of all the electricity consumed was generated from renewable energy sources — largely as a result of hydro power and solid biofuels — while more than half the electricity used in Portugal (54.2%) and Latvia (54.4%) came from renewable energy sources. On the other hand, in Cyprus, Hungary, Luxembourg and Malta the share of electricity generated from renewable sources was less than 10%.

Almost one fifth of energy used for heating and cooling from renewable sources In 2017, renewable energy accounted for 19.5% of total energy use for heating and cooling in the EU-28. This is a significant increase from 10.4% in 2004. Increases in industrial sectors, services and households (building sector) contributed to this growth. Aerothermal, geothermal and hydrothermal heat energy captured by heat pumps is taken into account, to the extent reported by countries.

7.6% of renewable energy used in transport activities in 2016 The EU agreed to set a common target of 10% for the share of renewable energy (including liquid biofuels, hydrogen, biomethane, ‘green’ electricity, etc.) in the transport sector by 2020. The average share of energy from renewable sources in transport increased from 1.4% in 2004 to 7.6% in 2017. Among the EU Member States the relative share 74

of renewable energy in transport fuel consumption ranged from highs of 38.6% in Sweden, 18.8% in Finland and 9.7 % in Austria down to less than 2.0 % in Croatia, Greece and Estonia see Gross inland consumption of renewables, EU-28, 1990-2017. Renewable energy sources accounted for a 13.9 % share of the EU-28’s gross inland energy consumption in 2017. Wood and other solid biofuels continue to be the largest contributor to the mix of renewable energy sources. Hydro power and wood accounted for 91.3 % in 1990. However, their combined relative rate of increase since then has been much smaller than that of the other sources. Consequently, their combined share decreased to 53.4% in 2017 see Gross inland consumption of renewables, EU-28, 1990-2017. In some of the EU Member States there was a rapid take-up in the use of renewable energy as a transport fuel. This was particularly true in Ireland, Luxembourg, Malta, Finland and Sweden.

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METALS & MINING

Glencore to cap global coal output in climate shift Glencore, one of the worldâ&#x20AC;&#x2122;s largest diversified resource companies, recently announced it will not grow its coal output beyond current levels as it aims to align its business with efforts to battle climate change. The group said it would cap its global thermal and coking coal production at the current level of about 145 million tonnes after holding talks with the Climate Action 100+ initiative. 76

METALS & MINING

the energy and mobility transition and to limit its coal production capacity broadly to current levels.”

Glencore to meet Paris Agreement targets Glencore said it would implement recommendations that have been developed by the G20 Task Force on Climate-related Financial Disclosures (TCFD), which aim to help investors understand their financial exposure to climate risk and help companies better disclose this information.

Banks increase exposure to fossil fuels

he Swiss-based resources giant stated it will focus on commodities including copper, cobalt, nickel, vanadium and zinc, as part of its “global response to the increasing risks posed by climate change.” The group, whose global members collectively manage more than USD 32 trillion in assets, includes a number of major Australian superannuation funds such as AMP Capital, AustralianSuper, Cbus, IFM Investors, QSuper and BT Financial Group. “To deliver a strong investment case to our shareholders, we must invest in assets that will be resilient to regulatory, physical and operational risks related to climate change,” the company mentioned in a statement. “To meet the growing needs of a lower carbon economy, Glencore aims to prioritise its capital investment to grow production of commodities essential to

Australia’s major banks have been getting back into fossil fuels over the past year, casting doubt on their seriousness in tackling climate change through their investments. The guidelines, released in June 2017, take into account the Paris Agreement’s pledge to keep global warming to below 2 degrees Celsius. “Glencore recognises the importance of disclosing to investors how the company ensures that material capital expenditure and investments are aligned with the Paris Goals,” it said. “Glencore will continue to disclose the metrics, targets and scenarios we use to assess and manage relevant climaterelated risks and opportunities,” company representatives say. This includes each material investment in the exploration, acquisition or development of fossil fuel, including thermal and coking coal production. “In 2017, we announced our first target of reducing our greenhouse gas emissions intensity by 5 per cent by 2020 compared to a 2016 baseline,” the company said. “We are currently on track to meet this target”. Glencore is developing new, longerterm targets based on policy and technological developments that support the Paris goals, and intends to make these public in its 2020 annual report. Glencore also said it would examine its membership of trade associations to ensure those groups aligned with the Paris 77

climate agreement and Paris goals. These associations include the Minerals Council of Australia. Glencore is the largest coal-producing member of the Minerals Council. Minerals Council Chief Executive Tania Constable said the group welcomes any review and accepts that “the minerals industry needs to ensure its approach is attuned to community expectations as well as commercial imperatives”. Any organisation which seeks to participate in public debate and policy should welcome transparency and vigorous scrutiny of its policy positions, she said.

Furthering the commitment to the transition to a low-carbon economy Glencore has a main role to play in enabling transition to a low carbon economy. “We do this through our well-positioned portfolio that includes copper, cobalt, nickel, vanadium and zinc - commodities that underpin energy and mobility transformation. We believe this transition is a key part of the global response to the increasing risks posed by climate change,” the company representatives state. They recognise climate change science as set out by the United Nations Intergovernmental Panel on Climate Change. To meet the growing needs of a lower carbon economy, Glencore aims to prioritise its capital investment to grow production of commodities essential to the energy and mobility transition and to limit its coal production capacity broadly to current levels. Following engagement with investor signatories of the Climate Action 100+ initiative, the company is taking the following steps to further the commitment to the transition to a low-carbon economy: Paris-consistent strategy/ capital discipline; Reducing its greenhouse gas emissions intensity by 5% by 2020 compared to a 2016 baseline; Review of progress; Alignment with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations; Corporate climate change lobbying.

METALS & MINING

Record recycling rates and use of recycled materials in the EU Recycling rate of plastic packaging almost doubled since 2005, EU statistical office Eurostat informs. The recycling rates and use of recycled materials in the in the European Union (EU) are steadily growing.

verall, the EU recycled around 55% of all waste excluding major mineral waste in 2016 (compared with 53% in 2010). The rate for recovering construction and demolition waste reached 89% (2016), the recycling rate of packaging waste exceeded 67% (2016, compared with 64% in 2010) while the rate of plastic packaging was over 42% (2016, compared with 24% in 2005). The recycling rate for municipal waste stood at 46% (2017, compared with 35% in 2007) and for the waste of electrical and electronic equipment such as computers, televisions, fridges and mobile phones, which include valuable materials which can be recovered (e-waste) in the EU reached 41% (2016, compared with 28% in 2010). In spite of these high recycling rates, on average only 12% of material resources used in the EU in 2016 came

from recycled products and recovered materials - thus saving extraction of primary raw materials. This indicator, called circular material use rate, measures the contribution of recycled materials to overall demand. The indicator is lower than recycling rates, which measure the share of waste which is recycled, because some types of materials cannot be recycled, e.g. fossil fuels burned to produce energy or biomass consumed as food or fodder. A circular economy aims to maintain the value of products, materials and resources for as long as possible by returning them into the product cycle at the end of their use, while minimising the generation of waste. On March 4, the European Commission adopted the Report on the implementation of the Circular Economy Action Plan. The monitoring framework shows the progress in four areas of the circular 78

economy: production and consumption, waste management, secondary raw materials and competitiveness and innovation. It comprises of 10 indicators published by Eurostat.

