Energy Industry Review - October 2019 edition by Energy Industry Review

Content Extreme Gestures for the Spheres of Influence in the Energy Sector

OPINION In the ‘90s we had the Gulf War, which led to the overthrow of the Saudi leader Saddam Hussein. Recently, we have faced new drone attacks against two oil facilities in Saudi Arabia.

The ‘Courage’ of Fighting Against Climate Change

Romania’s Energy Market - Where to?

CNG Fuelling Stations Increasingly Attractive

OIL & GAS INTERVIEW

OPINION There are attempts to raise the game of objectives either in quantitative or in temporal terms, to appear what we call ‘environmentally friendly’, with the certainty that nobody will be held responsible in bankruptcy cases.

Main Challenges Facing European Energy Transition

OPINION The exploratory scenarios comprised in the World Energy Council report describe three plausible alternative pathways for European regional energy systems. None of these scenarios is the preferred or most likely future, the energy experts warn.

Iulian Popescu - Deputy Managing Partner Musat & Asociatii, reveals the most important projects the team has been lately involved, but also his views on the energy market evolution in Romania.

Government Turns its Face to Investors

OIL & GAS

In conditions in which energy resources are increasingly expensive, CNG could efficiently offset the situation and this is why in Romania the number of stations opened is ever-increasing.

OMV Listed Second Time in the Dow Jones Sustainability Index OIL & GAS

The Ministry of Energy has put up for public debate a draft law amending and supplementing the Offshore Law and the Petroleum Law, through which it aims to relax taxation for investors.

OMV has entered the Dow Jones Sustainability Index (DJSI World) for the second time and is still the sole Austrian company included.

Combating Energy Poverty

CONSTRUCTION In Romania, one family in seven faces serious problems in terms of housing quality.

Romania’s Energy Efficiency Services Market

44 Petromidia Refinery’s Anniversary

Petromidia Refinery Navodari celebrates 40 years of activity, time frame when from one idea it reached to be the largest such unit in Romania and one of the most modern in the Black Sea region.

FPPG Study: Excessive Gas Taxation Blocks Investments

POWER Energy efficiency is a prerequisite for the sustainable development of any country, but the question is whether an energy efficiency services market truly exists in Romania.

Mining Industry Left Without Miners’ Lamp

OIL & GAS

METALS & MINING

BP’s Industry-first, Continuous Methane Measurement Programme

Restructuring of the mining industry in Romania, started 20 years ago, has led to the disappearance of over 550,000 jobs and condemning extensive areas to poverty.

Nuclear Energy: A Glimpse into Tomorrow

OIL & GAS

ENVIRONMENT

ANALYSIS

According to the analysis of the effective tax rates at European level, Romania has the highest tax rate specific to gas production. FPPG has recently launched the study ‘Status of the tax system specific to the upstream gas sector in Romania’.

BP announced that it will deploy continuous measurement of methane emissions in its future BP-operated oil and gas processing projects as part of its ambitious programme to detect, measure and reduce methane emissions.

Why nuclear? There is a clear need for new generating capacity around the world, both to replace old fossil fuel units, especially coal-fired ones, which emit a lot of carbon dioxide, and to meet increased demand for electricity in many countries.

HEADLINES

FIRST CBI CERTIFIED RENEWABLE ENERGY PROJECT FINANCING IN THE GCC REGION

he fourth phase of Mohammed bin Rashid Al Maktoum (MBR) Solar Park – Noor Energy 1 – has become the first project in the GCC region to receive Climate Bonds Initiative (CBI)’s certification for Renewable Energy Project Financing, supporting the efforts towards meeting the Dubai Clean Energy Strategy 2050. The flagship project is a collaboration between Dubai Electricity and Water Authority (DEWA), ACWA Power - a leading Saudi developer, owner, and operator of power generation and water desalination plants - and Silk Road Fund (SRF).

Noor Energy 1 is the largest singlesite Concentrated Solar Power (CSP) and single hybrid solar power project in the world with three different solar energy technologies in deployment. The technologies include building a CSP central tower, CSP parabolic trough and solar photovoltaic panels based on the Independent Power Producer model. With 20% progress already achieved by Noor Energy 1, the flagship project is set to generate an output capacity of 950 megawatts (MW) with an investment of AED 15.78 billion. The deployment of 700MW of CSP; 600MW from a parabolic basin complex and 100MW

from a solar central tower; and 250MW from photovoltaic solar panels has positioned the fourth phase as the largest single-site solar IPP investment project in the world that combines CSP and photovoltaic technology. Noor Energy 1 was also successful in breaking a number of world records, including the world’s tallest 260-metre solar tower and the world’s largest global thermal storage capacity of 15 hours; allowing for energy availability round the clock. This phase will provide clean energy for 320,000 residences and will reduce 1.6 million tonnes of carbon emissions annually.

ACER APPOINTS NEW DIRECTOR

he Administrative Board of the EU Agency for the Cooperation of Energy Regulators (ACER) has designated Christian Zinglersen as Director of the Agency. His term of office is five years (renewable once for up to five years) as of 1 January 2020. Christian Zinglersen is currently the first Head of the global Clean Energy Ministerial Secretariat hosted at the International Energy Agency in Paris (IEA). He previously served as Deputy Permanent Secretary at the Danish Ministry of Energy, Utilities, and Climate, where he was a member of the Ministry’s Executive Board responsible inter alia for

the energy policy portfolio. He served as the Danish government’s representative and Vice-Chair of the IEA’s Governing Board and was the Danish participant in the Director-General meetings on energy policy within the European Union. Prior to that he served as the Danish government’s head of the global climate negotiations, culminating in Denmark’s Presidency of the Council of the EU in 2012. Mr. Zinglersen started his career in the Danish Foreign Service where he focused on EU policy and law, having been posted to Brussels at the Danish Permanent Representation to the European Union. For a number of years, he taught Union 6

law at the University of Copenhagen. He holds a Master’s Degree in Law from the University of Copenhagen and is a graduate of IESE Business School’s Advanced Management Program and Harvard Kennedy School’s Senior Managers in Government program. Christian Zinglersen will succeed Mr Alberto Pototschnig, the first Director of the Agency, who has been instrumental in establishing and leading the Agency over the last nine years and in delivering on its extensive and growing mandate. Thanks to his pioneering work and leadership as well as the key contribution of the 28 NRAs, the Agency’s success has been widely recognised.

THE 28 ROMPETROL GAS STATION IN DOLJ TH

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ompetrol Downstream – KMG International Group retail division in Romania opened the fifth Rompetrol gas station in Craiova. The total investment amounts to USD 1.5 million and ensures 15 new work places. “The new gas station, the 11th opened this year, is part of the company’s strategy for the expansion of the retail network at the national level and the consolidation of its presence in key areas. This allows us to be closer to our clients and offer them high quality products and services,” Serghei Sevcenco, General Director Rompetrol Downstream, said. The company employs 290 employees in the county, operates a network of gas stations – 4 Rompetrol stations in Craiova, 11 Rompetrol Partener stations and 12 Express stations in different location in Dolj County. The company also has a depot in Almaj (20km from Craiova), Rompetrol cylinder distribution points and 17 LPG stations. “Finalizing the modernization of Rompetrol stations and Petromidia Navodari refinery – the largest production unit in Romania and one of the most complex in the Black Sea

region, the Group has a strategic aim to consolidate and expand its retail activities in Romania, Bulgaria, Georgia and the Republic of Moldova. Craiova is not just the heart of Oltenia but also our regional center where, besides the gas stations network, we have a depot connected to the road and railway infrastructure, which ensures our necessities for development,” stated Vlad Rusnac, Chief Retail Officer KMG International. At the end of August, at the national level, Rompetrol Downstream operated 940 points of sales (own gas stations, Rompetrol Partener stations, Rompetrol Express stations, internal bases of 9 and 20 m3), 70 units more than during the same period last year. To be added 6 fuel depots (Arad, Craiova, Mogosoaia, Simleul Silvaniei, Vatra Dornei and Zarnesti) and 3 LPG bottling stations (Bacau, Arad and Pantelimon). In January – June 2019, Rompetrol Downstream together with Rompetrol Gas have managed an increase of 7% in total fuel sales (gasoline, diesel and LPG) on the local market. The evolution was supported by the expansion of the distribution network and by the important increase in the NFR segment (non-fuel retail). 7

Journalists: Adrian Stoica, Daniel Lazar, Evgenios Zogopoulos, Dumitru Chisalita Digital Manager: Justin Iancu

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HEADLINES

FIRST INVESTMENT OBJECTIVE ON BRUA ROUTE INAUGURATION

ransgaz has inaugurated Jupa Gas Compressor Station, part of BRUA Phase 1 project, which is on the list of Projects of Common Interest of the European Union and is developed in the context of the need to diversify gas sources in EU countries. The event took place in the presence of Romanian and European high-ranking officials. “Through the way in which BRUA project has been managed so far, Transgaz has proven that it is able to manage strategic initiatives of European scale. BRUA is on schedule, as I have stated each time, and in the following period we will continue to inaugurate new investment objectives within this project. I thank all employees of Transgaz, as well as all contractors, for their effort. Besides BRUA, Transgaz manages simultaneously other major investment projects, such as those allowing the development of the National Gas Transmission System

so that each local community has access to gas, as well as Ungheni-Chisinau gas pipeline, which will increase the degree of regional energy security and provide the Republic of Moldova with a new economic and energy perspective,” said Transgaz General Manager Ion Sterian. BRUA Phase 1 project consists of achieving the following objectives: Podisor - Recas pipeline, 32” x 63 bar, with a length of 479 km, as well as 3 gas compressor stations (Podisor GCS, Bibesti GCS, Jupa GCS), each station being equipped with two compressor aggregates (one operational and one as back-up), with the possibility of ensuring bidirectional gas flow. Jupa Gas Compressor Station is a technological facility interconnected to the following gas trunklines: DN 32” Bibesti GCS - Jupa GCS, DN 32” Jupa GCS - Hungary, DN 20” West 1, DN 20” West 2. The purpose of Jupa GCS (Caras

Severin County) is to compress gas in the trunk pipelines to which it is connected, in order to offset pressure losses inherent in the gas transmission process. The station is bidirectional; it can compress gas both from Bibesti direction to Hungary direction and from Hungary to Bibesti. Jupa GCS includes two Gas Compressor Units (one active and one back-up) manufactured by SOLAR TURBINES, US, with a power of 4.6 MW each and consisting of: SOLAR Centrifugal compressor unit C40, meant to increase the gas pressure for transmission; SOLAR CENTAUR 50 gas turbine, which is the engine actuating the centrifugal compressor. The value of the construction contract on 31.08.2019 (without maintenance) for Jupa GCS amounts to RON 103.56mln, the value of the 2 compressor units installed in Jupa GCS being EUR 12.6mln.

GAZPROM TO SUPPORT EXPANSION OF SERBIA’S GAS TRANSMISSION INFRASTRUCTURE

working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Slavenko Terzic, Ambassador Extraordinary and Plenipotentiary of the Republic of Serbia to the Russian Federation, took place in Moscow on September 11. The parties paid particular attention

to the continuing expansion of gas transmission infrastructure in Serbia, highlighting the ongoing construction of the linear part of the gas pipeline stretching from the country’s border with Bulgaria to its border with Hungary. In 2018, Gazprom exported to Serbia 2.15 billion cubic meters of gas, a 1.2 per cent increase from 2017 (2.12 billion 8

cubic meters). In June 2017, Gazprom and the Serbian Ministry of Mining and Energy signed the roadmap providing for the development of gas transmission capacities in the country. GASTRANS d.o.o. Novi Sad, an engineering company, is responsible for the gas trunk-line construction project.

HEADLINES

INVESTMENTS AT UPG PLOIESTI AND A NEW ACADEMIC YEAR

he Petroleum-Gas University (UPG) Ploiesti has marked the official opening of the academic year 2019-2020, with 5,450 Romanian and 176 foreign students, coming from 25 countries. UPG has collaboration relationships with EU and non-EU countries, based on 71 collaboration agreements with institutions in Portugal, Bulgaria, Greece, Moldova, Kazakhstan, Turkmenistan, Lebanon, China, Serbia, Belarus, Azerbaijan, USA, Tunisia, India, Slovenia, Poland, France, Italy, Ukraine, Morocco, Cuba, Vietnam, Egypt.

In 2018-2019, 15 new collaboration agreements were concluded with the university and economic environment. The mobility number was 95 (students and teachers), the total amount being EUR 172,567. In the new academic year, the mobility will amount to 202, for which the total amount of EUR 812,668 will be granted. New grants were also won with the donor states Norway, Iceland and Lichtenstein, with a total value of over EUR 150,000. Following a donation of the Timken Foundation, of EUR 80,000, an online

technology will be implemented in an amphitheater that will allow to hear courses in English from universities around the world. A EUR 2.2 million grant from Norwegian funds will ensure heating with two heat pumps for two UPG buildings, financing being received within this project from Prahova County Council (EUR 300,000) and PECEF Technique (EUR 45,000 euros). Also, with funds from Electrica, photovoltaic panels will be installed in the main parking lot, and the investment (which will be amortized in 8 years) will reduce the utility bill by up to 15%.

HEADLINES

ENERGY COOPERATION BETWEEN ROMANIA AND POLAND

he second round of inter governmental consultations between Romania and the Republic of Poland took place on September 18 in Bucharest. Within these intergovernmental consultations, Secretary of State for Energy Doru Visan and his Polish counterpart Krzysztof Kubów signed the Memorandum of Understanding between the Ministry of Energy of Romania and the Ministry of Energy of the Republic of Poland on energy cooperation. Recognizing the interest to boost energy cooperation and considering the similarities regarding the objectives of energy and climate policies, as well as the impact of implementing the Clean Energy legislative package for 2030 and beyond, both countries wish to continue to explore, in detail, areas of

common interest that can be exploited to consolidate the voice of both countries at the level of the European Union, as well as at international level. “There is a significant potential of cooperation in the energy sector between Romania and Poland, which has the capacity to result in a valuable instrument yielding positive and concrete results in the sense of increased energy security, diversification of energy supply sources and routes, economic prosperity, progress to a secure, accessible and sustainable future for both countries,” Doru Visan said. At the same time, the bilateral discussions carried out on this occasion between the delegations of the two ministries highlighted that both Romania and Poland put at the

center of cooperation the principle of ensuring energy security, by developing a diversified and balanced energy mix and by diversifying energy supply sources and routes. The officials of the two ministries of Energy have expressed their mutual interest to cooperate in the field of electricity, where there are strategic areas of mutual interest, such as the nuclear and coal sectors, and to harmonize their positions within the European and international forums. Particularly appreciating the important steps Poland has taken in the development of the LNG sector, the Romanian side reiterated its interest in identifying the best technical solutions for the Romanian market to access the gas volumes that will be available through the Polish terminal Świnoujście.

ROMANIA SIGNS A COUNTRY PROGRAMME FRAMEWORK FOR 2020–2025

n 18 September 2019, Horia Grama, President, Nuclear Agency and for Radioactive Waste, Rodin Traicu, President, National Commission for Nuclear Activities Control, and Dazhu Yang, IAEA Deputy Director General and Head of the Department of Technical Cooperation, signed Romania’s Country Programme Framework (CPF) for the period of 2020–2025. A CPF is the frame of reference for the medium-term planning of technical cooperation between a Member State and the IAEA and identifies priority areas where the transfer of nuclear technology

and technical cooperation resources will be directed to support national development goals. Romania has been an IAEA Member State since 1957. Its 2020–2025 CPF identifies 4 priority areas: human health; energy and industry; nuclear and radiation safety; food and agriculture. The Medium-Term Strategy has been prepared through a joint consultation process among Member States and the Secretariat. It covers a period of six years from 2018 to 2023. The Medium-Term Strategy serves as a strategic direction and roadmap for the Secretariat to prepare the Agency’s 10

programme and budget during the period covered by it, by identifying priorities among and within its programmes for three biennia for the achievement of the Agency’s statutory objectives in an evolving international environment. The Medium-Term Strategy 2018– 2023 draws upon the implementation of the Medium-Term Strategy 2012–2017 and may be updated, if deemed necessary by the Board of Governors, before the start of a programme and budget preparation process, adapting to new developments and evolving needs and priorities of Member States.

HEADLINES

ROMANIA - US MEMORANDUM IN THE NUCLEAR FIELD

omaniaâ&#x20AC;&#x2122;s Prime Minister Viorica Dancila had a meeting with US Secretary of Energy Rick Perry, in the context of her working visit to the United States. On this occasion, a Memorandum of Understanding was signed between the Government of Romania and the U.S. Government on cooperation in the civil nuclear field. The document provides the perspective of consolidation of the economic relations between the two countries and of promotion of the essential objective of ensuring energy security, as a foundation for Romaniaâ&#x20AC;&#x2122;s

long-term prosperity. The Memorandum will serve as basis for encouraging bilateral cooperation in the promotion of stateof-the-art technologies in the nuclear field, radioactive waste management, development of the nuclear medicine sector, research activities on the applicability of nuclear technologies under development in physics, biology, as well as agriculture. Prime Minister Dancila highlighted that the Government of Romania had a major interest and the necessary instruments for consolidating the transatlantic trade and investment relationship, likely to

contribute to ensuring the sustainable prosperity and the security of the states on the two sides of the Atlantic. In this context, the topic of development of energy resources on the continental shelf of the Black Sea was also approached, a topic relevant for the energy security of the region and of Europe. At the same time, the Prime Minister reiterated the availability of keeping a constant and constructive dialogue with US investors interested in the Romanian market, including to find the best solutions of ensuring the success of projects and investments in the economy of our country.