Benefits of a circular economy A circular economy aims to maintain the value of products, materials and resources for as long as possible by returning them into the product cycle at the end of their use, while minimising the generation of waste. The fewer products we discard, the less materials we extract, the better for our environment. This process starts at the very beginning of a productâ&#x20AC;&#x2122;s lifecycle: smart product design and production processes can help save resources, avoid inefficient waste management and create new business opportunities. The circular economy offers an

METALS & MINING

OVERVIEW OF RECYCLING RATES OF DIFFRENT WASTE STREAMS (EU, 2016)

SOURCE: EUROSTAT

opportunity to reinvent our economy, making it more sustainable and competitive. This brings benefits for businesses, industries, and citizens such as: • More innovative and efficient ways of producing and consuming; • Protection for businesses against scarcity of resources and volatile prices; • Opportunities for local jobs and social integration; • Optimisation of waste management which boosts recycling and reduces landfill; • Energy savings as less production processes requires less energy; • Benefits for the environment in terms of climate and biodiversity, air, soil and water pollution.

TECH

Schneider Electric PacDrive 3 to optimize Fallas Automation’s R700 Case Packer Schneider Electric, the leader in the digital transformation of energy management and automation, announced Fallas Automation, a case packaging equipment manufacturer and long-standing customer, has expanded the use of Schneider Electric’s PacDrive 3 to its R700 Adabot Case Packer machines.

.allas Automation’s R700 Adabot picks up products and packages them in retail-ready cases, and Schneider Electric’s PacDrive 3 controls the entire machine. PacDrive manages all the kinematics for the individual axes, with its biggest machine including up to 20 axes, and provides greater productivity, flexibility, efficiency and availability. “Our PacDrive 3 technology unifies a programmable logic controller (PLC), a motion and robotics control functionality on a single hardware platform, bringing together machine and motion control to help our customers reduce complexities and improve efficiency,” said Gonzalo Buelta, Vice President, Industry OEM Business, U.S., Schneider Electric. “Fallas Automation has been a partner of ours for over a decade and we look forward to

continue working together to improve profitability, speed and agility for the future packaging industry.” Schneider Electric’s PacDrive 3, which is part of EcoStruxure Machine, is the company’s machine-centric automation architecture that enables machine builders to design better connected, more flexible and more efficient machines through advanced digital technologies and open standards. Fallas Automation has been using Schneider Electric technology for its case packer machines for years, and as one of our highest performing automation offering, they’ve decided to extend PacDrive 3 to additional machine lines for advanced performance. “Our partnership with Schneider Electric has been long lasting due to its unparalleled hardware and exceptional ongoing support,” said Jacob Cox, Controls Engineering Director at 80

Fallas Automation. “The company has continued to outperform by providing solutions for every opportunity we present, and we look forward to continue implementing its motion solutions on our case packing machines for increased productivity and maximum reliability.” Schneider Electric’s smart machine solutions are built on its Internet of Things (IoT)-enabled open and interoperable connected EcoStruxure™ system architecture and platform, from connected products to edge control to applications, analytics and services. Using open technology platforms, Schneider Electric helps original equipment manufacturers (OEMs), such as Fallas Automation, and machine builders create smarter, future-proof machines that are safe, connected, efficient and reliable. To date, more than 80,000 machines worldwide are controlled by PacDrive.

TECH

Testing services based on AI Bureau Veritas teams up with Microsoft Bureau Veritas, a world leader in testing, inspection and certification, and Microsoft, the leader in productivity platforms and services, announced on February 27 the conclusion of a global technical and business collaboration for the development of laboratory testing services based on artificial intelligence (AI).

Digital technology at the heart of Bureau Veritas’ strategy Bureau Veritas has incorporated digital technology as a key factor to leverage its growth initiatives as part of its 2015-2020 strategic plan. Bureau Veritas has teamed up with world leaders to offer new services incorporating new digital technologies in the fields of asset construction, with digital twins of buildings or ships, the control of the supply chain, with the blockchain, and the enhanced inspection of industrial assets by advanced data analysis. By joining forces with Microsoft, Bureau Veritas will develop the use of artificial intelligence in its testing activities, while consolidating its technical approach by creating a data lab bringing together Bureau Veritas’ experts in AI. “Digital technology is a major opportunity for our customers and for the development of our activities. This new collaboration with Microsoft aims to deploy artificial intelligence in our laboratories in order to deliver more

efficient testing services to our customers, while optimizing the working conditions of our laboratory technicians at the same time. And the new data lab will provide us with a breeding ground for genuine experts in the use of data to create value that will contribute to the achievement of our ambitions in the realm of the digital transformation,” Thomas Daubigny, Vice-President and Group Chief Digital Officer of Bureau Veritas declared.

Microsoft’s AI expertise as an enabler for Bureau Veritas’ digital transformation This alliance is the result of a first collaborative initiative in oil condition monitoring for Bureau Veritas’ Commodities business. Bureau Veritas plans to extend the use of artificial intelligence in all its laboratories through this partnership. These augmented laboratory services will be applicable to all types of tests on commodities, consumer products and components, in order to check that they comply with standards, 81

regulations or customer specifications, and to conduct independent risk assessments. The Bureau Veritas Group’s engineers and technicians will use the Microsoft Azure cloud platform to boost their production capacity and to deploy new test processes. Microsoft will support Bureau Veritas in the use of these tools, but also to show the Group’s customers how progress in artificial intelligence is being used in laboratory testing. “We are very proud that Bureau Veritas chose Microsoft to accelerate its digital transformation, in particular by creating its data lab. Thanks to artificial intelligence and the Azure Cloud, Bureau Veritas will be able to offer innovative new services to its customers, such as assistance with laboratory test procedures using machine learning, remote inspections that use visual recognition services and knowledge extraction, thanks to the semantic exploration of documentary content,” Laurent Curny, General Manager of Microsoft Services concluded.

TECH

BP partners with mobility technology accelerator Startup Autobahn BP has become the latest corporate partner to join Startup Autobahn, the global mobility technology accelerator founded by Daimler, Plug And Play, the University of Stuttgart and Arena2036.

tartup Autobahn identifies start-up ventures from around the world that have innovative techno lo gies and business mo dels, with a particular focus on develop ments in mobility. It connects them with its corporate partners to facilitate collabo ration and accelerate the development of products, services and ways of working that could advance mobility. “Working with start-ups and other industry-leading companies, BP is seeking to fuel cross-industry innovation and explore and accelerate the development of new advanced mobility technologies and business models. We’re committed to helping provide the energy needed to keep the world moving and working together in partnerships brings valuable insights that can help us advance the future of transportation,” Roy Williamson, Vice President, BP advanced mobility, said.

“To create an effective ecosystem centred on open innovation, we rely on strong and strategic partners. That’s why we are very proud of having BP’s advanced mobility unit join our STARTUP AUTOBAHN program,” says David Neef, Partnership Director of Plug And Play. Through its advanced mobility unit, BP is actively exploring how changes in fleets, last-mile logistics, electrification and on-demand mobility may shape future transportation. BP aims to be the energy provider of choice for transport. “We provide our customers with advanced liquid fuels and plan to provide the UK’s fastest and most convenient network of home, business and service station ultra-fast charging solutions for electric vehicles,” says BP. BP Ventures, supporting the advanced mobility unit, has already made a series of investments in mobility technology startups. These include investments in: • Freewire Technologies, the ma 82

nufacturer of mobile rapid-charging systems for electric vehicles enabling flexible deployment of charging facilities while building understanding of fastevolving markets; • StoreDot, the developer of innovative battery technology aiming to enable ultra-fast battery charging; • China’s NIO Capital US Dollar Fund, exploring investment opportunities in advanced mobility in China; and • Powershare, the provider of integrated hardware and software solutions in China that provides an online platform aimed at supporting streamlining of electric vehicle (EV) charging. In June 2018 BP purchased Chargemaster, the UK’s largest EV charging company. BP plans to begin rolling out ultra-fast charging at UK forecourts during 2019 and opened its first electric charging station in China with 66iFuel.