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HEADLINES

SIEMENS TO BUILD INDUSTRIAL POWER PLANT AT THE MARL CHEMICAL PARK

iemens will build a highly efficient combined cycle power plant as a turnkey project at the Marl Chemical Park in North Rhine-Westphalia, Germany. The order was placed by the specialty chemical group Evonik Industries. The new industrial power plant will consist of two units, each with an electrical capacity of 90 megawatts, and produce both electricity and process steam for the chemical park. The site’s integrated steam network will also supply district heat for about 2,000 homes in the future. The plant’s fuel efficiency will thus exceed 90 percent. With this combined cycle power plant, Evonik will replace its last coal-fired plant at the Marl Chemical Park. Because the plant will produce environmentally friendly electricity, process steam, and

district heat from natural gas, the company will be able to cut CO2 emissions by one million metric tons per year. The plant thus makes an important contribution to decarbonization. Construction is scheduled to begin later in 2019, and the power plant is expected to go into operation in 2022. Siemens Financial Services (SFS), Siemens’ financing arm, developed a leasing financing solution specifically for Evonik in collaboration with Siemens Gas and Power. Together with the Kf W IPEX Bank and LBBW, SFS will handle refinancing of the leasing agreement. The project volume is in the lower triple-digit million-euro range. Siemens’ scope of supply includes the turnkey construction of two identical power plant units as well as one industrial gas turbine, and one industrial steam

turbine for each unit. It also includes generators, auxiliary systems, and the control system. Siemens will carry out preventive maintenance work on both gas turbines for a period of 15 years under a long-term service agreement. This agreement also covers remote diagnostic services for daily plant monitoring and monthly analyses of the operating data. These digital services will ensure high plant availability. Thanks to the use of special heat recovery steam generators and catalysts, the system can operate on natural gas as well as re-gasified liquefied natural gas (LNG), and various other gases, such as residual gas from production processes. Each power plant unit can produce not only electricity but also up to 220 metric tons of process steam per hour.

MOLDOVA SET TO BUILD POWER LINK WITH ROMANIA

oldova will be able to connect its electricity network with Romania’s thanks to a joint investment by its inter national partners. Following an initial EUR 160 million loan provided by the EBRD and the European Investment Bank (EIB) in equal parts, the European Union (EU) is now joining the project with a EUR 40 million investment grant. The World Bank is providing a USD 70 million loan. The EU grant will co-finance the construction of a 600 MW back-toback converter substation in Vulcanesti. The World Bank loan will finance the

construction of a new 400 kV high-voltage overhead line between Vulcanesti and Moldova’s capital of Chisinau, as well as the expansion and upgrade of associated high voltage substations. The interconnection is of critical importance for the diversification of Moldova’s electricity resources. Currently, the country depends on a single power plant fuelled by natural gas, oil and coal and on electricity imports from Ukraine for up to 80 per cent of its electricity supply. The link to the Romanian electrical network will considerably enhance the stability and reliability of its power 12

supply – a prerequisite for the country’s economic development. The diversification of electricity re sources will open up Moldova’s electricity market to increased com petition, with access to the European market generating economic benefits for both companies and citizens. The project will ultimately pave the way towards Moldova’s integration into the European electricity grid operated by the European Network of Transmission System Operators for Electricity. The interconnection will be built by Moldova’s public electricity utility Moldelectrica between 2019 and 2024.

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

HEADLINES

TRANSELECTRICA OPENS THE ‘ENERGY HIGHWAY’ IN WESTERN ROMANIA

ranselectrica is carrying out a project to close the 400kV ring of Romania, an investment of over RON 129mln, which will be completed in 2021. Thus, the western part of the country will benefit from greater safety in terms of electricity supply. “This project, worth over RON 129mln, involves two stages: one for the construction of a new line, consisting of 259 poles, and the modernization of an existing line, of 142 poles. It is a project which for the community in the southwest and west of the country represents a huge benefit, because it is an area with deficit in terms of electricity supply, it means a lot for the exchanges at the western border of Romania, it means the revival of Romanian desire and capacity to build energy infrastructure

at national level,” said CEO Claudia Anastase, President of the Executive Board of Transelectrica. The 400kV ring will improve, on the one hand, connection with the western part, a more solid connection with Europe, and, on the other hand, will allow the evacuation of power from Dobrogea area. “The project also means an increase in the security of supply, as well as an increase in connectivity. At the same time, it means an integration of production from renewable resources, as well as optimization of electricity production and integration of the domestic electricity market in what we call the European electricity market,” Secretary of State Bogdan Andronic, from the Ministry of Economy, pointed out. The project, whose technical value

is near RON 130mln, will cover the production deficit in Banat area, bringing power produced at Iron Gates I hydropower plant in the south-west and west of the country, where there are few energy sources. According to Luca Iacobici, director of Timisoara Transmission Branch within Transelectrica, there are also other thermal power plants, in Mintia area, in Ruieni, in Paroseni, which are sources of production, but the Iron Gates I hydropower plant, given the power excess here, ensures the comfort of safe operation in the south-west and west of the country and having a power transmission grid in this part of the country, consolidated, secured. In this way, some damages in the counties of Caras-Severin, Timis, Arad and Hunedoara can be avoided.

OMV, SNAM AND TAG SIGN MOU FOR SUSTAINABLE LNG MOBILITY

MV, Snam and TAG have signed a Memorandum of Understanding (MoU) for the collaboration in the field of sustainable LNG (Liquefied Natural Gas) mobility. The agreement was signed by Rainer Seele, CEO of OMV Aktiengesellschaft, Marco Alverà, CEO of Snam S.p.A., as well as the Managing Directors of TAG GmbH, Daniele Gamba and Rudolf Starzer. The MoU lays out the intention to jointly explore potential opportunities in the field of sustainable LNG mobility in Austria such as the construction of a small-scale LNG

liquefaction plant, the framework for a later LNG supply agreement, and the development of an LNG market. “We believe that the demand for LNG on the road will grow. Studies suggest that the number of LNG trucks will increase to 280,000 in Europe by 2030. Less CO2 and particulate emissions as well as less noise add up to environmentally sound goods transport. This is why we should get on with expanding the requisite infrastructure and supply,” OMV CEO Rainer Seele stated. “Our cooperation with OMV and our associate TAG is aimed at boosting sustainable natural gas mobility in 14

Austria, building on an already successful experience. Italy has the largest number of both CNG (over 1,300) and LNG (over 50) distributors in Europe and Snam is investing to further strengthen the network for both cars and trucks. Gas is the most immediate solution for reducing pollution from fine dust and CO2 emissions from light and heavy transportation and also has great potential in maritime and rail transport. Additionally, thanks to biomethane and bio-LNG, it is gradually becoming renewable, paving the way for further decarbonisation of transport,” Snam CEO Marco Alverà added.

HEADLINES

EC CLEARS E.ON’S ACQUISITION OF INNOGY, SUBJECT TO CONDITIONS

he European Commission has approved, under the EU Merger Regulation, the acquisition by E.ON of Innogy’s distribution and consumer solutions business as well as certain of its electricity generation assets. The approval is conditional on full compliance with a commitments package offered by E.ON. “It is important that all Europeans and businesses can buy electricity and gas at competitive prices. Today, we can approve the acquisition of Innogy by E.ON because the commitments offered by E.ON will ensure that the merger will

not lead to less choice and higher prices in the countries where these companies operate,” Commissioner Margrethe Vestager, in charge of competition policy, stated. E.ON and RWE, which controls Innogy, are both energy companies based in Germany. They are active across the energy supply chain, from generation and wholesale to distribution and retail supply of electricity and gas. They are each active in several Member States but their activities mostly overlap in Czechia, Germany, Hungary, Slovakia and the UK. The two companies are engaged in a complex asset swap. Following this asset

swap, E.ON will focus on the distribution and retail supply of electricity and gas, whereas RWE will be primarily active in upstream electricity generation and wholesale markets. This decision follows an in-depth investigation of E.ON’s proposed acquisition of Innogy’s distribution and consumer solutions business as well as certain electricity generation assets of Innogy. The Commission approved on 26 February 2019, under the EU Merger Regulation, another part of the asset swap, namely RWE’s acquisition of certain generation assets held by E.ON.

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OPINION

The ‘Courage’ of Fighting Against Climate Change Motto: If only a fact in itself and the tactics of its approach are indicated, with targets far from being achievable, some even unresolvable, due to the lack of will and the ability to solve immediately, then there is a need for true ‘courage’ in front of this fight! (Vocabolario Treccani)

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

bviously, these words could also refer to the socalled fight against climate change. We notice that some aspects relating to climate don’t go well at all and are entirely outside what has been specified and established in Paris. For example, global primary energy consumption (85%) is in continuous growth, unfortunately with a persistent increase in the use of fossil fuels for energy production (65%); we also notice the irrelevant use, we could say, of energy obtained from renewable sources (7%), the quantity of greenhouse gas emissions following to grow in a relevant and continuous manner. Axiomatically speaking, all this will surely determine, sooner or later, the necessity of a real ‘courage’ in order to intensify the fight against Climate Change. The truth is there are attempts to raise the game of objectives either in quantitative or in temporal terms (from 2030 to 2050), to appear what we call ‘environmentally friendly’, with the certainty that nobody will be held responsible in bankruptcy cases. 18

As soon as the objectives of the 28 Member States have been set by the Presidency of the European Commission, Mrs. Ursula Gertrud von der Leyen, since she was Germany’s Defense Minister, announced that in the first 100 days of office she would implement a Green Deal for Europe to completely neutralize carbon by 2050. In line with the above, Latvian Vice-President Valdis Dombrovskis announced that Europe could become “the first Great World Economy to achieve this goal”. Forgetting, maybe intentionally, the fact that impact on global emissions would be symbolic given the decrease in the quota by only 5% compared to the European one, by the middle of the century. The new President of the European Commission Ursula von der Leyen, insists on raising the targets for reducing carbon dioxide emissions to 55%, even though the Climate Action Network - CAN demands that it reaches at least 65%. For declarative purposes we could assess this as positive, but from a technical and economic point of view - with what costs? And for the success of her intention, the new president has

OPINION

been involved in raising the scales/ targets of reducing emissions, presenting this possibility as a fact (because it is not the European Commission that decides in this context, but the Council of the European Parliament), with the parameters of the target assumed for reducing emissions having to reach 40% in 2030 as compared to 1990. Thus, values of 50%, if not even 55%, are proposed. This percentage is normal, given that there is no obstacle to reach the target proposed by CAN (Climate Action Network). The established targets start from and rely on the technical and economic feasibility, the assumed obligations, the impact of balance sheets of families and companies etc. Correlation with Brussels’ intentions was enthusiastic on the part of the various industrial lobbies that counted on the resumption of support through aid schemes from the states, but they are paying more and more attention, attention supported by the Alliance of European Green Parties, which always gave a negative vote. For example – Italy’s approach, which, through the objectives set in the Integrated National Energy-Climate Change Plan of December 2018, proposed to increase the installed power of electricity generation from renewable sources from 70% to over 93 GWe for the next decade, with an investment of EUR 30 billion, a proposal that already seems insufficient in relation to the dynamics of the necessary investments. For example, Italy’s energy group Enel commits to reduce its direct greenhouse gas (GHG) emissions per kWh by 70% by 2030, compared to 2017 as a starting point, which makes the group one of the energy producers that have committed early on to reduce emissions, in line with the updated version of April 2019 of the Science Based Targets initiative (SBT). Moreover, Enel has committed to reduce by 16% indirect emissions from natural gas sales on the retail market by 2030, with 2017 as a starting point. In reaching the zero emissions target, by 2021 the Enel group will increase its capacity for renewable energy production by over

25%, while reducing its thermal capacity by more than 15% compared to current levels. “The new commitment, which follows the UN’s commitment to adopt the target of limiting global temperature rise to up to 1.5°C compared to the pre-industrial levels, marks a remarkable step forward in achieving the Enel goal of zero carbon emissions by 2050,” a communique of the company informs. A second example might be Eni. Improving carbon efficiency and reducing GHG emissions are the first pillar of Eni’s decarbonization strategy, which is divided into specific short and medium term targets. In the short term, Eni has confirmed its 2025 target of reducing emission intensity by 43% compared to 2014 in upstream operated assets, through the elimination of process flaring, the reduction of fugitive methane emissions and the implementation of energy efficiency projects. These initiatives also contribute to the objective of improving the carbon efficiency index by 2% a year by 2021 compared to 2014, which is reflected into an overall improvement of 13.2% over the period, through energy efficiency projects and initiatives counting on all Eni businesses contribution. Let’s not forget the proposal from the new President of the European Commission that called for mandatory emissions reduction by 2030. Thus, from 40% to reach 50% - 55%, as the minimum accepted threshold. How it will be possible to achieve this commitment, considered extremely difficult from a technical point of view, compared to the previous targets, it has not yet been clearly expressed by government experts or by actors of the Italian energy sector. Obviously, all of them appealed to courage, the courage mentioned in the title of this article, not forgetting to recall the famous phrase of the great Italian actor Toto, who, in the fight with the impossible, said: “I have enough courage, I just have to overcome my fear!”. In other words, the Italian specialists concluded that “it is not enough to just write a quantitative target in a document, because surely the words will not be enough for it to be fully realized!”. 19

OPINION

Main Challenges Facing European Energy Transition A

Lavinia Iancu

s the future of energy cannot be predicted with any degree of precision, managing successful energy transition is a thorny issue concerning energy com munity all over the world, including European region. The exploratory scenarios comprised in the World Energy Council report (in collaboration with Paul Scherrer Institute) describe three plausible alternative pathways for European regional energy systems. None of these scenarios is the preferred or most likely future, the energy experts warn. The scope of this set of scenarios is to offer the energy leaders an instrument to engage constructively with uncertainty and to better prepare for emerging systemic risks and new opportunities. Let’s see what the main challenges facing European energy transition leaders are. 1. European energy systems are already approaching an investment cliff. All the three scenarios assume that an increase in energy investment will be forthcoming, but none of them delivers the full vision of successful energy transition and the achievement of the Paris Agreement. Despite the relative wealth of its highly industrialised urban societies, the global abundance of cheap capital and an increase in green finance, it is a challenge to attract the investment needed to manage and maintain existing 20

systems, decommission or repurpose (where it makes sense), build new infrastructures and manage stranding of assets. It is clear that a mix of publicprivate investment will be required, and yet there is no certainty that adequate investment will be forthcoming. 2. New global growth opportunities are emerging in energy, whilst geo strategic competitions are inten si fying. 3. Digital energy competitiveness is key to a next era of regional prosperity. Digitalisation is a key feature in all the three scenarios, but pace of change and scale of impact varies considerably among the scenarios. The impact of digitalisation is increasing in every part of all types of energy value chains. 4. European shared values imply that there can be no energy transition without social involvement and public acceptance. 5. New economics of whole system transition are needed to avoid increasing emotional reactions and establish a level playing field in the consideration of alternative netzero carbon technologies transition pathways. 6. Developing integrated energyindustrial strategies and promoting sector-coupling policies are pivotal in enabling affordable and deeper decar bonisation, in parallel with creating jobs and strengthening regional eco nomic competitiveness. The scenario narratives direct

OPINION

attention to how energy transition in the European region is being shaped by global developments and, in particular, the journey called the ‘Grand Transition’, which implies wider and fundamental shifts beyond the world of energy, e.g., socio-economic transformation to postnormal, post-industrial and so-called Creative Society; the shift to a circular economy; the rise of prosumers and a shift in social norms from ownership to sharing. 7. There is a need to build new capabilities in dynamic resilience and cross-scale governance in order to secure the benefits of global and local flows of clean, reliable and affordable energy for everyone, anytime, anywhere.

The role of national governments in energy security policy is shifting. The geopolitics of energy are broadening beyond oil and gas, and systemic risks of decentralised and renewable energy systems include extreme weather events and cyber crisis. At what level should decisions about energy security and resilience be made? Some decisions are best made at the pan-European level; others at the local community level. Europe promotes a policy rhetoric of subsidiarity – now it needs to effectively translate this into practice. The study also shows that meeting these 7 challenges will require different and collaborative action from key energy transition leaders across the region. Therefore, policy makers should engage

citizens in honest discussions of whole energy transition costs and re-localisation of new market designs; promote integrated policy pathfinding in relation to energyindustrial development; promote sectorcoupling strategies to achieve socially affordable and deeper decarbonisation; develop proactive energy infrastructure action planning, including repurposing of pipelines to progress hydrogen mandates. At the same time, energy business leaders should leverage digitalisation to help identify and secure new co-benefits and synergies, e.g., smart systems integration, switching supply and storage. Also, climate finance and investment community should promote technology neutrality in financing net-zero carbon pathways, the report concludes.

ENGINEERING EXCELLENCE Oil and Gas

Energy and Climate Protection Thermal power plants

Upstream facilities

Desalination plants

Pipeline systems

Renewable energy

Underground storage facilities

Climate protection

Tank farms and terminals

Power transmission and distribution systems

Refineries and petrochemical plants

Water and Environment

Transport and Structures Airports Hydropower plants

Roads

Water transmission systems

Railways

Water supply and wastewater networks

Urban transport systems

Water and wastewater treatment plants

Buildings and structures

Tunnels and caverns Alpine resorts

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

Romaniaâ&#x20AC;&#x2122;s Energy Market - Where to? Musat & Asociatii has been among the first, if not the very first, law firm in Romania with a department of lawyers specializing in energy and natural resources. This has led to attracting an impressive client portfolio in the field and creating a landmark in specialized legal consulting. In our discussion with Iulian Popescu - Deputy Managing Partner, he revealed the most important projects the team has been lately involved in, but also his views on the energy market evolution in Romania.

Dear Mr. Popescu, what is the business area of Musat & Asociatii law firm and to whom are the services provided by it addressed? Musat & Asociatii is a ‘full service’ law firm and we already have a tradition in being a single point of contact for our entire range of legal services necessary for business initiation, development and protection. Without being too theoretical about this, I believe that, given the training level and experience of our lawyers, as well as the openness we show towards the market, we address a very wide range of clients, from start-ups in various technological and innovation fields to multinational companies, traditional investment funds and institutional investors focused on certain large investment projects. In particular, our practice area with a focus on the energy market has been a traditional resource of our firm, focused on most market players. During the 30 years of existence we have assisted both private investors such as local, multinational or private companies as well as institutional actors such as banks, investment funds etc., in the process of privatization, liberalization and modernization of the energy market. Our experience covers the entire spectrum of legal issues related to the commercialization, production, distribution, transmission and supply of energy, licensing, as well as trading of emission allowances and renewable energy. The practice is also focused towards the main utilities providers in the Romanian energy sector, in structuring complex transactions, as well as on issues generated by the continuous liberalization of the market, including the legal and functional unbundling of operations. Our team of lawyers has also built an excellent reputation by providing legal assistance services in relation to a large number of projects in the oil and gas sector, as well as mining, which involved consulting granted both to the upstream and the downstream sectors, including on concession and licensing, exploration, drilling, storage, transmission, distribution, refining, pipeline construction, pumping stations and marketing.

What are the most important projects carried out in the field of energy and natural resources? Historically speaking, I don’t think I’m wrong to say that Musat & Asociatii has been among the first, if not the very first law firm in Romania with a 24

department of lawyers specializing in energy and natural resources. This has unavoidably led to attracting an impressive client portfolio in the field and creating a landmark in specialized legal consulting. The transactions in the field of energy and natural resources that record Musat & Asociatii storyline are notorious for those with genuine market knowledge, whilst the plethora of prizes won and distinctions granted to our teams of lawyers over the years are making, once again, proof of the firm’s standard of excellence in this field. Amongst the projects in which our team has been lately involved, I can mention:

(i) assisting an international leader in the field of energy infrastructure in connection with its participation in the selection procedure organized by the Romanian state for the construction and operation of an important hydropower plant; (ii) assisting a global player in the electricity and natural gas sector, in connection with the acquisition, development and construction in Romania of a large wind power plant; and (iii) assisting an international consortium, led by a multinational oil and gas company, on the construction of an important natural gas pipeline.

As a lawyer specializing in energy, how do you estimate the energy market and the business environment in Romania? Overall, I would say the business environment is characterized by stress, this being mainly due to the lack of legislative predictability, hence its instability; factors that have hindered businesses in making investment related decisions to their real potential. The effects of Ordinance 114 have been visible throughout the entire spectrum of the energy market and particularly in the evolution of prices. Even if, compared to past years, the level of

business attractiveness in the energy sector and the related market has downgraded, we are still frequently engaged by the traditional clients in the production, distribution and utility supply areas, as well as by new innovative companies and investment funds, to provide specialized legal assistance and representation services in energy projects of a smaller or larger scale, depending on presented opportunities. In terms of such opportunities, they are quite different and remain considerably polarized depending on the market,

ROMANIA IS ONE OF THE COUNTRIES WITH GREAT NATURAL POTENTIAL FOR THE DEVELOPMENT OF RENEWABLE ENERGY SOURCES. 25

respectively the electricity market, the oil and gas market, renewables market etc. For example, the O&G market, especially the upstream segment, has remained somewhat dormant over the past few years, being deeply influenced by the decrease of the oil price, and investments in mining have been insignificant, despite the considerable potential in the field of mineral resources, especially resources of salt, gold, silver, ferrous/non-ferrous metals, but also more exotic materials such as cobalt, sapropelic mud etc.

WE BELIEVE THE ENERGY MARKET WILL WITNESS IN THE FOLLOWING PERIOD SOME LARGE-SCALE CHANGES, ANTICIPATING THE APPARITION OF KEY INVESTMENTS IN ROMANIA AND THE ADJOINING REGIONS, BOTH FROM THE EU AND OVERSEAS INVESTITOR AREA, REGARDING NUCLEAR AND RENEWABLE GENERAL CAPACITIES. In the electricity sector, against the backdrop of a highly localized market, with a minimum international openness, the investment base is represented by the electricity distribution network, where works are aimed at refurbishing and improving the quality of the service, as well as works for expanding the networks. In a positive way, the future significant investments will focus on the area of smart metering and digitization systems, the only avenues able to streamline processes and create an operational model that responds to current needs.

In the context of important regulatory changes and unpredictability of legislation, how would you describe the attractiveness of the energy sector? Do you still see an interest from investors in Romania? Regarding the electricity market, the impossibility to store energy and the need for permanent balancing compels to reliance on viable transmission corridors, which are however poorly developed so far, and in absence of which international market exposure has been and remains restricted. Thus, although in recent years there havenâ&#x20AC;&#x2122;t been important electricity exchanges, the future tends to depend more and more on connections with neighbouring states for such electricity transfers (especially imports). At the same time, amidst the reduction of production capacities and growing consumption, a deficit between production and consumption is expected to be created and amplified in the market, resulting in an increase in average electricity prices in the following 5 years. A reduction of capacities is predictable to a great extent due to reaching the end of the production life of coal and gas-fired power plants and the high operating costs (including those related to carbon emissions), whilst a recovery of production is uncertain until the commissioning of the two new units planned at Cernavoda nuclear power plant. 26

Added to this landscape is legislative instability, strongly highlighted this year by the apparition and later amendment of the infamous GEO 114. This state of affairs has led to increased imbalances and repositioning of several players in the field, regarding their future investments and even their presence on the Romanian market. Currently, international utilities suppliers, such as CEZ, E.ON and Engie, assess the economic pertinence of their presence in Romania and a potential withdrawal of the largest private energy investor in Romania - ENEL - is in sight. On the other hand, the exit of some players (in the context of increase in demand and prices) could make room for other investors, either international, regional or even domestic. The sector is thus currently quite active, boosted by the presence of strong state-owned companies, and investor interest is growing. Musat & Asociatii Energy Law team is permanently connected to these trends, being involved together with our clients in the most important flows on the energy market. As such, we believe the market will witness in the following period possible significant changes, anticipating the apparition of new key investments in Romania and the adjoining regions, both from the EU and overseas investor area, regarding nuclear and renewable general capacities.

How is the development of investments in the Black Sea oil and gas sector seen from the position of a business lawyer? Black Sea oil and gas extraction has a phenomenal potential and must become a major focus in our energy strategy. The success of investments in this sector can actually reposition Romania on the strategic map of the area and it will also help replace the polluting electricity production based on coal and lignite, significantly contributing to the reduction of carbon emissions per energy unit. We still need to take into account that

offshore projects have a special risk profile, being affected by the lack of specific offshore infrastructures and involving high exploitation risks due to geological and technical uncertainties. The lifespan of projects is far greater than other extractive areas and consequently it is necessary to ensure and reconfirm legislative and fiscal stability. Lately we have witnessed heated debates on the offshore legislation, a framework necessary to ensure adequate conditions for making investments in exploitation. Both the Romanian state and the interested investors have understood that to exploit natural gas discoveries, as well as to continue prospecting operations/exploration of new hydrocarbon resources, especially in the deep area, huge investments and an attractive and predictable investment and legal environment are necessary. Despite some legislative gaps and a slow and often fluctuating pace of investment encouraging policymaking, the interest and dynamics of clients and other players focused on this area have increased lately. This trend is dependent and will significantly be influenced by the new draft offshore law, which is aimed to improve the tax system and allow the direct sale of gas, thus trying to adapt legislation to the specifics of Black Sea 27

projects. In this context, the signals received indicate that the scale of investments will increase only if the new legislative framework manages to provide attractiveness and especially stability of the fiscal and royalty system, so that it offsets from an economic point of view the investorsâ&#x20AC;&#x2122; obstacles relating to the risks specific to offshore investments, the significant investment costs and the long duration of project implementation.

What do you think about the development of renewable energy capacities? Is there still interest? Certainly the subject of renewable energy is and will remain a hot potato, especially

when the inventory of greenhouse gas emissions shows that, in Romania, approximately 70% of total GHG emissions are generated by the energy sector. Research shows that adoption of renewable sources, together with energy efficiency measures, is the most sustainable alternative to reduce such GHG emissions. Moreover, the current national strategy on climate change mentions the need to reduce these emissions by approximately 50% by 2050 compared to levels recorded in 1990, and Romania is one of the countries with great natural potential for the development of renewable energy sources. Our clients in this area are interested in the effects of streamlining the new technological generations in wind and solar production and expect their costs to decrease in the future, in order to increase competitiveness in relation to conventional production sources. We stay behind them in supporting the implementation of PPA tenders for the large end-consumers and working towards reducing the administrative and technical requirements for network access. We believe that wind and solar energy remains in the top of the production sources, given the evolution of efficiency and cost related to these technologies. Moreover, specialists expect the added value of such projects to 28

increase in the next period. Unfortunately, recent years have brought a downturn for investors, the main factor being related to the multiple legislative changes that this sector has gone through and the reduction of state involvement in supporting investments. However, the market expects the state to become active again, in order to help unlock the potential of production from renewable sources, thus accelerating transition to an energy system with a high share of RES and a better integration thereof in the National Energy System. Elements such as smart metering and network digitization, as well as efficient investments in the transmission network (including interconnections with the neighbouring countries) and the development of storage capacities are merely

some of the possibilities of state intervention with beneficial effects for the development of the sector.

How do you think the actors of the domestic energy market can get involved in order to overcome obstacles and ensure a functional market? It has come to my attention that lately, players in the field have ‘closed ranks’ by organizing, somehow better and more vocal than in the past, around professional organizations, chambers of commerce and on the occasion of events dedicated to the industry. Improved and wide-scale dialogue and finding common solutions are probably the best ways to ensure a truly functional market. Dialogue should, in the next period, focus on the Energy

SMART METERING AND NETWORK DIGITIZATION, AS WELL AS EFFICIENT INVESTMENTS IN THE TRANSMISSION NETWORK AND THE DEVELOPMENT OF STORAGE CAPACITIES ARE ONLY SOME OF THE POSSIBILITIES OF STATE INTERVENTION WITH BENEFICIAL EFFECTS FOR THE DEVELOPMENT OF THE SECTOR. Strategy of Romania 2019-2030, the Integrated National Energy and Climate Plan (NECP) 2021-2030, the Directive (EU) 2019/944, as well as on the conditions of Regulation (EU) 2019/943 on the internal market for electricity. As a lawyer but also as a member of the board of the American Chamber of Commerce in Romania, I have supported and continue to support organizational efforts of industry actors to exchange opinions, ideas, concepts and to submit ‘position papers’ to the competent authorities in order to signal the possible political and economic slippages and to help the decisionmakers to take into account the experience and the solutions of the business environment.

What are, in your opinion, the most important assets of Romania as regards its positioning on the regional energy market? I would mention here, first of all, the geostrategic position of Romania. An overused and possibly obsolete presence in public discourses, this genuine Romanian asset is mentioned more for laudatory purposes rather that to lead to an actual economic result. In other words, this ‘geostrategic’ position has turned from an undeniable advantage into a field of disputes for political pride and petty economic interests. I believe Romania’s policy must firmly aim at increasing the number of energy interconnections, the BRUA example being one of the steps to strengthen regional security and open up the Black Sea fields to the western market. I also deem important to use this positioning for the construction of network balancing and energy storage facilities that 29

will serve the wider Carpathian and Balkan region and to enhance production from renewable sources. Such storage facilities, together with an opening of the energy market to the East, for example through the creation of an underwater interconnection, may altogether represent determining factors for enhancing the business environment in the energy sector and strengthening the strategic positioning of Romania in Europe. A second asset, unfortunately also not sufficiently capitalised in my opinion, is the opening to the Black Sea, as well as the river access to the ‘mouths of the Danube’. Undoubtedly, a country with an opening to both sea and large navigable river should make better use of these assets. At the gaming table of the EU countries, Romania has finally understood that it must play its card concerning the Black Sea privileged position. Unfortunately, the long-term effects of the period when Romania was less experienced in the ‘card game’ will continue to take its toll on the lag in energy policy for the medium and long term. A policy of repositioning national interests, obviously, within the limits of the agreements to which Romania is a party, could change the balance in favour of our country and could open up the river/ maritime energy production and transport potential. A third asset is the newest find on the enormous potential (hundreds of billions of cubic meters of gas from offshore fields) of Black Sea gas exploitation. Using this asset is within our grasp, though for the success of this approach the Offshore Law must be improved. This can only be done by taking into account the voice of the investors and the specificity of the deep resources at the Black Sea. If we consider the Norwegian model in the North Sea a successful one, then we must find the way to adapt this model to our natural and national landscape.

How about the chapters in which Romania has weaknesses? The irony is that Romania’s biggest

strengths seem to be the areas with the deepest deficit. In addition, with the risk of repeating what the entire market has continuously complained about, as a legal professional, I cannot help stressing once more the lack of legislative coherence and predictability. Although most of the informed voices on the market have raised flags to authorities that the often and unpredictable legislative changes, made in many cases in a ‘hand-waving’ manner, without substantiation, have shattered the confidence of both local and international and institutional investors, it seems that we largely failed to learn from these mistakes. Moreover, I notice that we are perpetuating a mistake which, to some extent, sooner or later, could lead to what, more recently, the press calls ‘new socialist capitalism’. This new current takes shape in the context of possible reversals of privatizations in the Romanian economy (the well-known privatizations made in the years 1990 2000), and I refer here mainly to the latest information in the industry according to which the giants CEZ and ENEL have publicly declared their interest in exiting the Romanian market, which, in conjunction with the intention of one of the largest state-owned companies in the energy field to purchase those operations, may lead to the idea of re-nationalization of the utility companies. Without commenting on the opportunity of such re-nationalizations, with their particular advantages and disadvantages, I cannot help, but emphasize, that they are, inter alia, the consequence of a very volatile and effervescent legislative framework which, at first, seems to be at odds with the desire for stability of investors, from all fields.

What would you change, if you could, on the Romanian energy market in terms of development strategy, investments, legislation? I would change our internal perception from that of a defeated to that of a victor, enhancing the future of our international positioning and potential of the Romanian resources. It seems abstract, but the future means energy in flow, digitized, broadly interconnected, stable and predictable, and especially with zero carbon emissions. Such future can 30

be built from now on, gradually and in a balanced manner, through a subtle, modern and economically-strategically based legal framework to encourage the use of best practices and technologies for the retrofitting of energy production, to encourage domestic consumption under conditions of energy efficiency and, last but not least, to encourage and facilitate the net export of energy to neighbouring countries.

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Royal Dutch Airlines 31

OIL & GAS

Government Turns its Face to Investors The Ministry of Energy has put up for public debate a draft law amending and supplementing the Offshore Law and the Petroleum Law, through which it aims to relax taxation for investors. The new amendments come after the form adopted last year by Parliament has dissatisfied ExxonMobil and OMV Petrom, resulting in the postponement of the final investment decision on the offshore gas block Neptun Deep in the Black Sea.

Text by Adrian Stoica 32

OIL & GAS

omania has a significant potential of development of the gas sector, but tapping these resources requires substantial investments. Under these circumstances, it is necessary to ensure the adequate conditions for making the specific investments for the exploitation of gas discoveries, as well as for continuing the operations of exploration and evaluation of new hydrocarbon resources in the offshore blocks of the Black Sea, especially in the deep area, as well as for the redevelopment of existing fields and identification of new resources in shallow areas, according to the explanatory memorandum of the draft. Starting from this reality, the new draft mentions that “titleholders of petroleum agreements regarding offshore petroleum blocks in progress on the date of entry into force of this law shall benefit, during their performance, from the level of royalty, percentage rates of petroleum royalty, thresholds of gross production related to these rates and the specific fiscal regime applicable to exploration, development, exploitation and abandonment activities existing on the date of entry into force of this law.”

Proposals of the draft law Given the need to have a competitive tax system attracting investments, the high costs and the long term for the implementation and return on investments in the offshore sector, the explanatory statement shows that it is necessary to eliminate the windfall tax for sales prices at which investors do not achieve additional profits (between RON 45.71/MWh and RON 100/MWh). In the case of windfall gains obtained from prices exceeding RON 100/MWh, the tax grid is maintained. Obtaining a normal level of cost-effectiveness expected for investor at a price of RON 100/MWh substantiates the introduction of the windfall tax starting with this threshold, while prices lower than this level do not generate additional profits.