TECH

First commercial scale High energy density semisolid lithium-ion batteries

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 watthours per kilogram (Wh/kg), the current state-of-the-art industry benchmark for EV applications. These deliveries represent a significant milestone in the 24M mission to scale its unique, capitalefficient, low-cost 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 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.” 24M introduced its novel SemiSolid lithium-ion battery design in 2015, and has since leveraged its own semiautomated pilot facility to substantially advance both cell design and production readiness. The SemiSolid process, which uses electrolyte as the processing solvent, eliminates capital and energy intensive steps like drying, solvent recovery, calendaring and electrolyte filling. 24M leverages the process via differentiated cell designs, eliminating the need for significant inactive material (copper, 83

aluminum and separator), resulting in both a structural bill of materials advantage and a lower cost to manufacture. Further, the incorporation of electrolyte during the binderless slurry mixing process presents unique approaches to high energy density cell designs that have heretofore been impossible to explore. “We’ve been working diligently to advance our innovative technology and manufacturing process to address both the low-cost grid market, and, more recently, the high energy density requirements of the EV market,” said Rick Feldt, President and CEO of 24M. “We recognize the importance of a high-performance, low-cost solution to a market moving towards regional production, and are ready to scale our cells and manufacturing process.” “Demand for lithium-ion batteries is escalating rapidly due to increasing interest in electric vehicles and renewable energy, and the differentiated 24M manufacturing process and radical approach to cell design offers a powerful solution to cost-effectively respond to this need with a superior product,” said Koji Hasegawa, General Manager, Industrial Chemicals Department of ITOCHU Corporation. “Through this investment, ITOCHU is excited to be working closely with 24M to promote the global production of next-generation SemiSolid lithium-ion batteries.”

ANALYSIS

Revealing 2018 results A year governed by provisional status and legislative chaos 2018 was a difficult year for the energy sector, turmoil being felt at all levels. Record electricity prices on the energy exchange, continuation of interim managements at companies where the Romanian state is the majority shareholder, delaying the establishment of the new royalties for hydrocarbon producers and continuation of the profit reduction policy were the reasons that affected the evolutions of the sector. The coup de grĂ˘ce was given at the end of the year, namely Government Emergency Ordinance no. 114. A far-reaching piece of legislation that will hit even harder the investment programs of companies. From this perspective, 2018 can still be considered a good year for the energy sector. Text by Adrian Stoica 84

ANALYSIS

OMV Petrom reached the RON 4bn threshold OMV Petrom increased its net profit by 64% in 2018, reaching a level of RON 4bn, from RON 2.5bn in 2017. The record growth was generated exclusively by the evolution of the Upstream segment, which benefited from a favourable evolution of international oil prices. “Clean CCS Operating result increased by 47% to RON 4,804mn, supported by a more favourable market environment leading to higher prices in Upstream and by higher availability of the Brazi power plant, offsetting the less supportive refining margin environment and the lower Petrobrazi refinery utilization due to the planned turnaround in Q2/18,” reads the report published by OMV Petrom including the results obtained in 2018. Regarding the Upstream segment, OMV Petrom doubled in 2018 its operating result, despite an increase in production costs by 4% in Romania, to USD 11.38/ boe. Expressed in RON/boe, the company’s production cost is RON 44.83/boe in Romania. According to data presented by company officials, average daily production fell by 5% compared to last year, to RON 152.9 thousand boe/day, total oil, gas and NGL production stood at 55.82 million boe, and domestic oil production amounted

to 24.58 million bbl, by 2% lower than in 2017, mainly due to natural decline and conclusion of the transaction in 2017 with Mazarine Energy, partially offset by the contribution of new wells. Also, domestic gas production stood at 31.24 million boe, by 7% below the level in 2017, due to natural decline in main fields as well as planned and unplanned surface works. Investments in Upstream activities amounted to RON 3,150mln, accounting for 73% of total investments at group level for 2018, being by 29% higher than in 2017, result of boosting drilling and workovers, partially counterbalanced by the lower number of field redevelopment projects in execution. “Exploration expenditures increased to RON 466mn as a result of the increased drilling activities in deep onshore exploration wells. As of December 31, 2018, the total proved oil and gas reserves in OMV Petrom Group’s portfolio amounted to 532mn boe (of which 509mn boe in Romania), while the proved and probable oil and gas reserves amounted to 810mn boe (of which 766mn boe in Romania). The Group’s three-year average Reserve Replacement Rate increased to 38% in 2018 (2017: 34%), and in Romania it increased to 34% (2017: 29%). For the 85

single year 2018, the Group’s Reserve Replacement Rate increased to 42% in 2018 (2017: 34%) and in Romania it increased to 40% (2017: 33%),” OMV Petrom’s report shows. Regarding the Downstream segment, the Clean CSS Operating Result was RON 1.7bn in 2018, following the negative evolution of the Downstream Oil segment, partially offset by a higher result of the Downstream Gas segment. In 2018, the refining margin of OMV Petrom fell compared to 2017 by USD 1.47/bbl, to USD 6.28/bbl, following an increase in oil prices. The refinery utilization rate was 85%, impacted by the six-week planned turnaround (2017: 93%). Group total refined product sales amounted to 4.99mn t in 2018, 2% lower compared to 2017, mainly reflecting the decrease in total sales of refined products, except for retail sales. Group retail sales were 1% higher yoy, reaching 2.74mn t, as a result of a positive trend in the domestic market, despite the competition network growth. Group non-retail sales decreased by 5% compared to 2017, as an effect of lower product availability due to the refinery turnaround. Downstream Gas Clean Operating Result increased to RON 360mn in 2018 from RON 220mn in 2017, reflecting the optimization of products and clients’ portfolios, as well as

ANALYSIS

the improved performance of the power business supported by higher availability of the Brazi power plant. According to OMV Petrom’s estimates, national gas demand remained stable vs. 2017 and was covered by the lower domestic production and higher imports. On the Romanian centralized markets, the weighted average price of natural gas for transactions closed in 2018 (68.5 TWh), with delivery until end-2019, was RON 92/MWh. In 2018, OMV Petrom’s gas sales volume decreased by 8% yoy, mainly due to lower equity production. On the centralized markets, OMV Petrom sold 13.8 TWh in 2018, with delivery until end-2019, at an average price in line with the market price.

Business plans reviewed downwards “Recent regulatory instability has led us to revisit our growth investment plans, while we seek clarity on the Romanian investment climate,” OMV Petrom representatives announced. For 2019, OMV Petrom forecasts that the average price of Brent oil will be USD 65/bbl and the refining margins are estimated to be at a similar level to that in 2018. Also, demand for oil products, gas and power is expected to be broadly similar to 2018. The company has planned investments of around RON 3.7bn for 2019, mainly in Upstream (75%). “Our focus remains on extracting the highest value from the existing Upstream portfolio, thus we estimate the daily average production decline to be contained at around 5% yoy, excluding portfolio optimization.” OMV Petrom plans to drill around 100 new wells and sidetracks and maintain a constant level of workovers yoy. Exploration expenditures are estimated to be around RON 380mln. Regarding the start of works at Neptun Deep Block, OMV Petrom officials mentioned that “The current legislative environment does not provide the necessary prerequisites for a multibillion investment decision. We remain keen to see the Black Sea developed and we will continue the dialogue with

the authorities to understand the way forward.”