It is necessary to eliminate the use of the reference price to determine the basis for the calculation of the windfall tax, in order to put the Offshore Law in line with the principles of taxation in Romania provided for in the Tax Code, and with the international practice regarding the determination of upstream taxes based on prices achieved. Moreover, it is necessary to mention the principles for determining the reference price in the primary legislation in order to ensure the stability and predictability of the legislative environment. It is necessary to increase the maximum level for the deduction of investments in the upstream segment to determine the offshore windfall tax, from 30% to 60%, in order to maintain the competitiveness of the offshore sector in Romania and attract investments, given the high costs and risks and, respectively, the long term of offshore investments in the Black Sea. It is necessary to eliminate the limitation of deduction of investments for the calculation of the corporate tax, taking into account that this tax has a general nature and all activity sectors must be treated uniformly, in accordance with the provisions of the Tax Code. Thus, discrimination to which offshore operators are subjected compared to the other economic operators is removed, as the former owe a corporate tax at a tax base artificially increased from which the expenses with the amortization of all investments made by offshore operators are not deducted. In order to allow the practical implementation of the deduction at the calculation of the offshore windfall tax of the investment value in the upstream segment, a legislative clarification and possibly the issue of an order are required in order to clarify the application of article 19, especially regarding para. 9 and 10. The National Agency for Mineral Resources (NAMR) does not have in its attributions the approval of all offshore investments made by titleholders (e.g. technological installations/facilities for treatment, processing, transmission; 33

other investments such as various infrastructures, e.g. offshore rigs etc.), verification of the book value of investments being within the competence of the National Agency for Fiscal Administration. The corporate tax and the offshore windfall tax are two different taxes and therefore it is necessary that the tax base be determined adequately for both taxes. Given the existence of two different taxes, each with own rules of determination, it is not justified to affect a right of deduction established by general rules applicable to the corporate tax, by the similar deduction applicable to the offshore windfall tax, according to the relevant international practice. It is necessary to eliminate the obligations to trade on the centralized markets in Romania in the medium and long term, in order to ensure the marketplace for natural gas from offshore blocks and, consequently, the revenues necessary for a return on the major investments involved by such projects in accordance with the international practice in the field of natural resources. Moreover, the right to freely dispose of the extracted oil and gas quantities, provided by the petroleum agreements and by Petroleum Law as a right of any titleholder of petroleum agreement, was considered by investors as an essential element of the concession which they considered upon conclusion of the petroleum agreement, respectively at the time of making investments in Romania. The explanatory statement shows that Romania’s gas supply security depends, in the long run, on the development of domestic resources, and the greatest contribution can be brought by Black Sea exploitation. Another solid argument for the development of the sector is that natural gas is the cleanest among fossil fuels, with carbon emissions per energy unit by 40% lower than those of coal, as well as considerably lower emissions of air pollutants. Projects on the identification and capitalization on hydrocarbon resources in the Romanian sector of the Black

OIL & GAS

Sea require both keeping the current investors and attracting new investors with the technical expertise and capabilities necessary to make massive long-term investments, with a high risk, which also involve the use of performing technologies. Long-term investments require a coherent and predictable system of laws, policies and regulations allowing investors to make a rigorous and efficient planning of investment programs. So far significant investments have been made in the offshore sector in Romania (over the past 15 years, in the offshore sector approximately USD 2.5bn have been invested in the exploration activities and over USD 1bn in activities of development and redevelopment for the existing fields), starting from the assumption of existence of a stable legislative climate for the entire duration of the petroleum agreements. The stability of taxes and royalties is essential to ensure investorsâ&#x20AC;&#x2122; trust in order to decide to move to the development phase. The development of a competitive and stable legislative framework may determine capitalization for the following decades on a substantial potential of natural resources, with a significant economic impact on the Romanian economy by creating well-paid jobs, bringing substantial contributions to the state budget, eliminating the risks of energy security and the possibility to acquire a regional position of influence in the energy sector. Offshore projects in the Romanian Black Sea sector have a profile of specific investment risk, in conditions in which: offshore operations involve high risks associated with exploration and exploitation activities; geological and technical uncertainties assumed by investors for the exploration phases are significant; there is no upstream offshore infrastructure; the lifespan of offshore projects is much higher compared to other investment projects, requiring more than ten years from the confirmation of discoveries until the production phase.

Tax rates The offshore windfall tax will be calculated by applying one or several calculation percentages, as the case may be, on windfall gains obtained from the sale of natural gas extracted from offshore blocks, as they are determined according to Annex No. 2 to the draft, tax from which the value of investments in the upstream segment is deducted. The tax rates are calculated based on gas sales prices applied by titleholders of petroleum agreements regarding offshore petroleum blocks based on the price grid below, adjusted annually as of January 1, 2020 with the annual index of consumer prices, as follows: a) 30% of the windfall gains obtained from prices higher than RON 100/MWh and lower than or equal to RON 115/ MWh; b) 35% of the windfall gains obtained from prices higher than RON 115/MWh and lower than or equal to RON 130/ MWh; c) 40% of the windfall gains obtained from prices higher than RON 130/MWh and lower than or equal to RON 145/ MWh; d) 50% of the windfall gains obtained from prices higher than RON 145/MWh and lower than or equal to RON 160/ MWh; e) 55% of the windfall gains obtained from prices higher than RON 160/MWh and lower than or equal to RON 175/ MWh; f) 60% of the windfall gains obtained from prices higher than RON 175/MWh and lower than or equal to RON 190/ MWh; g) 70% of the windfall gains obtained from prices exceeding RON 190/MWh.

Offshore windfall tax Depending on the weighted average price of natural gas sold from own domestic production from offshore blocks, hereinafter referred to as PMPC, the draft mentions that the following calculation formulas will be applied: 1. If PMPC is between RON 100/ MWh and RON 115/MWh inclusively, 34

adjusted with IPC, as appropriate, the total offshore windfall tax owed is calculated as follows: IVST = ISO - VID ISO = CI x VS VS = (PMPC - PB) x VGC VID = min (VI, 0.6 x ISO) IVST - the total offshore windfall tax owed; ISO - the offshore windfall tax calculated at the windfall gains from the sale of natural gas at PMPC prices between RON 100/MWh and RON 115/MWh inclusively, adjusted with IPC, as the case may be; CI - the tax rate applied to windfall gains from the sale of natural gas [30% according to Article 19(3) (a)], applicable following PMPC prices between RON 100/MWh and RON 115/MWh inclusively, adjusted annually with the IPC rate starting with January 1, 2020; VS - windfall gains from offshore blocks, calculated from the sale of natural gas, with PMPC prices between RON 100/MWh and RON 115/MWh inclusively; PMPC - the weighted average price of natural gas sold from own domestic production from offshore blocks; PB - the minimum base price of the corresponding calculation range, for PMPC prices between RON 100/MWh and RON 115/MWh inclusively, is RON 100/MWh, adjusted annually with the IPC rate as of January 1, 2020; VGC - the gas volumes from domestic production sold from offshore blocks; IPC - the annual consumer price index in the previous year published by the Romanian National Institute of Statistics; VID - the value of deductible upstream investments; VI - the total value of upstream investments as they are provided in Article 19 (9), which is diminished monthly with the deducted VID value. 2. If PMPC exceeds RON 115/MWh, adjusted with IPC, as appropriate, the total offshore windfall tax owed is calculated as follows: IVST = ISO - VID ISO = CI x VS

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VS = (PMPC - PB) x VGC VID = min (VI, 0.6 x ISO) ISO - the sum of offshore windfall taxes, calculated for each price range according to Article 19(3)(a)-(g), respectively: ISO = ISO1 + ISO2 +...+ ISOi ISOi is calculated according to the calculation formula from point 2, where the corresponding terms have the following meanings: CI - the tax rate applied to windfall gains from the sale of natural gas, for each corresponding price range, according to Article 19(3)(a)-(g) of the draft law; PB - the minimum base price of the corresponding calculation range, adjusted annually as of January 1, 2020 with IPC; VS - the windfall gains from offshore blocks, calculated for each corresponding price range.

Example of calculation For the sale of a VGC volume of 1 MWh at a sales price of RON 120/ MWh, the total offshore windfall tax owed is calculated applying the previous formulas as follows: IVST = ISO - VID = 6.25 - 3.75 = RON 2.5 ISO = CI1 x VS1 + CI2 x VS2 = 0.30 x 15 + 0.35 x 5 = RON 6.25 VID = 0.6 x ISO = 0.6 x 6.25 = RON 3.75 CI1 = 0.3 - the tax rate (30%) applied to offshore windfall gains from the sale of natural gas applicable for charging prices between RON 100/MWh and RON 115/MWh inclusively, according to Article 19 (3)(a), adjusted annually with the IPC rate as of January 1, 2020; CI2 = 0.35 - the tax rate (35%) applied

to offshore windfall gains from the sale of natural gas applicable for charging prices between RON 115/MWh and RON 130/MWh inclusively, according to Article 19 (3)(b), adjusted annually with the IPC rate as of January 1, 2020; VS1 = (115 - 100) x 1 = RON 15 the windfall gain from offshore blocks, calculated as difference between RON 115/MWh and RON 100/MWh, adjusted annually with the IPC rate as of January 1, 2020; VS2 = (120 - 115) x 1 = RON 5 the windfall gain from offshore blocks, calculated as difference between PMPC (RON 120/MWh in the given example) and RON 115/MWh (the minimum base price of the range), adjusted annually with the IPC rate as of January 1, 2020.

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CNG Fuelling Stations Increasingly Attractive The use of Compressed Natural Gas (CNG) as alternative fuel for increasing energy efficiency seems to be a winning card. In conditions in which energy resources are increasingly expensive, CNG could efficiently offset the situation and this is why in Romania the number of stations opened is ever-increasing.

Text by Daniel Lazar

ompressed Natural Gas (CNG), consisting mainly of methane [CH4], is a substitute of fossil fuels, such as gasoline, diesel or propane/LPG, being obtained by compressing natural gas at a pressure of 200-248 bar, at less than 1% of the volume

it occupies at the standard atmospheric pressure.

Increasingly more cities invest in local transport fleets on CNG According to a study conducted by Oana Gulei-Gradinaru (NGVA 36

Romania), the objectives of purchasing non-polluting buses will go up from 24% to 45% in 2025 and from 33% to 66% in 2030, depending on the population and GDP of each country. Romania and other countries with lower GDP will have a gradual development, of approximately one fifth of the new bus

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fleet in public transport and should reach zero emissions in 2030. The initial target must be reached within approximately two years of the entry into force of the Directive, which could materialize in Q3/Q4 2021 (by December 31, 2025).

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ENERGY EFFICIENCY

Energy efficiency means the ratio of output of performance, service, goods or energy, to input of energy (Directive 2012/27/EU). According to Law No. 121/2014 on energy efficiency, improving energy efficiency is a strategic objective of the national energy policy, due to major contribution it has in achieving the security of energy supply, sustainable development and competitiveness, in saving the primary energy resources and reducing greenhouse gas emissions. One of the main concerns of policy makers at European Union level, according to the Kyoto Protocol, also strengthened by the Paris Agreement, is related to the reduction of greenhouse gas emissions, corresponding to the assumed targets a 20% reduction of these emissions for period 2013-2020. Under Romanian Presidency in the first six months of this year, the Council of the European Union reached an agreement with the European Parliament on the reform that will determine the reduction of carbon emissions in transport. The agreement was approved by the member states of the European Union within the EU Council. As such, Member States will have 24 months, from the moment of entry into force of the European Directive, for the implementation at

PREDICTIVE MAINTENANCE

Because natural gas is an abundant resource. • Because it is a solution proven at global level. • Because it is: ECOLOGICAL is the least polluting of the fossil fuels; ECONOMIC - its cost is lower; SILENT - noise pollution of CNG engines is lower than in conventional heat engines; SAFE - safety in operation is practically proven. One of the main advantages, from the point of view of society, consists of reducing greenhouse gas (GHG) emissions compared to the other fossil fuels, and correspondingly consists of reducing effects on climate change. The estimated reduction of CO2 emissions compared to gasoline and diesel is between 13% and 26% (ngvamerica. org), and considering the most relevant GHG emissions generating effects on climate changes (CO2, CH4, N2O), their reduction is estimated at 29%-39%. At the same time, replacing traditional fuels reduces air pollution and improves population health. The main harmful emissions (NOx - nitrogen oxides, SO2 - sulphur dioxide, non-methane volatile organic compounds and particulate matter PM10 and PM2.5) are lower in the case of CNG combustion compared to other fossil fuels. CNG is used on internal combustion engine vehicles that have been ‘converted’ (later equipped with a CNG facility) or on vehicles that have been manufactured especially for CNG, either individually or with a segregated gasoline system to extend the range (dual fuel) or in combination with other fuel, such as diesel (biofuel). The context is

favourable to CNG, as diesel price is in continuous growth and pollution puts increasing pressure at international level. In developing countries, such as Romania, the decision to install a dual fuel system is rather economic than related to social responsibility. Consumers in these countries are rather interested in purchasing a new car than reducing the costs of vehicles they already own. Therefore, converting the existing vehicles to CNG, especially among fleets or taxis, can significantly reduce pollution at national level and help reach the European targets.

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national level of decisions on ensuring a cleaner environment by using clean vehicles. The main objectives are to purchase some vehicles, trucks, buses as clean as possible between 2025 and 2030. These new rules will also apply to public road transport services, special passenger transport services, waste collection, postal and parcel services. According to a communique of the environmental group Transport & Environment, the agreement on reducing carbon emissions on February 12, 2019 has two different implementation terms for Eastern and Western Europe, with Eastern European countries having lower targets than Western ones.

Case study (data provided by TDR Energy) We consider a gasoline car, with an average consumption of 7.0 litres/100 km. By converting gasoline to CNG, the average fuel consumption becomes 4.3 kg/100 km. CO2 emissions resulting from gasoline consumption are: CO2 emissions (G) = Gasoline quantity x EF where: EF = Emission Factor CO2 emissions (G) = 7 l x 2.79972 Kg CO2 e/l = 19.59804 Kg CO2e reported per 100 km travelled and results in a consumption of 195.9804 g CO2 e/km CO2 emissions resulting from CNG consumption: CO2 emissions (CNG) = CNG quantity x EF where: EF = Emission Factor CO2 emissions (CNG) = 4.3 kg x 3298.43 Kg CO2 e/ton = 13.19372 Kg CO2e reported per 100 km travelled and results in a consumption of 131.9372 g CO2 e/km The emission factors used are approved at the European Commission level through the Joint Research Centre and take into account the life cycle of fuel, taking into account the Heat Power and WTT (Well to Tank). This results in a reduction in GHG emissions by 32.7% when using compressed natural gas CNG - as a fuel compared to gasoline.

Increasingly more CNG stations in Romania CNG Romania aims to implement the first network of fuelling stations for compressed natural gas vehicles in Romania along the European transport corridors. The coordinator of the project is Denisson Energy (Antares Group), having NGVA Romania as partner. The allocated budget amounts to EUR 5.2 million, with 85% cofinancing from the European Union under the CEF Program. The project, whose duration of implementation is March 2016 - December 31, 2020, is supervised by INEA - the Innovation and Networks Executive Agency (European Commission) and the Ministry of Transport (Romania). The general objective of the project is support for implementing a sustainable and efficient transport system, decarbonization of road transport in the Pan European corridors, by introducing the alternative CNG fuel in Romania. The specific objective is to build nine CNG fuelling stations along the road corridors of the TEN-T network in Romania, in order to cover the potential of longdistance transport and urban transport; support for market entry and use of CNG in Romania. So far, stations have been opened in Ramnicu Valcea (CNG Romania Antares Natural Gas), Bucharest (by Engie), Pantelimon (CNG Logistic Group and Flora Gas), Buzau (LPG & CNG Service Solutions), Mihailesti (INA Garden), the closest across borders being that in Ruse, Bulgaria. And the process will definitely continue.

CNG, huge importance for both trucks and buses Volkswagen Group and its industry partners from the gas supply, network, and filling station operation sectors showcased their products and services at the 3rd CNG Mobility Days in Berlin (25-26 June 2019), presenting an overview of the current situation and the future of CNG. Volkswagen Group brands also exhibited their latest CNG models in the passenger 38

car, truck and bus segments. In parallel with the advancing electrification of its fleet, Volkswagen Group and its brands continue to rely on CNG as an alternative drive technology for decarbonizing road transport, and the product range has been revised and expanded again with this in mind. Volkswagen Group currently offers the widest selection of CNG vehicles of any manufacturer, by a substantial margin. At the annual general meeting in mid-May 2019, Herbert Diess, Chairman of the Board of Management of Volkswagen, announced that CNG would continue to play an important role for the group in the future: “We are the global market leader for gas drive systems, and better positioned than our competitors. We also plan to continue further expanding and improving this technology.” Using CNG as an energy source for automobiles meaningfully contributes to reducing emissions, as well as representing a cost-efficient customer alternative to petrol and diesel. “Volkswagen is committed to the Paris Climate Agreement. CNG has an important role to play in the alternative drive systems strategy that runs alongside the Group’s electrification offensive. It is sufficiently proven, immediately available, efficient and cost-effective. Furthermore, CNG cars are not affected by driving bans in city centres,” explains Stephen Neumann, Volkswagen Group Representative for CNG Mobility. For the first time, the MAN and SCANIA brands also reported on the latest developments for trucks and buses, as part of the CNG Mobility Days. According to the new emissions standards in the European Union, by 2030 CO2 emissions must fall 30% from 2019 levels – a goal that is virtually unattainable using conventional drive types. CNG, which already has 15% lower fuel consumption than diesel vehicles, is an immediately available and usable alternative for trucks and buses. At present, a particularly persuasive argument in favour of using CNG – especially for haulage companies – is the exemption from tolls for natural gas-powered trucks.