Rompetrol Rafinare – Remarkable operational performances in 2018 Rompetrol Rafinare, a member of the KMG International Group, had remarkable operational performances in 2018 for their two refineries – Petromidia Navodari and Vega Ploiesti, but also for the Petrochemicals Division on the Midia industrial platform, against the backdrop of increased market volatility, especially in the fourth quarter of the year that passed. With the support of the Group and its sole shareholder - KazMunayGas, the company continued last year the positive trend it started in 2015 due to major investments made between 2007 and 2013 in order to extend and modernise the production units in Romania. Therefore, 22 new historical records were obtained, half of them at Petromidia refinery. “Year 2018 has become a turning point for the 40-year history of the Petromidia Refinery - raw materials processed, products obtained, processing capacity utilisation degree, reduction of technological losses, improvement of the energy efficiency index or over 2 million hours free of incidents. We have been building together for 11 years and during this time we managed to increase the activities and operations on the Petromidia platform, and together we are prepared for new challenges that motivate us and give us the strength to continue”, says Yedil Utekov, Rompetrol Rafinare General Manager.” In the context of the increases in prices and petroleum products commercialised during last year, Rompetrol Rafinare reached the gross turnover of USD 5.26 billion last year, which is 27% higher than the same indicator in 2017. Regardless of the company’s production activities, the consolidated financial results recorded in 2018 were mainly driven by the high volatility of the oil and gas market environment, the major fall in the gross refining margin in the 86

last quarter of the year - from USD 55.2/ tonne in Q4 2017 to 40.7 in Q4 2018, but also in the general economic environment in Romania and in the region (currency exchange rate, fiscal regime etc.). The operating result (EBITDA) decreased by 27% in 2018 - from USD 210.7 million in 2017 to USD 153 million, and the net consolidated result obtained was negative: USD 23 million as compared to 2017, when the indicator was positive around USD 21 million. Rompetrol Rafinare continued as Romania’s largest petroleum exporter, as the quantities exported by the refining and petrochemicals divisions to the KMG International subsidiaries in Bulgaria, Moldova and Georgia and to the partners in the Black Sea region increased by 27% last year, up to USD 1.7 billion. The gross turnover of the refining the segment amounted to more than USD 4.46 billion in 2018, 28% higher than the previous year, in line with the trend in the international quotations for raw materials and petroleum products, but also for the volumes obtained from production units. Despite the historical operating and production results, the financial results of the refining activity in 2018 were negatively influenced by unfavourable market conditions, especially in the fourth quarter, which affected the annual result of the segment. The trend in the international refining margins, the volatility and variation in raw materials and petroleum products, the revision in the last quarter of the year also led to a 3% decrease in the gross margin of processing of the Navodari unit as compared to 2017 and 15%, respectively, in the case of net refining margins. The Petromidia Navodari refinery recorded 11 new operating records last year, with historical levels reached on processed raw materials (5.92 million tonnes), petroleum products (5.78 million tonnes), gasoline production (1.36 million tonnes) and diesel fuel (2.75 million tons), fuel for aircrafts (317 thousand tonnes), white product yields (86.2%), refining capacity utilisation (91.98%). These include the

ANALYSIS

improvement of the energy efficiency index - EEI (96.1) and the reduction of technological losses (0.83% wt.). In 2018, the total fuel sales were 4.44 million tonnes, 5% higher than the volume sold in 2017, half of which were delivered on the domestic market. Established in 1905, the Vega Refinery in Ploiesti recorded 8 historical records for the year 2018 - processed raw material, obtained products (bitumen, solvent, and hexane), the degree of refining capacity utilisation, technological losses and the energy efficiency index. Thus, the Ploiesti unit processed a quantity of 406 thousand tonnes last year, 9% higher than the 2017 indicator. This trend was also reflected in the main products obtained - bitumen (over 100 thousand tonnes), hexane (84.5 thousand tonnes) and solvents (43.5 thousand tonnes). Vega operates in perfect synergy with the Petromidia Refinery in Navodari, the largest in Romania and one of the most modern in the Black Sea Region. Thus, Petromidia supplies the full quantity if raw materials/semi-finished products to the Ploiesti refinery, needed to obtain special products with high added value. The petrochemical division registered a turnover of USD 202.7 million in 2018, 6% higher than the level recorded in the similar period of 2017. Currently this is the only unit producing polymers in Romania. The financial results were strongly affected last year mainly by the unfavourable market conditions and the high volatility of raw materials and petrochemical products, with the LDPE/ HDPE petrochemical margins being the lowest in the past 7 years. Thus, the operating result (EBITDA) obtained last year was still negative, i.e. approximately USD 18 million. At the same time, the net result was negative, i.e. USD 37.4 million. The Petrochemical Division of the refinery obtained an increase of about 3% in processed raw materials (propylene, ethylene) last year, from 199 thousand tonnes in 2017 to 203 thousand tonnes. Given the unfavourable context, the

petrochemicals division reduced its processed ethylene by 6% - imported raw material required for low and high density polyethylene installations. At the same time, the company increased its processed propylene by 7%; this raw material is provided by the Petromidia refinery. The petrochemical segment is the only polypropylene and polyethylene producer in Romania. The dynamic development strategy ensures a competitive position for the company in the domestic market as well as on the regional markets - Black Sea and Mediterranean Sea region, Central and Eastern Europe. The consolidated gross turnover of the distribution segment amounted to USD 3 billion in 2018, 26% higher than the 2017 result. The financial results were affected in 2018 by the trend in the international quotations for fuels - which saw a 21% appreciation for Euro 5 gasoline and a 30% appreciation for Euro 5 gas oil, the RON/USD exchange rate and the general economic context. For example, in the last quarter of the year, international quotations rose by an average of 16% for gas oil and 2% for gasoline, and in the context of a 4% depreciation of the RON/USD exchange rate, the impact on the price of domestically traded fuels was 6% for gasoline and 21% for gas oil. These market changes were determined by the high pressure on the margins of the distribution segment, and pump prices followed the growing trend of macroeconomic growth; however, these could not be fully assimilated on the level of end-users. Rompetrol Downstream and Rompetrol Gas increased their total volume of products sold by 6% up to a level of 2.38 million tonnes (gasoline, gas oil, liquefied petroleum gas). Retail and wholesale fuel sales increased by 3% and 5%, respectively, in 2018 as compared to the 2017 volumes. Last year, Rompetrol Downstream continued the fuel distribution network expansion programme and, at the same time, the filling station rebranding programme, reaching 918 units at 87

the end of 2018, as compared to 807 commercialisation points in 2017.