Choose the Flowserve SIHI equipment! Customer Trust Remains the Focus of Our Commitment Using our resources and collective experience, we support our customers, at global level, to exceed their business targets. We fulfil this promise by the careful way in which we listen to customer requests and subsequently by delivering the products and services they need. Our strengths • A business model underscoring the advantages for customers, such as: predictable/low maintenance costs and increased reliability. • The large number of customers, proof of increased productivity, optimization of equipment maintenance and repair costs, contributing to obtaining competitive positions in their markets. • We expand technological innovations whenever possible, with the aim to improve our ability to meet the needs of our customers. • We are open to new challenges and potential projects, which we will approach with the particularly successful team of Flowserve SIHI. • Starting on 14th April 2017, the name of our company has changed from Sterling Fluid Systems (Romania) to Flowserve SIHI Romania - the only official entity of Flowserve SIHI Corporation for Romania and Moldova.

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Romgaz â&#x20AC;&#x201C; Clean Energy Since 1909 Company Profile Romgaz is a joint stock company whose majority shareholder is the Romanian State owning a 70% stake. The company is listed on Bucharest Stock Exchange and GDRs are transacted on London Stock Exchange. The company has a vast experience in the field of gas exploration and production and a history that began in 1909 with the discovery of the

first commercial gas reservoir in the Transylvanian Basin by drilling well Sarmasel. 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 in the underground deposits, interventions, workover and special operations on wells and technological transport. 40

Starting with 2013, Romgaz extended its scope of work by taking over the Iernut thermoelectric power station, and thus it became also electric power supplier. The company dwells on the implementation of the latest technology in geologic exploration, gas production and underground storage, financed from its own or external sources. The company economic and financial position is characterized by the profit constancy

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Trade The entire quantity of gas traded by Romgaz was sold on the internal market. Romgaz traded quantities delivered on free market both by bilateral negotiation and on the centralized market. Quantities delivered during 2018 have been traded 60% on the Romanian centralized market.

Technological Transport and Maintenance Branch Romgaz performs, through one of its branches, transportation of goods and people, technological transportation particularly, and maintenance activity for the benefit of the company and third parties.

Romgaz Branch for Well Workover, Recompletions and Special Well Operations

and solvency. Thus, Romgaz is one of the state-owned companies that have fulfilled all the conditions for economic rise, turning into one of the most important companies in Romania.

Exploration Romgaz designs and plans all exploration works based on its own concepts by using modern professional software, assessments of the geological areaâ&#x20AC;&#x2122;s prospectivity displaying specific features within the blocks under concession. These are performed by using specific surface exploration methods to identify the areas with hydrocarbon accumulations (prospects), followed by exploration drilling to prove the presence of accumulations.

Natural gas production Romgaz natural gas production activities are performed by the two production branches with the headquarters in Medias and Tg. Mures,

operating together over 140 commercial fields, located in Transylvania, Moldova, Oltenia and Muntenia. Romgaz production branches are set up in 14 production departments: Filitelnic, Delenii, Medias, Roman, Danes, Agnita, Cristur (Medias branch) and Sangiorgiu de Mures, Sarmasel, Grebenis, Sangiorgiu de Padure, Taga, Muntenia and Oltenia (Tg. Mures branch). These fields produce through 3240 wells and complex surface facilities made up of gathering pipes, gas heaters, impurities separators, compressors, dehydration stations and gas metering panels.

Electric Power Production and Supply Electric power plant (CTE) Iernut is Romgazâ&#x20AC;&#x2122;s SPEE Iernut Branch. CTE Iernut is a condensation electric power plant with intermediate superheating having 600 MW installed power. Its capacity to produce electric power accounts for 5% of the domestic/national market share. 41

SIRCOSS is the branch for well services of the National Gas Company ROMGAZ S.A. established in 2003 as a result of a reorganization process. This branch reunited all work teams and equipment used for the well workover and special well operations activities. SIRCOSS specialises in well recompletions jobs, workover operations, special well operations and production tests in natural gas wells.

Storage Starting from April 1st, 2018, SNGN ROMGAZ SA has unbundled its storage activities, according to Directive 2009/73/CE of the European Parliament and of the Council of July 13th 2009 and to the Electricity and Natural Gas Law no. 123/2012, art. 141, and DEPOGAZ Ploiesti Subsidiary SRL has taken over License no. 1942/2014 (transferred from SNGN ROMGAZ SA) for operating the natural gas underground storage system. The Underground Gas Storage Subsidiary DEPOGAZ Ploiesti SRL is completely owned by SNGN ROMGAZ SA.

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OMV Listed Second Time in the Dow Jones Sustainability Index OMV has entered the Dow Jones Sustainability Index (DJSI World) for the second time and is still the sole Austrian company included. The index was launched in 1999 and serves as a benchmark for investors who integrate sustainability considerations into their portfolios. The Dow Jones Sustainability World Index comprises the top 10% of the largest 2,500 companies in the S&P Global Index in terms of sustainability leadership, based on the assessment of long-term economic, environmental and social criteria.

“We

are very pleased that our efforts in implementing our sustainability strategy have been recognized with the inclusion of our company among the leaders of sustainable business performance. We will maintain our sustainable approach of striking the right balance between affordable energy, security of supply and climate protection, while taking into account the interests of our stakeholders”, said Rainer Seele, CEO of OMV. Manjit Jus, Head of ESG (Environmental, Social and Governance) Ratings at RobecoSAM, praised OMV’s entrance into the family of bestperforming sustainability companies: “We congratulate OMV for being included in the DJSI World. The SAM Corporate Sustainability Assessment has again raised the bar in identifying those companies best-positioned to address future sustainability challenges and

opportunities. This year – which marks the 20th anniversary of the DJSI – record corporate interest in the SAM CSA reflects the enduring relevance of the DJSI for measuring and advancing ESG practices.” OMV is listed on the following sustainability indices: FTSE4Good Index Series, STOXX® Global ESG Leaders, S&P Europe 350 ESG Index, MSCI ACWI ESG Leaders Index, MSCI ACWI SRI Index and ECPI Indices. The ESG performance of OMV has been awarded Prime Status following the assessment of ISS oekom, recognized as an ‘Industry Mover’ in the RobecoSAM Yearbook, received an AAA score from MSCI, an A– (Leadership) score by CDP, has been rated as an ‘Outperformer’ by Sustainalytics, and holds a Quality Score 1 from ISS in the ESG categories. OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. With Group sales of EUR 23 bn and a 42

workforce of more than 20,000 employees in 2018, OMV Aktiengesellschaft is one of Austria’s largest listed industrial companies. In Upstream, OMV has a strong base in Romania and Austria as part of the Central and Eastern Europe core region as well as a balanced international portfolio, with Russia, North Sea, Middle East and Africa as well as Asia-Pacific as further core regions. 2018 daily production stood at approximately 427,000 boe/d. In Downstream, OMV operates three refineries with a total annual processing capacity of 17.8mn tons and more than 2,000 filling stations in ten countries. OMV runs gas storage facilities in Austria and Germany; its subsidiary Gas Connect Austria GmbH operates a gas pipeline network in Austria. In 2018, gas sales volumes amounted to around 114 TWh. Sustainability is an integral part of the corporate strategy. OMV is set to invest EUR 500mn in innovative energy solutions by 2025.

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Petromidia Refineryâ&#x20AC;&#x2122;s Anniversary Four Decades of Performances and Professionalism 44

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Petromidia Refinery Navodari celebrates 40 years of activity, time frame when from one idea it reached to be the largest such unit in Romania and one of the most modern in the Black Sea region. Petromidia started up its first installation in 1979 – Atmospheric Distillation – and since then it started an evolution carried on via major investments, every year. Only in 2019, 50 million dollars are allocated for the alignment and continuation of installation revamping, as well as for the digitalization of Petromidia Refinery.

he positive trend of the operational results is the proof that at Petromidia, the development stra tegies were successfully implemented. Last year, no less than 11 records were broken, having reached historic levels on raw material processing (5.92 million tons), obtained oil products (5.78 million tons), essences production (1.36 million tons) and Diesel fuels (2.75 million tons), aviation fuel (317 thousand tons) or on the ratio of utilization of the refining capacity (91.98%). The refinery has the highest white product output in the region - 86.2% and ranks 9th among the 250 refineries in Europe and Africa, according to a study made in 2018 by Wood MacKenzie. During 1979-2018, Petromidia processed a total volume of 122.8 million tons of raw material and 3.1 million in the first half of this year, the objective for 2019 is to reach another historic record – 6.1 million tons. Its evolution and turmoil also reflected in the processed quantities: approximately 26 million tons (1979 – 1989) – part of a centralized raw material supply and finished goods sales system, 23.2 million tons (1990 – 2000) – on the background of the transition to market economy, 22.6 million tons (2001 – 2007) – alignment to the mandatory Euro standards and the generation of our own fuel distribution network in Romania and in the region, 51 million tons (2008 – 2018) – part of the national

oil and gas company KazMunayGas and important investments in revamping and increasing the fining capacity. Since Rompetrol was taken over by KazMunayGas, total investments of over 1.6 billion dollars were made. Out of this amount, approximately one billion dollars was directed to Petromidia, and the largest project, in value of approximately 450 million dollars aimed revamping and increasing the capacity from 3.5 to over 5 million tons of raw material annually. “Petromidia is the engine of the development of Navodari for the last 40 years, but also the heart of the KMG International Group - which stays at the base for the success of Rompetrol in the Black Sea basin. We are proud of the history and performance achieved by the refinery and we wish to continue the development of Petromidia, along with our main resource: the passion and commitment of the employees. We celebrate with the people who built the Petromidia story, present at all the stages that defined what Petromidia means today - a model of efficiency and professionalism,” Zhanat Tussupbekov, CEO of KMG International, said. The first steps in developing the concept of Smart Refinery were made this year, by implementing Advance Process Control (APC) – a software meant to optimize the production and mitigate impact on the environment. Introducing the digitalization projects at Petromidia level, the refinery enters in a new era, where the main objectives are 45

activity efficiency, cost reduction and processed volumes increase. Petromidia at present has a Nelson complexity index of 10.5 and it represents the processing unit in the region with the highest capability of extraction of Sulphur from the oil, exclusively obtaining the Euro 5 fuels. Also, a study made by Solomon Associates shows that Petromidia has a complexity index of 11.4 and is among the youngest refineries in Europe (by international standards). Also, the refinery has a utilization rate of 90%, higher compared to the European average of 83%, a level reached only through constant investments and commitment of employees. Moving to higher quality fuels occurred in several stages: following the revamping at the beginning of the ‘90s, the refinery started producing Euro 2 in 1996. Four years later, from Petromidia left Euro 3 fuels, and 2005, the quality standard Euro 4 was reached. In 2007, the year of being taken over by KMGI, Petromidia started delivering Euro 5 fuels on the domestic market, two years earlier than the requirements of the European Commission. This step was successfully taken because of increasing more than three folds the volumes of the reactors. The Euro 5 fuel (less than 10 parts of Sulphur per million) is improved and constantly optimized, due to revamping the installations in the refinery. With the support of the future investments, KMG International aims to increase the quality of the fuels and

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to enter the Euro 6 segment, which will have an even lower impact on the environment. At the same time, several important and innovative projects are foreseen, such as developing a new bitumen unit that would double the annual production, an alkylation unit that could develop the capacity of obtaining essence or a dewaxing installation that would allow for the optimum Diesel fuel production and for temperatures of -35 degrees Celsius. On Petromidia platform, currently work over 2,800 people, direct employees of the group, as well as contractors. The annual contribution of Rompetrol Rafinare (the operator of Petromidia Refinery) to Romaniaâ&#x20AC;&#x2122;s State Budget is approximately 1.5 billion dollars. Given the 40th anniversary of Petromidia, KMG International launches new education and health programs

in the region, aiming to healthily and harmoniously develop the new generation. The projects developed in partnership with two important NGOs aim at supporting the children coming from less advantaged families in Constanta County and not only, via a free dental health national program, as well as by supporting quality education and teachers in the elementary and gymnasium and high school and university education in the country. For the construction of the refinery, it was necessary to recover from the sea, over 30 hectares of land. For four years, between 1975 and 1979, works ran at fast pace to develop a refinery that would integrate in the general plan of the times. In time, the refinery started to introduce on the technological flow ever more installations, including those of the Petrochemistry Division. Otherwise, today, Petromidia is the only 46

national producer of polyethylene and polypropylene. After Vega Refinery joined the Rompetrol portfolio, Petromidia Refinery created a perfect synergy with the unit at Ploiesti, to which it delivers the necessary materials/prefabs to obtain new products and special solutions. Petromidia Navodari is the largest refinery in Romania and one of the most modern in the Black Sea and the Mediterranean Sea areas. Its strategic setting and complex distribution network make Petromidia a real energetic hub, capable to substantially cover the distribution station network in Romania. At the same time, the fuel produced at Petromidia, of a higher quality and in compliance with the Romanian and European regulations, is distributed in countries like Bulgaria, Georgia or the Republic of Moldova, where it is sold still under the Rompetrol brand.

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7 Piatra Craiului St. | DIBO Industrial Parc | Negoiesti | Romania Phone: +40 244 542 029 For more information please contact us at office@endurancelift.com 47

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LUKOIL - KazMunayGas Agreement on Joint Studies President of LUKOIL Vagit Alekperov and Chairman of the Management Board of KazMunayGas Alik Aidarbayev have signed on September 20 in Almaty (Kazakhstan) an Agreement on Joint Studies. The two companies agreed on major terms of cooperation and expressed their willingness to begin studies on mineral resources in order to evaluate the hydrocarbon potential of certain areas in the Republic of Kazakhstan.

he agreement continues the long-term successful cooperation between the two companies. Earlier this year LUKOIL, the Ministry of Energy of the Republic of Kazakhstan and KazMunayGas concluded a contract for hydrocarbon exploration and production on the Zhenis block. Baseline agreement on the I-P-2 project was also signed earlier this year. Both projects are located in Kazakhstan Caspian shelf. In addition, LUKOIL and KazMunayGas are strategic partners in a number of large-scale projects: Karachaganak, Tengiz, Kumkol, Caspian Pipeline Consortium (crude oil transportation project) among them. The I-P-2 license block is located in the Kazakh Sector of the Caspian Sea with water depth within its area ranging from 300 to 400 meters. The distance to the shore is 130 kilometres. The nearest port,

Aktau, is 130 kilometres from the block. A number of 2D seismic surveys covering the block area were acquired in previous years. LUKOIL has been operating successfully in Kazakhstan since 1995. The company participates in the development of the Tengiz, Karachaganak and Kumkol fields, in a joint venture developing the Tsentralnoye field in the Caspian Sea as well as in the Caspian Pipeline Consortium. In April 2019, LUKOIL and 48

KazMunayGas concluded a contract for hydrocarbon exploration and development on the Zhenis block in the Kazakh Sector of the Caspian Sea. Zhenis Operating LLP (a fifty-fifty joint venture between LUKOIL and KazMunayGas) will be operator of the project. In accordance with the concluded contract main minimal obligations include drilling of one exploration well and a 3D seismic survey. The new project in the Caspian Sea is an important step in expanding the resource base in the region which has a strategic importance for LUKOIL and where it has accumulated considerable expertise. In 2018, LUKOIL and KazMunayGas concluded a Joint Operating Agreement and a Financing Agreement on the Zhenis project and in February 2019 the Ministry of Energy of the Republic of Kazakhstan issued mineral rights on the block.

OIL & GAS

Trilateral Talks with Russia and Ukraine on the Future of Gas Transit to Europe he third round of trilateral talks at political level on the long-term transit of Russian gas via Ukraine to Europe was constructive according to the VicePresident for Energy Union Maroš Šefčovič. He also underlined the steps taken by the parties in the right direction. “I believe that today we have taken steps in the right direction. In other words, there was convergence of the position on most of the issues we discussed,” Maroš Šefčovič stated. Officials are discussing a new longterm agreement on natural gas flows after the current deal expires in January. One by one, all key areas in the trilateral meetings have been addressed, namely: • How EU energy rules should be reflected in the legal framework of a future contract; • The appropriate duration of such contract; • Necessary volumes and their flexibility; • The tariff setting; • The Stockholm arbitration.