Romgaz: Growing production and investments, declining profit Romgaz estimates for 2017, a net profit of RON 1.4bn, down 22% compared to the profit posted in 2017, at a turnover of RON 5bn (+9%) and a gas production volume up 3.39% (5.33 billion cubic meters). Investments made in 2018 totaled RON 1.15bn (+47% year-on-year) and exploration cost, representing 3D seismic services aimed to discover new reserves doubled to RON 98mln, compared to RON 48mln in 2017. The company maintains a high rate of the net profit margin, to 28.6% in 2018. Royalties, the windfall tax and the reduction of storage tariffs are the main elements contributing to the reduction of the net profit, according to data provided in the preliminary report. Expenses with petroleum royalties (RON 445mln in 2018) increased by 51% compared to 2017 (RON 294mln), following the provisions of NAMR Order no. 32/2018, which introduced as reference price the level recorded on the Vienna exchange. The tax on windfall gains obtained as a result of price deregulation in the gas sector increased by 43%, to RON 164mln. Revenues from gas storage plunged by 41%, being estimated at RON 298mln, following the decrease in storage tariffs approved by ANRE, despite an increase in the quantity of gas injected in and respectively extracted from the underground storage facilities in 2018. Another reason causing the lower profit is the reduction by 30.6% of revenues from electricity sales, following the decline in production by 37.48%, the reason being the higher market coverage by Hidroelectrica, the increased demand for gas for consumption and storage. Romgaz also announced an impairment of RON 103.6mln on assets related to gas fields, following an internal analysis on their profitability, as well as the registration of an impairment of RON

ANALYSIS

54mln on assets representing the current Iernut power plant, due to forecasting the closure of its activity in 2020, the quoted report also mentions. Regarding prospects, the company will focus mainly on the following directions: • Increase in the portfolio of resources and reserves through the discovery of new resources and increasing the degree of recovery of reserves; • Optimization, development and diversification of the underground storage activity; • Consolidating the position on the electricity supply market (Iernut and Mintia); • Exploring new opportunities of development in the field of renewable energy sources; • Diversifying the activity through investments in the petrochemical industry. Advisability studies will be started.

Transgaz: Profit reduced by 14% and investments surging 372% Transgaz announced that its preliminary gross profit for 2018 fell by 14%, respectively by RON 100,965 thousand, to RON 498.95mln (EUR 105mln). Operating revenues decreased by 6% year-on-year, to RON 1.64bn, mainly due to lower revenues from fees, capacity booking and international gas transmission, according to an unaudited report of the company. Financial revenues fell by RON 143.7mln following the transfer of the provision for the depreciation of the stake held by Transgaz in the share capital of Nabucco Gas Pipeline International. Operating costs were 3% lower, amounting to RON 1.05bn in 2018, as the company recorded savings mainly by reducing consumption and technological gas losses and due to lower prices of auxiliary materials, as well as the lower expenses for staff, maintenance and transmission. According to the Development Plan for the period 2018-2027, which will

be submitted for shareholders’ approval in the meeting scheduled for March 11, Transgaz will invest EUR 1.9bn to expand the gas transmission system. The most important project remains BRUA (Bulgaria - Romania - Hungary - Austria Interconnector), with the three phases: phase 1 - worth EUR 478.6mln; phase 2 - which will require EUR 68.8mln; followed by phase 3 - worth EUR 530mln. Other major projects target development on Romania’s territory of the southern transmission corridor, to take over gas from the Black Sea coast, where EUR 360mln will be invested. To develop the gas transmission system in the eastern part of Romania, investments of EUR 174mln will be allocated, and for NTS interconnection with the T1 transit pipeline and reverse flow in Isaccea another EUR 101mln will be spent. At the same time, interconnection with Ukraine will cost EUR 125mln and that with Serbia - EUR 42mln.

Declining turnover at Oil Terminal Oil Terminal, which operates the petroleum terminal in the Port of Constanta, last year posted a net turnover of RON 145.96mln, down by RON 7.63mln compared to RON 158.03mln in the previous financial year. The net result stood at only RON 317,000, Oil Terminal thus recording a loss of almost RON 2mln from the gain reported for the first nine months. Oil Terminal last year obtained revenues from the provision of services of RON 143.86mln, by 7.79% lower than the figure of RON 156.01mln posted in 2017. The sharpest decline was recorded in the chapter ‘other operating revenues’, i.e. a loss of approximately RON 986,000, compared to RON 9.63mln in the previous financial year. Thus, the company posted total operating revenues of RON 158.42mln, down by 7.60% compared to RON 158.42mln recorded in the previous year. On 31 December 2018, the total assets of Oil Terminal stood at RON 541.92mln, 88

up 0.37% compared to RON 539.92mln at the end of 2017. In the meantime, the total debts increased by 6.61%, to RON 90.12mln, from RON 84.53mln.

Record profit for Hidroelectrica According to the unaudited preliminary financial results of Hidroelectrica for 2018, the turnover increased by 30.7% compared to 2017, to RON 4.25bn. EBITDA increased by 35% in the same period, to RON 3.05bn, while the net profit went up 13.9% vs. 2017, to RON 1.55bn. The total quantity of electricity sold in 2018 was 16.9 million MWh, higher by 22.7% compared to the previous year, according to the annual report for 2018 of Fondul Proprietatea. Fondul Proprietatea announced that it adjusted downwards by RON 391mln the value of its stake of around 20% in Hidroelectrica, the largest electricity producer in Romania, following the issue of GEO 114 and the first elements of secondary legislation prepared by ANRE for its enforcement, but even under these circumstances, compared to the end of 2017, the value of FP’s stake in Hidroelectrica increased by almost 9% (RON 319mln), from RON 3.566bn to RON 3.885bn. Considering this evaluation, the value of the entire company rose from RON 17.83bn in 2017 to RON 19.42bn today.

Market liberalization favouring Nuclearelectrica Nuclear energy producer Nuclearelectrica in 2018 posted an EBITDA of RON 1.09bn, climbing by 17.88% compared to the previous financial year. Nuclearelectrica, the company that operates the nuclear power plant in Cernavoda, last year posted total revenues of RON 2.13bn, by 12.10% higher than the amount of RON 1.90bn in 2017. In the meantime, total operating expenses increased at a slower pace, +6.45%, to RON 1.65bn, from RON 1.55bn. Thus, the company obtained an operating profit of RON 535.21mln,

ANALYSIS

surging 41.59% compared to the amount of RON 377.99mln posted in 2017. Last year, Nuclearelectrica achieved net financial revenues of RON 36.19mln, compared to financial losses of RON 18.45mln a year before. The net profit increased by 27.40%, to RON 390.54mln, from RON 306.54mln. In the first 9 months, the net gain was RON 321mln. Contributing to the increase in profits was also the full liberalization of the electricity market in Romania, as of 1 January 2018. The total assets of Nuclearelectrica were on 31 December 2018 RON 8.80bn, by 4.76% lower than the amount of RON 9.24bn at the end of 2017. In the same reporting period, total debts fell by 3.98%, to RON 1.69bn, from RON 1.76bn.

Transelectrica: Net profit three times higher Transelectrica reported for 2018 a net profit of RON 89mln. The level is over three times higher than in the previous year, when it reported RON 28mln, according to the preliminary financial report of the company. The gross profit rose by 106%, from RON 47mln in 2017 to RON 96mln in 2018. Revenues totalled RON 2.719bn. Last year, they recorded a decline by 11%. Long-term debts reached at the end of last year the value of RON 630mln. They fell by 8%, following reimbursements made according to the existing loan agreements. Short-term debts also recorded a growth by 10% (from RON 1.108bn on 31 December 2017 to RON 1.215bn on 31 December 2018). In 2018, Transelectrica posted an operating profit growing by 54% compared to 2017. The advance took place amid a decrease by 13% in total operating costs (including amortization). Thus, the decrease by 11% in operating revenues was offset. The sector of activities with allowed profit recorded a slight increase in revenues. The advance was 0.4%. EBITDA was influenced by the negative evolution of the functional system services segment and unplanned exchanges declining by 7% compared to 2017 (RON 64mln in 2018 compared to RON 68mln in 2017). Also, net domestic

consumption increased by 2.2%, while the net energy production increased by 1.5%. Physical export cross-border exchanges fell by 11.8% compared to the similar period of 2017, and import cross-border flows recorded a decrease by 11.4%. Transelectrica SA increased in 2018 its revenues from the allocation of interconnection capacity by 8% compared to the value achieved in 2017 (RON 82mln in 2018 compared to RON 76mln in 2017), confirming that, starting with December last year, the capacities booked by traders for both export and especially for import had an upward trend.

Electrica: Net profit up 34.3% Electrica S.A. posted a net profit of RON 230.395mln in 2018, up 34.3% compared to 2017, when the company recorded a net profit of RON 171mln. The individual net profit (preliminary and non-audited) reported by the company amounted to RON 297.973 million in 2018, increasing by 15.4% compared to the previous year, and the net profit per share was RON 0.88, compared to RON 0.76 in 2017. Company’s assets are worth RON 7.529bn, in slight decline from RON 7.617bn in 2017. Electrica’s equity amounted to RON 5.628bn at the end of last year, while total debts stood at RON 1.9bn. Electrica Group has recently announced that it plans investments worth a total of RON 739mln this year, of which RON 710mln represent the investment plan of distribution subsidiaries. Electrica Group provides services to over 3.7 million customers and has national coverage - with organization in three areas for electricity distribution: Transilvania Nord, Transilvania Sud, Muntenia Nord and the entire country for electricity supply and for maintenance and energy services. As of July 2014, Electrica has been a company with private majority capital, listed on the Bucharest and London stock exchanges. Electrica is the only Romanian company in the field of electricity distribution and supply in Romania. 89

Conpet’s profit fell by 20.1% Conpet S.A. ended 2018 with a net profit of RON 59.466mln, by 20.1% lower than the result in the previous year, and the company’s turnover amounted to RON 385.140mln, after an increase by 2.2% year-on-year. Revenues from transmission hold a 98.82% share in turnover, the difference of 1.18% representing revenues from activities such as renting out land and telecommunication equipment, wagon maneuver, sale of tubular goods etc. The total assets of the company increased by 0.2% compared to the level recorded on 31 December 2017, to RON 750.520mln, following an increase in fixed assets. Equity recorded rose slightly, by 0.3% compared to 31 December 2017, reaching RON 660.208mln; total debts went up 0.1%, to RON 89.124mln. Operating expenses incurred in 2018, in the amount of RON 353.601mln, climbed by 7.8% compared to those recorded in 2017, mainly due to higher staff expenses and expenses with provisions established for employee benefits (holiday leaves and employee participation in profits). The operating profit achieved in 2018, of RON 64.834mln, plunged by 21.9% compared to 2017, mainly due to an increase in staff expenses. According to the company, investments made in 2018, in the amount of RON 69.470mln, were financed from the upgrade share with RON 63.065mln and from other own sources with RON 6.405mln. The investment program for 2018 was accomplished at a rate of 91% and considered the continuation of works for the rehabilitation of oil and gasoline transmission trunk pipelines, as well as investment works on installations, equipment and endowments related to the national petroleum transmission system. Therefore, although in 2018 the energy companies have faced an unstable regulatory framework, which in some cases prompted the review of investment plans downwards, most of them have recorded however positive results.

EVENT

he energy sector is under going deep changes. These days, maybe more than ever, young professionals that are studying, working or are just being interested in the energy field for its interconnections with the economy, society and/or environment, need a broader grasp of the sector. Thus, the EPG Summer School 2019 is a great opportunity for students and young professionals all over the world to interact, debate and get together in order to build a sense of community. With a focus on Smart Transformation in the Energy Sector, the Summer School aims to facilitate a cross-disciplinary and cross-border collaboration in order to advance the energy transition goals. To this purpose, the global trends of energy markets and policy making must well understood, in their mutually influencing dynamics and against the background of the energy sector’s greatest externality: global warming. In this respect, EPG Summer School pays significant attention to decarbonization initiatives around the globe and particularly in Europe, while also focusing on the major role

of renewable energy and its evolution over the years. A through discussion of the oil and gas sector, with its challenges and prospects, will be included on the agenda in order to address the future of transportation issues. Then, the risks and opportunities of the nuclear sector will be highlighted, as well as the transition aspects to a clean and safe power generation system. Special attention will be given to digitalization, smart technologies, energy efficienc3y and emerging products and services, without forgetting the requirements of sustainability and affordability. The first edition of Energy Policy Group’s Summer School took place between 23 and 27 July, 2018 in Bucharest, with a focus on ‘Smart Transformation in the Energy Sector.’ The Summer School enjoyed the participation of 15 young energy professionals from Romania and across the world and of 24 reputed speakers, Romanian and international. In one densely packed week, together they debated the challenges and prospects of the energy sector and of the policy and market tendencies that are shaping the ongoing smart transition. 90

EPG Summer School 2018 was only the first step of an ambitious educational project. Building on this first edition, EPG Summer School 2019 will take place again between 25 July and 2 August 2019 in Bucharest. This year, EPG will concentrate more on decarbonization initiatives around the globe and particularly in Europe, while also focusing on the major role of renewable energy and its evolution over the years. Additionally, special attention will be given to digitalization, smart technologies, energy efficiency, emerging products and services, while also considering requirements of sustainability and affordability. The ambition for this year’s edition will be to draw a balance between interactive seminars or debate sessions (webinars, documentary screening) – led by reputed experts – and field trips to a variety of energy sector assets and facilities (wind farm and nuclear power plant). The second edition of EPG Summer School will be held between 25 July and 2 August 2019 in Bucharest. Details and application form: https://www.enpg.ro/summerschool/