Highlights Firstly and importantly, both sides have agreed in principle that a future contract

will be based on the EU law. “We have clearly described to the Russian side that Ukraine is gradually implementing EU energy rules and a future contract must respect them,” the Vice-President for Energy Union highlighted. “At the same time, Gazprom is well acquainted with EU rules in its commercial relations with European gas companies. This would therefore be a well-known territory. The Russian side has asked for assurances regarding the transposition of EU legislation into the Ukrainian law – that it is indeed the case. We will accelerate the work of EU Energy Community so that transposition is on time and correct.” In this context, the good news is that there is clear progress on unbundling of Naftogaz. “The Ukrainian Government had made it its priority and I congratulated the Minister on the adoption an action plan/roadmap that paves way for a fully unbundled independent transmission system operator to be established – and certified according to the EU law – by the end of this year. I appreciated that the CEO of a company being formed was also present here today,” Maroš Šefčovič added. An agreement on all three elements, as they are interlinked, is also needed. The volumes are key for the tariffs setting. The 49

duration of a future contract is important for investment into the Ukrainian transit system. For Ukraine, well-functioning transit with volumes for EU consumers is the most important issue. Russia puts emphasis on direct sales to Ukrainian consumers. These issues are to be discussed. “I am glad to say that EU underground storage filling levels are very good – currently standing at 96 percent of full capacity. Ukraine’s underground storage filling levels are also good – currently at around 19.6 bcm, almost 4 bcm above levels in September last year,” Maroš Šefčovič mentioned.

Next steps The parties have agreed that there will be an inter-ministerial consultation with the two companies participating to hammer out the remaining interlinked issues. “We would resume at political level by the end of October when, I hope, we will have more progress on the remaining issues. We will remain in contact in the meantime. With Ukraine, we will work closely on the unbundling and certification process as well as on the transposition of EU legislation into the Ukrainian law,” Maroš Šefčovič concluded.

OIL & GAS

FPPG Study Excessive Gas Taxation Blocks Investments According to the analysis of the effective tax rates at European level, Romania has the highest tax rate specific to gas production. The Oil and Gas Employers’ Federation (FPPG) has recently launched the study ‘Status of the tax system specific to the upstream gas sector in Romania’. In the attempt to facilitate the maintenance of balance between state interests and those of investors, the study, conducted by the tax consulting firm Biris Goran, proposes a number of measures ensuring legislative stability and predictability, as well as the reduction of the effective tax burden to a level close to the average of European countries.

Text by Adrian Stoica

ccording to the mentioned study, Romania has the highest effective tax rate specific to gas production, calculated as rate of upstream gas revenues, both in 2017 (19.4%) and in 2018 (25.3%), being almost triple compared to the average of the other states included in the analysis (7.0% in 2017 and 7.6% in 2018). “Moreover, it is noticed that, in the light

of recent legislative amendments, the effective tax rate registered in Romania in 2018 came to detach by almost 7 percentage points compared to the second highest effective tax rate (in Hungary), the effective tax rate reaching 18.4% of revenues in 2018). Therefore, we assess that, at least in the European context, the tax system specific to the gas upstream sector in Romania leads to an extremely high effective burden, almost 50

triple compared to the average of the other countries included in the analysis,” the authors of the study say.

Taxation disproportionate compared to revenues The increase in the effective tax rate is due, among others, to changing the modality of calculation of the reference gas price and applying higher windfall tax

OIL & GAS

rates in the case of higher sales prices, the study explains. Basically, while in 2017 the state collected from gas producers (mainly OMV Petrom and Romgaz, which ensure about 94% of production) RON 1.3bn, in 2018 the amount increased to RON 1.8bn. The state has appropriated almost all windfall gains of producers, by increasing taxation. “In 2018, although total taxes and royalties related to the upstream gas sector increased significantly, by 41% compared to 2017, revenues recorded in the upstream gas activity increased by only 8% compared to 2017. Moreover, in absolute values, almost the entire growth of RON 538mln in sales/revenues from this activity was ‘cancelled’ by an increase in taxation with the amount of RON 524mln. Thus, as it was expected, given the modality of collection and the calculation of taxes and duties specific to the upstream gas sector, it is noticed that they register a disproportionate evolution compared to revenues actually recorded from this activity,” the study also shows.

Offshore investments discouraged In the context in which gas production suffered significant declines and specialists estimate that keeping or even increasing it can be achieved only through offshore fields, the current taxation system discourages investments. “Moreover, as a general feature, it can be noticed that the royalty and windfall tax system is not differentiated depending on the difficulty of exploitation or depending on the techniques used, with no incentive to encourage them. Therefore, from this perspective as well, Romania seems to be one step behind,” the study shows.

Proposed tax measures The study has identified a number of measures that can be taken by authorities to improve taxation. The proposed measures include correlation of taxation with the degree of difficulty and risk of exploitation, in the sense of encouraging, through a more favourable tax regime, related to more difficult exploitation (lower taxation

for offshore and for onshore exploitation requiring improved techniques compared to the conventional ones, such as deep drilling etc.). On the other hand, windfall taxes should admit losses in the initial phases, the full deduction of investments made so that windfall taxes are owed starting with the full recovery of the investment by the producer. In terms of employment, maybe the highest impact could be obtained through the significant reduction or elimination of specific taxation for small projects or those with low return, which would encourage the extension of activities with a lower return, which currently are not a priority for investors.

Amendment of the Offshore Law and Petroleum Law A first important step to restore balance in the tax system applied to the upstream gas sector could be in the opinion of the authors of the study the adoption of the draft law amending the Offshore Law No. 256/2018 and the Petroleum Law No. 238/2004, recently published. Regarding the calculation of royalties for gas, it proposes, among others, first of all the use of sale-purchase prices actually realized (less the transmission, storage costs and other logistical costs). Regarding the offshore activity, it is proposed to raise the threshold above which the windfall gains for which tax is owed are determined, from RON 45.71/MWh to RON 100/MWh. Also, the deduction of investments by up to 60% of the windfall tax, compared to the current limit of 30%, eliminating the provisions on non-deductibility in terms of corporate tax of investments deducted in the calculation of the windfall tax and reducing the obligation to trade the domestic production on the centralized market from the current rate of 50% to a quantity of maximum 20%. “Through the amendments (proposed in the draft - Ed.), the total government take reaches a more balanced level of approximately 60% of profits generated in a standard offshore project, which gives a chance to the development of Black Sea projects,” the study also shows. 51

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OIL & GAS

Intumescent Coatings Market to Surpass USD 1.2 billion by 2024 A recent report by Graphical Research estimates that global intumescent coatings market size will surpass USD 1.2 billion by 2024 owing to its applications in automotive, oil & gas, and construction sectors primarily due to its fire-retardant properties. They provide fire protection due to swelling properties at high temperature and are applied to structural elements like wood, steel, and aluminum structures which usually lose strength during fire. Growing use of passive fire protection methods as per structural design codes are predicted to promote the industry growth in the coming years.

ntumescent coatings industry size worth over USD 900 million in 2017, is projected to grow at a CAGR of around 4.5% over the period of 2018-2024. Its growing use in oil & gas, construction, and automotive sectors is predicted to boost the market growth trends over the coming eight years. However, scarce supply of raw materials like graphite, epoxy resins, and sodium silicate, largely used in construction and automotive industries, is predicted to inhibit the market growth. Intumescent coatings market is

segmented in the terms of applications, technology, end-use industries, and regions.

Hydrocarbon applications segment to grow at a CAGR of around 5% over 2018-2024 Cellulosic applications segment worth over USD 430 million in 2017, is anticipated to witness a noticeable growth over the forecast period. Rising health & safety concerns coupled with heavy demand for intumescent coatings from construction and automotive sectors is predicted to drive the segment growth. Hydrocarbon applications segment 52

worth over USD 450 million in 2017, is projected to make significant gains at over 5% over the period of 2018-2024. Key explorations in oil & gas and energy sectors have resulted in heavy demand for the intumescent coatings in these sectors.

Water based intumescent coatings Water based intumescent coatings market is predicted to grow at over 5% over the period of 2018-2024 owing to its weatherability and low volatile organic compounds (VoC) contents coupled with its ecofriendly features resulting in safe workplace conditions.

OIL & GAS

Solvent based intumescent coatings market is anticipated to witness moderate growth over the forecast timeline due to its high dry rate, resulting in damage of the soft coated surface layer.

Intumescent coatings growth in construction and use segment Intumescent coatings growth in construction end use segment is forecast to grow at a CAGR of around 5% over 2018-2024. Construction end use segment is expected to witness a substantial growth over the period of 2018-2024 owing to the growing demand for intumescent coatings in buildings & constructions as a result of its fire retarding (or fire resisting) properties. Automotive end use segment is projected to witness a noticeable

growth over the forecast timeline due to the need to provide protection to oil tubes in engine bay from high engine temperatures. Oil & gas end-use segment worth over USD 450 million in 2017, is predicted to witness significant growth over the forecast timeframe owing to extensive use of intumescent coatings to provide protection against fire to steel structures used in offshore oil & gas applications.

Global trends Germany intumescent coatings market is predicted to grow at a CAGR of around 4.5% over the period of 2018-2024 owing to strict rules regarding vehicle safety and protection against fire. Brazil intumescent coatings market is forecast to surpass USD 30 million by 2024. Brazil intumescent coatings market

is predicted to register highest gains at around 5% over the period of 2018-2024 owing to strict legislations passed by the government regarding the use of fire protection systems in constructions for safety purpose. The U.S. market is projected to witness a surge over the forecast timeline owing to the growing application of intumescent coatings in the aerospace sector to protect various airplane parts from fire. China intumescent coatings market worth over USD 145 million in 2017, is predicted to witness a substantial growth by 2024 as a result of rise in infrastructure spending and the presence of high amount of shale gas reserves in the region. Key industry participants include AkzoNobel, Crown Paints, Carboline Global, Rudolf Hensel GmbH, SherwinWilliams, and Hempel Group.

ENVIRONMENT

OGCI CCUS Initiative Scaling Up Actions Towards Climate Goals

The Oil and Gas Climate Initiative (OGCI) announces progress towards methane target and new CCUS initiative to scale up actions towards climate goals. The OGCI further initiatives are set to accelerate the reduction of greenhouse gas emissions and support the goals of the Paris Agreement, ahead of OGCI’s annual event in New York City.

irst, OGCI launched a new initiative to unlock large-scale investment in carbon capture, use and storage (CCUS), a crucial tool to achieve net zero emissions. OGCI’s CCUS KickStarter initiative is designed to help decarbonize multiple industrial hubs around the world, starting with hubs in the US, UK, Norway, the Netherlands, and China. The aim of the KickStarter is to create the necessary conditions to facilitate a commercially viable, safe and environmentally responsible CCUS industry, with an early aspiration to double the amount of carbon dioxide that is currently stored globally before 2030. Second, OGCI showed progress towards its methane intensity target announced last year. Members are on

track to meet the methane intensity target, having reduced collective methane intensity by 9% in 2018. In addition to the methane intensity target, OGCI is now working on a carbon intensity target to reduce by 2025 the collective average carbon intensity of member companies’ aggregated upstream oil and gas operations. Third, all OGCI member companies have pledged to support policies that attribute an explicit or implicit value to carbon. Acknowledging the role that attributing a value to carbon plays as one of the most cost-efficient ways to achieve the low carbon transition as early as possible, OGCI supports the introduction of appropriate policies or carbon value mechanisms by governments. OGCI Climate Investments, OGCI’s USD 1 billion-plus fund, has nearly 54

doubled the number of investments in promising clean technologies over the year. The fund now has a total of 15 investments in its portfolio. Climate Investments actively supports these companies in deployment and scaleup as well as continuing to search for additional opportunities in its focus areas. In a joint statement, the heads of the OGCI member companies said: “We are scaling up the speed, scale, and impact of our actions in support of the Paris Agreement. Accelerating the energy transition requires sustainable, large-scale actions, different pathways and innovative technological solutions to keep global warming well below 2°C. We are committed to enhancing our efforts as a constructive partner with governments, civil society, business and other stakeholders working together to

ENVIRONMENT

transition to a net zero economy.” “The progress towards our methane intensity target makes us confident that the actions we are taking deliver results. We are on track to reach our methane intensity target of 0.25% by 2025. Encouraged by our experience of working together on reducing methane emissions, we are now working on a target to reduce by 2025 the collective average carbon intensity of our aggregated upstream oil and gas emissions.” OGCI’s CCUS KickStarter initiative is designed to facilitate large-scale investment in a commercially viable, safe and environmentally responsible CCUS industry. To achieve this, OGCI will start by building on the work of many others to jointly put five emerging hubs into operation – in the US, UK, Norway, the Netherlands, and China. Its aspiration is to double the amount of carbon dioxide that is currently stored globally, while building a pipeline of potential future hubs to bring this new industry to scale. In parallel, OGCI has launched a joint CCUS Acceleration Framework with the 11 countries supporting the Clean Energy Ministerial CCUS Initiative, which brings governments and industries together to create a global, commercial CCUS industry at the scale needed to meet the Paris Agreement. Nature Based Solutions are crucial to achieving net zero emissions, in tandem with CCUS. OGCI has joined the Natural Climate Solutions Vision initiative, convened by the World Economic Forum and the World Business Council for Sustainable Development.

joined the Global Methane Alliance, together with the United Nations and Environmental Defense Fund, which aims to work with gas-producing countries to include methane emission reductions from oil & gas in their nationally determined contributions.

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Carbon intensity target preparation

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Methane emissions progress

OGCI Climate Investments

OGCI members reduced their collective average methane intensity by 9% in 2018, and members are on track to meet the 2025 target of below 0.25%. As part of OGCI’s engagement to expand the impact of its actions, OGCI

OGCI Climate Investments, the USD 1 billion-plus fund set up by OGCI member companies to lower the carbon footprint of energy and industries, has made the following seven new investments in the last year:

To complement its methane emissions intensity target, OGCI is working on a target to reduce collective average carbon intensity by 2025. The target will take into account carbon dioxide and methane emissions from members’ aggregated upstream oil and gas operations emissions from a baseline of 24kg CO2e/boe in 2017. Member companies have developed a baseline and are aligning methodology and assumptions to work towards the collective target. Reducing carbon intensity involves actions including improving energy efficiency, minimizing flaring, upgrading facilities and co-generating electricity and useful heat. OGCI member companies have pledged to support policies that attribute an explicit or implicit value to carbon. Recognizing the urgency of responding to the climate challenge, all OGCI member companies support the consideration and introduction by governments of appropriate policies or carbon valuation mechanisms, such as through tax, trading systems, incentives or other market-based instruments appropriate to the profile of emissions, to the carbon mitigation opportunities and to the socio-economic situation of each jurisdiction.

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Kelvin reduces methane emissions by using artificial intelligence to better control complex processes and systems. SeekOps develops and fields advanced sensor technology for methane emissions detection, locali zation and quantification. Boston Metal has developed an electrochemical process to manu facture low-emissions ferroalloys, and ultimately emissions-free steel. 75F aims to increase occupant productivity and reduce energy use in commercial buildings through its smart control solution. Norsepower manufactures mecha nical rotor sails that provide auxiliary propulsion power for large ships to reduce their fuel consumption. XL provides hybrid and plug-inhybrid electrification solutions for commercial vehicles. Wabash Valley Resources captures and stores carbon dioxide from ammonia production in what is expected to be the largest carbon storage project in the US.

About OGCI The Oil and Gas Climate Initiative is a CEO-led initiative which aims to drive the industry response to climate change. Launched in 2014, the members engage together on action to accelerate the reduction of greenhouse gas emissions. They explicitly support the Paris Agreement and its aims, and they act with integrity to accelerate and participate in the energy transition. Their USD 1 billion-plus fund, OGCI Climate Investments, supports the development, deployment and scale-up of technologies and business models that can significantly reduce greenhouse gas emissions. OGCI 13 members account for 32% of global operated oil and gas production. OGCI is made up of 13 oil and gas companies: BP, Chevron, CNPC, Eni, Equinor, ExxonMobil, Occidental, Pemex, Petrobras, Repsol, Saudi Aramco, Shell and Total.

ENVIRONMENT

BPâ&#x20AC;&#x2122;s Industry-first, Continuous Methane Measurement Programme BP announced that it will deploy continuous measurement of methane emissions in its future BP-operated oil and gas processing projects as part of its ambitious programme to detect, measure and reduce methane emissions. Continuous measurement, including instruments such as gas cloud imaging (GCI), will be rolled out to all new major projects worldwide. The technology has also been tested and installed in existing facilities such as BPâ&#x20AC;&#x2122;s giant natural gas Khazzan field in Oman. 56

ENVIRONMENT

“This programme represents an industry first and reflects our commitment to be a leader in advancing the energy transition by maximising the benefits of natural gas.” Gordon Birrell, BP’s chief operating officer for production

t is a key part of BP’s wider and longer-term strategy to deploy a suite of complementary methane detecting techniques across new and existing facilities. The data generated will help BP identify the largest opportunities to tackle methane emissions, drive efficiency and develop best practice – and is ultimately aimed at delivering and improving on BP’s methane intensity target of 0.2% from its Upstream operations.

Step-change in industry practice The deployment of this technology represents a major step-change in the oil and gas industry’s approach to detecting, quantifying and reducing methane emissions. Historically, engineering calculations and emission factors have played an important part in quantifying emissions. “This programme represents an industry first and reflects our commitment to be a leader in advancing the energy transition by maximising the benefits of natural gas,” Gordon Birrell, BP’s chief operating officer for production, transformation and carbon, said. “For gas to play its fullest role in the

energy transition, we have to keep it in the pipe. This new technology will help us do that by detecting methane emissions in real time. The faster and more accurately we can identify and measure leaks, the better we can respond and, informed by the data collected, work to prevent them.”