Balkan and Black Sea Petroleum Association

BBSPA

4-5 April, 2019 Intercontinental Hotel, Bucharest

ANNUAL CONFERENCE www.bbspetroleum.com

POLICY ISSUES ACTIVITIES UPDATES KEY PROJECTS

4th April - Day 1 Key Note Opening Address by Iulian-Robert Tudorache, Secretary of State, Ministry of Energy of Romania Key Note Address by Zoltan Nagy-Bege, Vice-President, ANRE Veneta Tsvetkova, Director of Directorate for Energy Projects , Ministrey of Energy of Bulgaria. Energy Strategy of Bulgaria Session I. Legal and Regulatory Framework Alexander Yordanov, Member of Bulgarian Energy and Water Regulatory Commission: Balkan Regional Gas Market Christian Filippitsch, Partner, Norton Rose Fulbright: EU Energy Laws Oliver Altenhoff, Head of Regulatory Affairs, Open Grid Europe: Security of Supply Michael Polkinghorne, Partner, White and Case: Competitive Markets Stefan Lochner, Manager, Frontier Economics: Recent Arbitration Cases in CEE Energy Sector Session II. Infrastructure, Markets and Prices Attila Török, Head of Gas Exchange Services, Central European Gas Hub: Gas Hubs Dimitris Mezartasoglou, Head of Research Team, IENE: Gas Trading Hub in SE Europe Paolo Maffeis, Senior Manager, PRISMA European Capacity Platform: Ivestments in New Gas Transmission Michael Unterberger, Gas Connect Austria: Incremental Capacity Project between Hungary and Austria Jörn Brunotte, Senior Account Manager, Supply & Origination Projects East, Uniper Kamen Ivchev, CEO, MET Energy Trading Bulgaria: Regional Gas Trade Development Chikako Ishiguro, Senior Analyst, Osaka Gas: LNG Markets Development John Roberts, Senior Fellow, Atlantic Council: The Future of the SGC and Prospective Diversification Christos Papadopoulos, Regional Director Europe, Energy Exemplar Europe: Globalised Gas Market Piotr Kuś, Deputy Director in the Development Division, Gaz-System Svetoslav Benchev, Bulgarian Oil and Gas Association: The New Bulgarian Law on Fuels - a Burden or a Chance 5th April - Day 2 Session III. Upstream and Supply Saniya Melnicenco, President, ROPEPCA: Regulatory Framework for Petroleum Operators in Romania Spyros Bellas, Vice President, Hellenic Hydrocarbon Resources Managemen: Search for Oil and Gas in Greece Ilona Vari, Head of EU Regulatory Affairs of MOL: Decarbonization Policies and Investments in Upstream Activities Kostadin Sirleshtov, Partner, CMS: Regulatory and Upstream Developments in Bulgaria Varinia Radu, Partner, CMS: Upstream Activities and Legal Update in Romania Mihai Petre, Senior Manager, Deloitte:Taxes and Royalties Trends in Romania Denitsa Dimitrova, Senior Manager, Deloitte: Taxes and Royalties Trends in Bulgaria Gianpaolo Dalla Vedova, Lloyd’s Register, Business Development Manager: Offshore Safety Imad Garaisy, Director Energy, Fenchurch Faris: 3D Printing, from Hype to Reality and Insurance Implications

Media Partners

EVENT

Solutions for a 2050 carbon-free Europe The contribution of low carbon technologies In the context of Romanian Presidency of the Council of the European Union, the Ministry of Energy, in cooperation with the European Atomic Forum (FORATOM) and the Romanian Atomic Forum (ROMATOM), organized the Conference ‘Solutions for a 2050 carbon-free Europe – The contribution of low carbon technologies.’

he event, which took place at the headquarters of the Permanent Representation of Romania to the European Union in Brussels, created a platform for debates on challenges of the European energy system, namely the transition to decarbonization of the energy sector in the European Union. The conference was opened by Romanian Energy Minister Anton Anton and European Commissioner for Climate and Energy Policy Miguel Arias Cañete. “We are going through a crucial moment when we have a great responsibility to our citizens, towards whom we need to make clear, predictable and smart decisions for the development of the European energy system. Throughout this process we have to keep

in mind energy security, the affordability of costs for the population, the social and economic development of the Member States and the responsibility towards the environment. For this reason, in order to respond to these challenges and reach the targets set by the European Union on decarbonization, we need all the forms of clean technologies. Nuclear energy, which is globally recognized as a low-carbon energy source, can contribute to ensuring energy security and combating climate change,” Minister Anton Anton pointed out. In turn, Miguel Arias Cañete presented the Strategy of the European Commission for reducing emissions of greenhouse gases in the EU, in the context of objectives set by the Paris Agreement. The Commissioner noted that one of the future challenges would be to identify the 92

solutions leading to the energy system’s transformation towards decarbonization, in the conditions of increasing economic competitiveness and creating new jobs. At the same time, Miguel Arias Cañete said that the development and implementation of the new technologies requires particular attention, as in order to reach the ambitious targets in the field of energy and environment a smooth transition for the European consumers is necessary. The event of the Romanian Presidency of the European Council of the EU brought together dozens of representatives from various low-carbon emissions electricity production sectors (nuclear, wind and hydro), as well as representatives of energy-intensive consumers (the International Federation of Industrial Energy Consumers).

EVENT

First Conference of Romanian Prosumers 150 energy prosumers, utility companies, PV suppliers and central authorities participated on February 18 at the First Conference of Romanian Prosumers, organized by EnergiaTa (â&#x20AC;&#x2DC;YourEnergyâ&#x20AC;&#x2122;), a Romanian initiative launched three years ago in order to make prosumers a reality in Romania and to accelerate the transition to a green economy.

tarting January 1st, 2019, after many efforts, Romanians can produce energy from the sun and inject it into the grid, receiving money for the produced energy, namely: 0,046 euros/kWh. In March-April, the Environmental Funds

Administration will run a program to encourage the adoption of solar energy, offering up to 4200 euro as subsidy. According to the new legislation, energy distributors have the obligation to make connection within 30 days, and suppliers are obliged to purchase electricity at the regulated price. 94

In the first part of the Summit Conference, representatives of ANRE - National Regulatory Authority for Energy, AFM - Environmental Fund Administration and Transelectrica talked about the subsidy program, which will give the AFM almost 120 million euros for the Romanians. They will be able to

EVENT

receive up to 4200 euro, covering up to 90% of the amount needed to buy and install solar power systems. They also discussed the regulations generated by ANRE in the context of European legislation, the technical requirements and the certification of the equipment by Transelectrica and about the procedures of three of the energy distributors on the market. “This meeting aimed to encourage installers to get involved in the AFM program and to clarify the prospect’s path for those interested. Authorities, stakeholders and decision-makers have met the energy community to find out real market status and respond to the questions of those present, thus giving individuals the chance to apply and benefit from a smooth path to become prosperous,” said Claudiu Butacu, cofounder of the energy project. The settlement process involves the involvement of installers, which must be validated by the AFM. The subscriber period is 25.01 - 01.03.2019, but so far, a small number of installers have registered. Beneficiaries will be able to apply to the grants offered not directly, but by these installers. In March the list of installers validated on the AFM website will be published. The assignment of the enrolled will be done on the first come, first served system, so those who apply just need to make sure they are eligible and apply as soon as possible. “In March-April, we hope to start the program for individuals, after adopting the AFM budget and obtaining the European funds from the POR. Individuals will be able to sign up with the validated installers, there will be an IT application, we have tried to create a system. Documents will be submitted directly to installers, they will be sent in real time through the application,” said Andrei Iorgulescu, representative of the Environmental Fund Authority (AFM). The main problem for installers saying they are reluctant and not enrolled in large numbers is the fear that they will not recover their money or that they will recover them very late; given the large

amounts invested, this is a risk for all small and medium businesses. “We are quite advanced, we have over 40 files submitted for validation, we hope to have as many as possible to cover all regions of the country. We assume the term of 2-3 weeks, even if it is not written, because until the end of the validation period we cannot make any legislative changes in this respect,” mentioned Andrei Iorgulescu. At this time there is no official information on the number of existing prosuments, EnergiaTa estimates show somewhere between 10 and 20, a few hundred others being in the process of becoming prosumer. “It is a fact that the interest that we find is major, by your presence here at this conference [...] ANRE will try to work on a guide of the prospective or will support the realization of one,” said Ion Dumitru, Directorate General Energy Efficiency, Renewable Sources, Cogeneration and Thermal Energy, National Regulatory Authority for Energy. In the second panel, the representatives of 3 energy companies on the distribution area explained what the process is and what is the company’s position with regard to prosumers. “Enel’s vision is the active consumer of the energy ecosystem, so we hope that the procedures will evolve to a simpler version. I would look at the stage in which we are a first iteration, which needs to be improved by all those involved,” said Andrei Covatariu, responsible for energy management regulations and Enel X. “I think the next year will be encouraging for prosumers, but the biggest pressure will be on the shoulders of network operators due to the high volume of demand we anticipate. However, we declare ourselves prepared for the wave of demands that will follow,” said Aurora Raducanu, Network Extension Division, Oltenia Distribution. “We are ready for prosumers, for which we have put details about the ATR release procedure,” said Ligia Costin, director of distribution network development, Electrica. 95