Technology breakthroughs In addition to continuous methane measurement, BP is also aiming to make use of a network of complementary technology, including a new generation of drones, hand-held devices and multispectral flare combustion cameras – drawing upon scientific breakthroughs made in diverse fields, spanning healthcare, space exploration and defence. “Many of today’s technological breakthroughs were only aspirations until recently. Three years ago, we sat in a room and brainstormed what we would need to achieve continuous measurement, because at the time the technology portfolio needed was not yet fully developed. Now we have the technology and solutions to get after this challenge. Technologies like GCI enable us to have continuous measurement. Coupled with complementary intermittent tools like drones equipped with lasers and methane ‘sniffing’ technology we are now creating a step-change in how we operate our new major projects, so that, inspections that used to take seven days will now be able to take 30 minutes. That time saving will allow us to continue to innovate and deliver better results,” Morag Watson, BP’s vice president of digital innovation, explained.

PETROTEL-LUKOIL

115 years of challenge

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change!

Integrated global programme In time, the data collected will feed information into an extensive digital cloud network as part of a global integrated approach to reduce both methane and carbon emissions. This announcement follows BP’s recently announced Upstream Carbon Fund – USD 100 million of funding for 57

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ENVIRONMENT

selected emission reduction projects to deliver new greenhouse gas (GHG) emissions reductions in BP’s existing Upstream oil and gas operations. By the end of 2018, BP generated 2.5 million tonnes of sustainable GHG emissions reductions throughout its businesses. Earlier this year, BP confirmed a threeyear partnership with the Environmental Defense Fund (EDF), a New York-based non-profit environmental advocacy group, aimed at developing further technologies to detect and prevent methane leaks. BP is also a founding member of the Oil and Gas Climate Initiative, which brings together 13 of the world’s largest energy companies and has set up a USD 1 billion investment fund to address methane emissions and invest in complementary technology, including Carbon Capture, Use and Storage (CCUS). BP supports the Methane Guiding Principles, which were developed by a coalition of industry, institutions, academics and NGOs, to reduce methane emissions across the gas value chain. BP participates in a number of World Bank flaring reduction initiatives, including the Global Gas Flaring Reduction Partnership (GGFR), which works to increase the use of natural gas associated with oil production by helping to remove technical and regulatory barriers to flaring reduction. It is also a member of the ‘Zero Routine Flaring by 2030’ initiative, which brings together stakeholders to work together to eliminate routine flaring from operated oil assets by 2030. BP reports progress to the World Bank each year.

Mars technology in world-first methane monitoring project BP’s North Sea business has successfully executed a ground-breaking pilot project testing innovative ways of remotely monitoring methane emissions on its offshore assets. The pilot, which combined highly

advanced sensor technology originally designed by NASA for the Mars Curiosity Rover with a fixed-wing remote piloted air system (RPAS), or drone, broke the UK’s record for the longest commercial drone flight and demonstrates the feasibility of this unique approach to monitoring methane.

Record drone flight The drone circled the Clair platform at a radius of 550 metres for 90 minutes, travelling for a total of more than 185 km, significantly beating the previous record of 100 km. The pre-programmed drone, once airborne, managed itself autonomously. Throughout the flight, the RPAS live-streamed valuable data collected by the methane sensor. “Improving our knowledge, understanding and performance by testing new technologies and working closely with suppliers is central to the North Sea’s carbon education plan, which aims to limit greenhouse emissions in our North Sea business. This pilot project represents a significant step forward in our ability to do that,” Ariel Flores, North Sea regional president stated. Following the successful results, the specialist drone will be deployed to all of BP’s North Sea assets in 2020, including ETAP and Glen Lyon. “We wanted to test a method for collecting large amounts of data on our emissions over long periods of time, without having to send people or equipment offshore. The solution would also have to deal with the turbulent atmospheric conditions that we typically experience offshore in the North Sea. Ultimately, we identified the RPAS drone solution provided by UK supplier FlyLogix combined with the ultra-precise sensor technology by SeekOps, as a good fit with our requirements. We set up a test project to monitor methane emissions from our Clair Phase 1 platform, West of Shetland,” Project manager, Joe Godwin, Clair field environmental lead, mentioned. The drone itself was tracked and 58

remotely controlled by a team of three qualified pilots using satellite communications and radio link from the remote Island of Papa Stour – the team never had to leave their base onshore. “Eliminating methane emissions is a key focus area in order to decarbonise offshore oil and gas operations. As the OGTC launches its new Net Zero Solution Centre, this is an example of the game-changing technology we need to see more of in order to precisely detect and quantify methane emissions, then contain and eliminate them,” Luca Corradi, the Oil and Gas Technology Centre (OGTC) innovation network director, added.

Following US progress The North Sea trial follows the rollout of a major leak detection drone programme in BP’s US operations. BPX Energy is now using drone-mounted leak detection technologies, which enable up to 1,500 well sites to be surveyed every month across all of its operating basins. The flights generate data around the location and size of a leak and issue a work order to fix it. The technicians in the field are quickly dispatched and equipped with Fieldbit’s multi-source Augmented Reality (AR) technology – or smart glasses – which enables them to virtually link to technical support in the office. Through the use of this technology, both are able to see the affected area and work together to fix it, improving safety, accuracy of repairs and productivity. “We are encouraged by the efficiency gains achieved since drone inspections were fully deployed. Today, we are able to run Leak Detection and Repair (LDAR) programmes in all of our assets at around USD 40 per well and we believe costs will continue to fall. BP is committed to taking a leading role in addressing the methane challenge and we are seeing that digital technologies can expand the scale of our methane emissions reduction programmes,” BPX Energy chief executive Dave Lawler said.

Compressed Air Treatment Future-proof Drying

nybody using refrigeration drying in compressed air treatment is required to comply with the F-gas regulation. The new EU 517/2014 directive represents the end for certain refrigerants that are still currently used in these dryers. Nearly every compressed air station uses refrigeration dryers, since most applications require these machines to deliver a dependable supply of quality dried compressed air. The F-gas regulation EU 517/2014 has been in force since 2015. It is intended to minimise the emissions of partly-fluorinated greenhouse gases (F-gases) as they significantly contribute to global warming. The effects of this legislation can already be felt by operators of compressed air stations, because F-gases are used as refrigerants in refrigeration dryers. This means that operators have to comply with the directiveâ&#x20AC;&#x2122;s stipulations when they service or repair existing refrigeration dryers, or when new refrigeration dryers are purchased. The refrigerants used up until now are being withdrawn from the market. All refrigerant dryers from Kaeser Kompressoren will therefore use the new R-513A refrigerant by the end of 2019. It is climate-friendly and provides users with peace of mind when it comes to future-proof operation. KAESER is supporting all customers to convert their systems to a more environmentallyfriendly alternative. When planning the purchase of a new dryer, consideration should be given to make sure that the unit uses a refrigerant that complies with the requirements of the directive, not just today, but also in the years to come, and that the refrigerant will be available for future service work. Some manufacturers use materials that are legal today, but which will eventually become prohibited, or which will simply no longer be offered, due to their high global warming potential. This means that those operators who use these materials will soon be faced with the same problem â&#x20AC;&#x201C; KAESER is aware of this issue and takes early preventative countermeasures accordingly.

R-513A refrigerant offers the most future-proof operating solution for refrigeration dryers. All KAESER refrigeration dryers will use this environmentally-friendly and safe alternative by the end of 2019.

It rarely makes sense to retrofit older but functional machines to use new refrigerants. Operators are well advised to take note of the currently-used refrigerants in their equipment and to obtain information regarding alternative strategies. KAESERâ&#x20AC;&#x2122;s experienced and certified personnel are available to assist you. Certified service is advisable for all refrigeration dryers in order to provide different solutions with regards to this subject; this is especially true for older systems where refrigerant conversion is uneconomical. All KAESER refrigeration dryers are designed to provide maximum efficiency and energy cost savings. Thanks to the new refrigerant, they are also future-proof for their entire service life when it comes to applicable refrigerant legislation. Moreover, they are exceptionally efficient, require minimal maintenance and are easy and quick to service. 59

CONSTRUCTION

Renovation of Buildings and Impact on Combating Energy Poverty In Romania, one family in seven faces serious problems in terms of housing quality and therefore national programs for the renovation of energy inefficient buildings and those in the communities with low income can be very efficient if the extended, social, economic and health benefits of renovation are considered.

Text by Daniel Lazar

benefits for society and public spending, interior comfort and air quality, helping to prevent illness and premature mortality.

ccording to Executive Director Mihai Moia, the Association for the Promotion of Energy Efficiency in Buildings - ROENEF has the objective of promoting a favourable legislative framework for the sector of constructions and energy efficient rehabilitation of buildings in Romania, supporting a stable and predictable business environment, technological neutrality and full transparency in the relationship with public authorities. National Strategies of Renovation have a triple objective: increasing the rate of deep renovations, achieving energy saving targets and improving the living conditions for millions of vulnerable citizens. Combating energy poverty with the help of national strategies of renovation involves specific measures and funding instruments to reduce energy consumption and contribute to fighting energy poverty. Deep renovations bring extensive

Current situation of the building stock in Romania A current radiography of the situation of buildings in Romania reveals a number of aspects that cannot be overlooked. Thus: • 8.1 Million dwellings, distributed in 5.1 million buildings; the deep renovation of single-family homes (SFH) represents 61%; • 37% of Romanian dwellings are concentrated in only 2% of the building stock; • The net area increased steadily from about 270 million square meters in 2000 to 425 million square meters in 2016; • Most residential buildings were built during 1961-1980, 60

CONSTRUCTION

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as well as a shortage of skills and vocational training (lack of skilled workers in the use of technologies and systems of energy efficiency and integration of renewable energy sources; lack of knowledge at the level of local public administration regarding measures to improve the energy performance of buildings; lack of knowledge on the application of public procurement rules in building renovation projects).

in the absence of specific energy efficiency standards regarding building envelopment; About 53% of the residential buildings were built before 1970; In Romania, one family in seven faces serious problems regarding the quality of the home, the most common being the deterioration of walls, floors and window frames; In the urban area, 72% of the dwellings are in block type buildings, while in the rural area 94.5% of the dwellings are single-family.

Priority actions proposed •

Two other countries want to implement the Romanian project Through the UNDP/GEF Project ‘Improving EnergyEfficiency in Low Income Households and Communities in Romania (2011-2016)’, the towns of Calafat and Petrosani have approved action plans regarding energy efficiency and energy poverty; three new sources of funding and concrete projects developed for funding have been identified; 46% of the interviewed households plan to implement measures to improve energy efficiency due to the project; it resulted in 826 construction engineers, architects and energy auditors trained, authorized and applying energy efficiency measures; 17 counties have expressed their interest in replicating the project activities due to the promotion campaign; two other countries (Armenia and Moldova) expressed their interest in replicating the project activities. Through this project 1606 residential buildings have been rehabilitated; the technical documentation regarding the energy efficiency measures for 50 types of residential blocks is available on the website of the Ministry of Regional Development and Public Administration (MDRAP); it has been succeeded to install 21 energy efficient plants in public buildings; 71 social buildings from six municipalities benefited from financial assistance, within the project.

•

Increasing the degree of deep renovations and introducing quality standards within the financing programs for measures to improve energy efficiency in buildings; making operational the National Register of Buildings at national level and focusing on buildings with the lowest energy performance; establishing a support scheme for the deep renovation of single-family homes (SFH). Development of a regulatory framework regarding ESCO companies and energy performance contracts, given that out of 8.1 million homes in Romania, SFH represent 61%; 1 in 7 families face serious problems regarding the quality of the home.

Benefits The benefits of this program include increased comfort and air quality, leading to avoidance of illness and premature mortality; increasing employment in the construction sector; increasing the efficiency of public money spending; increasing the energy efficiency of buildings and energy savings; energy managers report energy consumption to the National Trade Register (RNC); resulting in data and information available to policy makers in the process of developing new programs and strategies; reducing energy poverty; lower energy bills; the use of the EnPC model guarantees energy savings; mobilizing private investments to increase energy efficiency in buildings; implementation of modern and efficient technical solutions that contribute to increasing energy efficiency. EnPCINTRANS is a project implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in cooperation with the Baden-Württemberg Climate Protection and Energy Agency, Germany and with competent European Energy Performance Contracting Centres (EPCs) in Croatia, Greece and Slovenia, a centre for e-learning skills in Slovakia and key actors for promoting EPC locally in Latvia, Serbia, Romania and Ukraine. Without any doubt, each of us wants the best quality of life, which results not only from a job that satisfies you from all points of view, but also from the conditions you work or live in. Therefore, the implementation of this project should be propagated at the level of the entire society.

Obstacles faced The main obstacles in carrying out the building renovation programs are of a legislative nature (the existence of several public administration authorities with responsibilities in the field of buildings, without correlation between their attributions; lack of coordination of local development strategies with national strategies; lack of a regulatory framework regarding ESCO companies and energy performance contracts), economic nature (insufficient public and private funds for the renovation of buildings - a high degree of dependence on public subsidies; execution of low quality renovation works; low demand for technologies with low energy consumption for buildings; inadequate calculation of energy savings: the extensive benefits of renovation such as health, safety and air quality should be assessed throughout the investment life cycle), 61

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Romaniaâ&#x20AC;&#x2122;s Energy Efficiency Services Market We have repeatedly invoked in the pages of our magazine and nothing can contradict the assumption according to which energy resources are vital in an ever-changing world. Moreover, energy efficiency is a prerequisite for the sustainable development of any country, but the question is whether an energy efficiency services market truly exists in Romania.

Text by Daniel Lazar

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s definition, the energy efficiency services (EES) market in Romania is an activity or set of activities (defined within a contract) aimed to bring an energy efficiency improvement and other agreed performance criteria. According to the President of the ESCOROM Association of Energy Service Companies in Romania, Carmen Pavel, energy efficiency improvement is measured and verified for a defined period, through methods agreed under contract, but it also involves a number of general requirements: activities must be designed to achieve energy efficiency improvement and to fulfill other agreed performance criteria, such as the comfort level, safety of production etc.; activities must rely on data collected relating to energy consumption and include energy audit, as well as identification, selection and implementation of actions and verification of results. The data adapted from IEA and JRC studies, prepared two years ago, for EES companies in the European Union describe the existing situation and make recommendations for the future market development, with a

focus on energy performance contracting. The value of the global ESCO market increased in 2017 by 8%, to USD 28.6 billion, and the market is interested in product, has resources to purchase the product and it is allowed by law and other regulations to purchase the product from the supplier. In terms of energy efficiency services providers in Romania there are many questions asked. Is the transparency of services offered ensured? Is the quality of services offered ensured? Are financing, standardization of services offered and the framework of competition/collaboration ensured? Is there practical experience in the field? In 2016, the respondents of JRC survey (Energy Service Companies in the EU, 2017) estimated an investment potential of around EUR 780 million per year for the entire RO ESCO market (in the public and private sectors). But barriers are related to mistrust, as risk transfer means increased costs (in the private sector) and respectively the lack of legislative framework (in the public sector). As such, new concepts have emerged, such as Energy Sufficiency - that level of energy services consumption in line with human welfare and environmental limits (turning off lights in unoccupied rooms, lowering thermostats, avoiding travel by plane or rather cycling than driving to the workplace). The implementation of this concept on the EES market in our country has a number of barriers, of which we mention: complexity of the concept/ lack of information; lack of confidence in the ESCO industry; low energy prices; administrative barriers in the public sector; lack of government support - regulations and fiscal policies, respectively programs for energy efficiency investments; existence of funding programs (POR; LIOP etc.). Of course, there are also drivers and here we would include: the installation of smart meters at consumers; increasing the share of energy management systems in industry; implementing remote monitoring platforms. 63

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Do We Turn Off the Light or Pay for the Survival of Oltenia Energy Complex? Text by Adrian Stoica

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To avoid the insolvency or even bankruptcy of Oltenia Energy Complex, the Executive has prepared a mechanism to support the largest energy producer in Romania. If the plan of the Government in Bucharest receives green light from Brussels, Oltenia Energy Complex will receive up to RON 10.5bn for 10 years. The saving solution means introducing a special tax, as of 2020, that all electricity consumers will pay.

he new tax, which will be called adequacy tax, would be highlighted separately in the energy bills, and impact to consumers will amount to RON 0.033/ kWh in the first year, 2020, following to be gradually reduced, to RON 0.002/ kWh in 2030. â&#x20AC;&#x153;Currently the regulated

tariffs for household consumers are around RON 0.412/kWh, so the adequacy tax will increase these tariffs by 8% in 2020, 4.8% in 2021 and 4.3% in 2022,â&#x20AC;? according to the support scheme prepared. The Executive mentions however that the support mechanism for Oltenia Energy Complex will be assessed annually by ANRE, and the value of 65

this aid or the period in which it will be granted can decrease depending on the energy capacities that appear in the market.

Money for emission allowances The additional money that the energy producer will receive in this

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way will be used to pay part of the emission allowances that Oltenia Energy Complex is required to purchase. Analyses conducted by the Ministry of Energy show that during the 10 years of application of the support scheme the thermal energy producer will pay from own sources 78.8 million allowances, and from the money that it would collect from the adequacy tax - 67.7 million. For this year, Oltenia Energy Complex has the obligation to pay emission allowances worth RON 1.6bn. Last year, it paid RON 1.45bn, for which it contracted loans of RON 500mln from six banks, with state guarantees.