Another point raised by those present was the necessity and implications of the Building Authorization. One of the points mentioned was the possibility for the mayor to oppose or postpone the obtaining of authorizations at a local level for various reasons. “In our talks with the Ministry of Development, we have tried to avoid the building permit. As there is a derogation for solar panels that produce heat, we tried to introduce the same thing for photovoltaic, but we did not succeed. The discussion showed that the need to have a building permit depends on the designer, who has to technically evaluate the impact on the building, and then it will be possible to give a derogation,” the AFM representative said. At the Prosumers Conference, a large number of questions have been answered. However, there are still unresolved and unclear issues, processes that can be improved, costs that can be reduced, and these will be debated in a future meeting of the Energy Community. “For three years we have worked to make prosumers a reality in Romania, and today this is possible. In the coming period, we are proposing to launch the Consumer Guide, but also to help simplify the licensing process and reduce VAT on energy products and services for prosumer. In the medium term, we hope to reach 100,000 prosumers in Romania, and in the long run Romania will operate 100% renewable energy by 2050,” said Mihai Toader-Pasti, energy project co-founder and president of Future Energy Leaders Romania. The complete record of the debate at the Consumer Conference can be viewed on energiaTa website or on the Facebook energiaTa. energiaTa is an educational and awareness project that has been doing three years to make prosumers and network injectors possible and to simplify the legislative process. energiaTa prosumers comunity currently has over 4,000 members from across the country.

EVENT

Cities of Tomorrow Communities in focus The seventh edition of Cities of Tomorrow, organized by the German-Romanian Chamber of Commerce and Industry (AHK Romania), will take place on the 26th March 2019 at JW Marriott Bucharest Grand Hotel and will be dedicated to communities, the business community as well as the civil society, and the importance of their engagement in the sustainable development of regions and cities.

his year the organizer will add a new dimension to the event concept: the civil society. A dialogue between public authorities and the business environment is important, but the involvement of the civil society is as necessary. Therefore, AHK Romania considers that the key element in shaping the sustainable development is the TRIALOGUE. Moreover, the event will focus on the role of communities in developing a city, a region – a country. The functionality of a community is not only determined by its inside, but more by how it collaborates with other communities. The way we understand to engage as a community, to have a unitary voice and to constantly get involved, defines our future. The novelty of this year is the pitching competition ‘Communities in

trialogue’. 9 participants of 3 categories, public administration, civil society and business environment, will each have 5 minutes to present their city/regionbased project, which contributes to urban development, investment location development and city/region marketing, the implementation of smart city solutions, the enhancement of life quality or the improvement of the dialogue between stakeholders. These projects will be evaluated by a jury of experts, and the winners will be awarded prizes by AHK Romania that will support the future development of their projects. Similar to previous years, the event will also host a project marketplace, where sponsors will have the opportunity to present their solutions and technologies for cities and regions, while representatives of local authorities (regional development agencies, 96

county councils, municipalities) and communities will present concrete projects, for which they seek support of private actors. Moreover, during the second part of the event, AHK will continue the World Café concept, consisting of 8 roundtables, which will allow participants higher involvement in interactive discussions and the identification of problems and solutions. The conclusions and insights of the roundtables will then be the foundation of future actions. A relevant aspect for the success of this project is not only the day of the event itself, but also what happens afterwards – how do participants use the exchange of ideas, experience and contacts acquired at Cities. Brochures of past editions and concrete initiatives that were born at the event can be found at www. citiesoftomorrow.ro.

We make the cities.

26.03.2019 | JW MARRIOTT BUCHAREST GRAND HOTEL

w w w.cit iesof tomorrow.ro There comes a time when we have to think global and act local. We. The community. Communities in TRIALOGUE: public authorities, business environment, civil society.

MARCH’S READING

Effective policies to address energy poverty W

ritten within the frame work of ‘European Energy Poverty: Agenda CoCreation and Knowledge Innovation’ and compiled by Anca Sinea and George Jiglau, Center for the Study of Democracy from BabesBolyai University, this paper gathers the conclusions of the Bucharest Energy Poverty Conference ‘Energy poverty, clean energy, and the European energy divide’ organized on 22-24 January 2019. Conclusions were reached during the two introductory panels attended by researchers, experts, policy-makers and representatives of a variety of stakeholders from across the ENGAGER COST action Member States. Discussions centred around two topics: ‘Transforming the State of the Art’ and ‘Addressing Energy Poverty through Innovative Approaches.’ Proceeding from the topics discussed within the conference panels, the position paper aims to answer the following questions: What are the main challenges associated to energy poverty around Europe and how should they be faced? Is there a potential for innovative action and what are its premises? The burden of energy costs on households is pervasive. Energy poverty has a strong impact on the quality of life, whereas it also paves the way for more fundamental challenges to economies and the environment. It is a silent yet rapidly progressing phenomenon, as we embarked upon a process of transforming our economies into sustainable and clean

systems. It is also a phenomenon of high complexity, as it is both a result and a cause, with externalities both nationally and across state borders, involving energy policies, but the healthcare system, the construction sector, the labour market, welfare policies, and the economy as a whole. Its manifestations are specific from one region to the other. Despite the lack of consensus with regard to measurement, reality has proven that there is a wide room for action and that good practices amount, whereas the potential for innovation remains untapped. While there is no general remedy to cause massive and rapid transformations, there is capacity for small and powerful change. The principles that lay at the basis of change are common and are based on steady dialogue, mutual trust, inclusiveness, and engagement of all stakeholders, accountability, crosssectorial learning. All European states (both EU and nonEU) deal with energy poverty in their national public policies. At the European level, it is considered a policy objective of the Energy Union and the ‘Clean Energy for all Europeans’ legislative package. Moreover, the European Commission has committed substantial financial support for developing meaningful research. There is a substantial need to standardize the approaches of energy poverty and to create a common language and a set of instruments between scholars and policy-makers, who often enact 98

single-dimensional policies, and at a larger scale, among EU Member States, which hold limited comparative understanding. A standard set of instruments and a common definition can be a good guide and support for constructive politics, quality policy-making and implementation as they can set the framework for awareness at the level of stakeholders and for responsible intervention through suitable and welltargeted measures, while minimalizing the potential for distortions and abuses. In a time of growing challenges to democratic regimes across Europe, multidimensional topics, especially those with considerable social sonority, play easily into the hands of some politicians who display fractional images of reality, leading to the enactment of measures that are attractive to voters on the shortterm, but which are unsustainable and distorting the long-term and with regard to the national economy in general. It is, therefore, paramount to support and inform responsible politics in order to prevent abuses. The development and energy poverty action toolkit is essential to equip institutions and decision-makers with tools to provide better policies and responses, and to society at large (NGOs, the media and the public opinion) to prevent misconduct. The effective dissemination of such tools, of good and bad practices is therefore just as important as their development. See the paper here: www.engagerenergy.net/positionpaper/