The thermal power plants of Oltenia Energy Complex, vital for the National Power System The evaluation of the future support mechanism was based on a study on the adequacy of the National Power System (NPS), conducted by Transelectrica, which showed that without the operation of Oltenia Energy Complex, Romania will not be able to ensure its electricity demand, even with imports to the maximum technical extent possible, and prices would increase significantly. The conclusions of the study, which will be presented in Brussels, show that keeping operational the production capacities of Oltenia Energy Complex until they can be replaced by new production capacities with low emissions, is a matter of national security. In the event of stopping the capacities of Oltenia Energy Complex, by increasing the electricity price by around 70%, the latter would reach around EUR 0.136/MWh, thus seriously affecting the national economy, through the risk of relocation of major processing industries (aluminium, steel etc.), with global marketplaces.

What does the adequacy study show The study analysed several scenarios of evolution of the production capacity received from producers, of domestic

consumption, of net import/export capacities of the Power Transmission Grid (PTG) from the PTG Development Plan for 2020-2029. Taking into account the investment projects for interconnection of Transelectrica for the period 20192030, the degree of interconnection will increase in time, as investment projects are completed, from a value of the net interconnection capacity of 1.5 GW in 2010 to 2.7 GW in 2025 and 3.6 GW in 2030. However, in all the three scenarios analysed there is only one conclusion: without the thermal power plants of Oltenia Energy Complex, Romania will be forced to turn off the light.

MW in 2020 and 2021 and 0 MW respectively starting with 2022. This situation is generated by the fact that it has been in insolvency since 2014, with the real risk of going bankrupt. Conclusion: The results show that in 2022, the first year when Oltenia Energy Complex will not have any operational group (according to the scenario without support mechanism), the missing capacity for the peak load is approximately 2,800 MW, and the import capacity of PTG is 1,800 MW. Also, during 2023-2027 the missing capacity is higher than the import capacity of PTG.

Scenario 2

Scenario 1 This scenario considered a peak load net consumption level during winter for normal weather conditions. Regarding the non-usable capacities, the following were considered: • 100% of the installed capacity in photovoltaic power plants; • 70% of the installed capacity in wind power plants; • 55% of the installed capacity in hydropower plants in rivers or reservoirs; • 320 MW at Hunedoara Energy Complex starting with 2022 following the financial difficulties and compliance with environmental requirements; • 197 MW at CET Govora starting with 2022 following the financial difficulties and the fact that the power plant depends on the primary resource coming from Oltenia Energy Complex; • 44 MW at CET Govora starting with 2020. It was considered that the new gas-fired group, estimated to be commissioned in 2020, will not be completed, given the financial difficulties; • At CET Galati, the net capacity available of 352 MW in 2019, was considered diminished to 156 66

This scenario considered severe weather conditions (cold winter). In addition to Scenario 1, an increase in the net domestic consumption by 200 MW and the lack of primary source for wind power plants (no wind) were considered. Conclusion: The results show that in the entire period 2020-2030 the missing capacity from the peak load is higher than the import capacity of PTG. For 2022 the difference between the missing capacity from the peak load and the import capacity of PTG is 2,022 MW, which represents the use at full capacity of the entire capacity currently available of Oltenia Energy Complex.

Scenario 3 In addition to Scenario 2, this scenario takes into account potential problems in the natural gas transmission network modelled through a non-usable capacity of 850 MW. Conclusion: The difference between the missing capacity from the peak load and the import capacity of PTG increases for the entire analysed period, in 2022 reaching 3,000 MW over the production capacity currently available at Oltenia Energy Complex.

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CEZ Launches Market Test to Divest Its Assets in Romania Czech group CEZ officially launched a market test on the divestment process in Romania. The interest confirmed in writing by the potential investors will be followed by an invitation to submit non-binding offer. In Romania, CEZ is considering selling seven companies, keeping only those engaged in energy services (ESCO) activities and part of trading. These steps are in line with the new strategy previously approved by the parent company.

EZ has included seven Romanian companies in the market test (Distributie Energie Oltenia, Ovidiu Development, Tomis Team, MW Team Invest, CEZ Vanzare, TMK Hydroenergy Power and CEZ Romania). Potential investors can express their interest both for the entire group of companies mentioned, as well as individually for any of the companies. Testing of market interest is carried out exclusively for CEZ by the investment bank Société Générale. Potential investors will find instructions for expressing interest on the CEZ website (www.cez.cz).

CEZ Group is one of the main integrated utility companies in Romania. It includes one of the largest distribution companies in the country (customer portfolio 1.4 million, 6,826 GWh of electricity delivered in 2018), Europe’s largest onshore wind park Fantanele-Cogealac (600 MW installed capacity, 2018 production 1,105 GWh), a modernized hydropower system in Resita consisting of four dam reservoirs and four small hydropower stations (22 MW in total, 83 GWh produced in 2018) and electricity and gas supply to end-customers (3,425 GWh sold in 2018). The divestment of Romanian 67

companies is in line with the new strategy of the parent company, approved in June this year. It provides for the gradual sale of assets in Bulgaria, Romania, Turkey and partly also in Poland. The exception is represented by companies focused on the field of modern energy services (ESCO), which CEZ wants to develop further both at home and abroad. CEZ Group entered the Romanian energy market in 2005 with the purchase of one of the distribution companies. Romanian assets have generated positive EBITDA from the start and regularly contribute to CEZ Group’s dividends.

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Enel Included for 16th Straight Year in Dow Jones Sustainability World Index E

nel has been confirmed in the Dow Jones Sustainability World Index (DJSI World) for the sixteenth year in a row. Enel’s Spanish subsidiary Endesa has also been confirmed in this year’s edition, marking the company’s 19th straight year. Enel and Endesa are two of the eight companies admitted to the index at the global level in the electric utility sector. In addition, the Group’s South American subsidiary, Enel Américas, has been confirmed in the Dow Jones Sustainability Emerging Markets Index and Dow Jones Sustainability MILA (Latin American Integrated Market) Pacific Alliance Index for the second consecutive year, as well as in the Dow Jones Sustainability Chile Index for the third straight year, while its Chilean subsidiary Enel Chile has been confirmed in the three indices for the second time. Enel Américas and Enel Chile were the only two Chilean power companies to be confirmed in all three indices. “Sustainability is a key driver for creating long-term value among our shareholders and all our stakeholders,” said Francesco Starace, Enel CEO and General Manager. “By fully integrating the UN Sustainable Development Goals into our strategy, which addresses

emission-free generation technology as well as smart electricity infrastructure, we are setting a standard for companies willing to maximise their profits in a way that is virtuous for communities and ecosystems. As such, our inclusion in the DJSI for the sixteenth straight year is a recognition of our commitment towards developing a sustainable business model, leading the energy transition and promoting responsible business practices.” Enel’s global sustainability leadership is acknowledged through its presence in several other renowned sustainability indices, such as the FTSE4Good Index, the Euronext VIGEO-EIRIS indices, the OEKOM ‘Prime’ rating, the ECPI indices, the Thomson Reuters/SNetwork ESG Best Practices Indices, the Thomson Reuters Diversity & Inclusion Index and Equileap’s Top 200 ranking on gender equality. In addition, Enel has been confirmed in the STOXX Global ESG Leaders indices review of September 2019, for the sixth consecutive year. Enel is increasingly attracting the attention of Environmental, Social and Governance (ESG) investors, whose stake in the company is steadily growing, representing about 10.5% of the Group’s share capital as of December 31st, 2018, up 78% compared to 2014. This increase 68

reflects the growing importance the financial market gives to non-financial elements in the creation of long-term sustainable value. DJSI recognised Enel’s proactive role in tackling climate change and promoting a zero-emission energy model. Enel’s ambition to embrace the energy transition, by seizing all business opportunities in the areas of renewables, digitalisation and the electrification of energy demand contributed to this achievement. Furthermore, the company’s ‘Open Innovability’ model set the benchmark for the second year in a row, as the company received once again the maximum score in Innovation Management from DJSI. Through the Open Innovability model, Enel develops innovative solutions that guarantee long-term sustainability for the Group’s business and for the communities in which it operates, building an ecosystem of collaboration with start-ups, industrial partners, entrepreneurs and research centres, among others. Enel also excelled in other criteria focused on assessing responsible business management practices such as risk and crisis management, cybersecurity, data privacy protection, corporate citizenship and transparency on social and environment performance.

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Fitch Ratings Granted the BBB Rating to Electrica Group E

lectrica Group, leader in the distribution and supply of electricity in Romania, obtained the issuer corporate rating of BBB (Investment Grade), with a stable outlook, from the rating agency Fitch Ratings. The BBB rating reflects Electrica Group’s solid financial profile, the stability of the cash flow, the leading position both on the electricity distribution and regulated supply segments, in the regulated area, as well as the potential of maintaining a high level of investments during the next period. In view of the business development opportunities and of the ambitious investment plan undertaken during the 4th Regulatory Period, Electrica Group explores several options for financing sources’ diversification. In this regard, the Group made the decision to apply for obtaining an issuer rating from one of the three major rating agencies, considering that this is a proof of transparency and, at the same time, a key element in order to obtain financial flexibility. The existence of a history of the issuer’s rating at the time of a bond issuance or when obtaining another source of financing is beneficial in terms of successfully placing the debt, by accessing the credit instruments market

under favourable conditions. The decision to obtain an issuer rating also took into account the fact that credit risk opinions issued by one of the three major rating agencies are used by institutional investors around the world. Through the IPO that took place in 2014, the only privatization with a majority stake on the Romanian capital market, Electrica has managed to attract about 2 billion lei, funds used in a responsible manner in two major areas: implementation of an ambitious investment program and opportunities for mergers and acquisitions. Thus, Electrica Group has become the largest investor in the modernization and refurbishment of electricity distribution network, with a total of 3.1 billion lei invested in the last five years. As a result of these investments, the quality of the services offered by the distribution companies within the Group has improved significantly, contributing also to the solid financial results, with a stable outlook. Another important part of the IPO use of proceeds was used, at the end of 2017, for the acquisition of the 22% minority stakes held by Fondul Proprietatea in the distribution and supply subsidiaries of Electrica Group. Following these major projects carried out in the last years, as undertaken 69

through the IPO Prospectus, Electrica has used the proceeds, still retaining the capacity to sustain future projects, also through external funds. “We are willing to enhance the credibility of Electrica Group in front of our investors, their trust being extremely important to us. Thus, our aim in investor relations is to be regarded as a transparent company. The rating offers to all stakeholders an independent valuation, comparable with that of similar companies which are also tracked by the rating agencies. After obtaining the rating, our investors will benefit from Fitch’s experience regarding the analysis and monitoring process of Electrica Group’s public rating, providing additional comfort when analysing a potential increase in the investment in Electrica,” Corina Popescu, CEO of Electrica, stated. With approximately 7,000 shareholders from over 30 countries, Electrica has become a constant presence in the top of the most valuable Romanian brands. With a market capitalization of almost 4 billion lei, Electrica is the only Romanian company listed activating in the field of electricity distribution and supply in Romania. From 2014 until now, Electrica has offered the most stable dividend yield among all the companies included in BET.

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IDTechEx Discusses Unknowns and Certainties It is certain that lithium batteries will be dominant over the coming decade and their chemistry will change in pursuit of reduction in cost and flammability and to obtain greater energy density. Uniquely, IDTechEx forecasts the biggest application - electric vehicles - in 101 categories, but any forecast has assumptions that matter a great deal.

n the IDTechEx report, ‘Lithium-Ion Batteries for Electric Vehicles 2020-2030’, IDTechEx forecasts ten years assuming, not predicting, no global recession and no shortages. However, although it ducks the fool’s errand of forecasting recessions, it warns that lithium-ion battery shortages can be caused by shortages of lithium, cobalt and nickel despite the current glut. This is because EV demand is rising so fast, with pure electric vehicles particularly important as they take over 80% of the EV battery demand. Cars will be the largest users in market value followed by trucks/buses, which are essentially one business and leading a trend to bigger batteries in the mix. IDTechEx report, ‘Electric Vehicles in Construction, Agriculture and Mining 2019-2029’ analyses another rapidly emerging user of large batteries,

some around the 1MWh level also seen in some ships and manned electric aircraft. Other IDTechEx reports cover marine and airborne EVs specifically. For lithium batteries, those metal shortages are a maybe, but shortage of production capacity is more likely despite new facilities being committed all the time. Call that a probably. The IDTechEx report, ‘SolidState and Polymer Batteries 20192029: Technology, Patents, Forecasts’ describes something certain, which is that reduced flammability and greater energy density will be seen from an increasing minority of lithium batteries being of those morphologies particularly after 2025. Some even avoid that worrisome nickel and cobalt. Many will be made by adaptation of existing battery factories so they are not an escape route from any shortage of facilities. “Around 18% of the USD 3 trillion 70

level EV market in 2030 would be lithium batteries in an unconstrained scenario. The improved performance and cost from solid-state and polymer batteries can only boost demand. The incumbent manufacturers are rapidly increasing output of lithium-ion batteries in the meantime. Impressive newcomers to battery cell making such as Tesla and Dyson are investing heavily to launch next-generation cells of their own technology for their own EVs. The Toyota-Panasonic advanced battery joint venture is particularly formidable,” Dr Peter Harrop, Chairman of IDTechEx advises. What with low silicon then high silicon anodes and other changes, some manufacturers may be cutting corners in rollout leading to future recall of bad product. That will not help output. So, there we have it. The lithium battery is an excellent business to be in, but all is not plain sailing.

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Ørsted to Use Haliade-X by GE in 2 New Offshore Wind Farms Ørsted, the world-leading offshore wind developer, has selected GE Renewable Energy as the preferred turbine supplier for two of its US offshore wind farms which marks the world’s first commercial deployment of GE’s Haliade-X 12MW offshore wind turbine.

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ubject to final agreed and signed contract and all required project approvals, Ørsted will deploy Haliade-X 12MW wind turbines on the two offshore wind farms constituting Ørsted’s Mid-Atlantic cluster: • Skipjack (120MW) off the coast of Maryland. Expected commissioning: 2022. • Ocean Wind (1,100MW) off the coast of New Jersey. Expected commissioning: 2024. In the US alone, seven states on the east coast have committed to building a total of 20GW of offshore wind capacity by 2035, emphasising the need for a broad and diverse supplier base. “We look forward to introducing the next generation offshore wind turbine to the market. For decades, Ørsted has pioneered the introduction of new technology and new suppliers which has been fundamental to drive down the cost of electricity, and today offshore wind is a competitive source of homegrown clean energy that can help countries and states achieve their climate targets while creating long-lasting economic activity. We are delighted to see GE’s long-term commitment to offshore wind and to partner with them on our Mid-Atlantic cluster,” Martin Neubert, Executive Vice President and CEO of Ørsted Offshore, says. “We are truly excited to be selected preferred supplier with the most powerful offshore wind turbine on the market by the global market leader. Offshore wind is a high-growth segment for our company, and like Ørsted, we are enthusiastic about the potential of offshore wind, both in the US and globally. As this announcement demonstrates, our significant investment in technology innovation, which leverages all appropriate resources within GE, positions us to help our customers lower the cost of energy produced by clean, abundant,

reliable offshore wind. We thank Ørsted for their trust and commitment,” Jerome Pecresse, President & CEO of GE Renewable Energy, states. Following the 30MW Block Island Wind Farm – America’s first offshore wind farm which was commissioned in 2016 and pioneered the 6MW Haliade turbine – Skipjack and Ocean Wind will be Ørsted’s second and third offshore wind farms to deploy turbines from GE Renewable Energy. In the US, Ørsted has been awarded the rights to build offshore wind farms to serve the markets of Maryland, New Jersey, Rhode Island, New York, and Connecticut. These wind farms will have a total capacity of approx. 2.9GW and will be commissioned by 2024.

Back in time In 1991, the renewable energy company Ørsted built the world’s first offshore wind farm, Vindeby, near the coast of Denmark, comprising 11 turbines that generated a total 5 megawatts. That farm looks like a field of daisies by today’s standards — but its creation opened an industry that’s grown in leaps and bounds, with total installed capacity topping 22.5 gigawatts in 2018, more than the total generating capacity of Greece, Portugal or Chile. Ørsted says it will hit 7.45 GW of offshore wind capacity by 2020. To generate all that, the turbines themselves have had to grow from tender saplings to towering oaks like the Haliade-X 12MW, the world’s most powerful offshore wind turbine. Whereas the turbines at Vindeby each could generate 450 kilowatts, just a single Haliade-X has the capacity to churn out, as the name suggests, 12MW. The turbines have also grown up: The first wind farm’s rotors measured just 35 meters in diameter. The HaliadeX’s rotor stretches 220 meters, more than twice the length of a soccer pitch. And at 107 meters each, the turbine’s blades are so long that maker LM Wind Power, a division of GE Renewable 73

Energy, built a massive new factory on the Atlantic coast in Cherbourg, France, to ease transportation in moving them from the plant to a cargo ship. The Ocean Wind — the larger of the two planned farms, off the coast of New Jersey — is expected to generate 1,100MW, the equivalent of an average American nuclear reactor. Skipjack, off of Maryland, can produce 120MW. “We look forward to introducing the next-generation offshore wind turbine to the market,” said Martin Neubert, executive vice president and CEO of Ørsted Offshore. “Today, offshore wind is a competitive source of homegrown clean energy that can help countries and states achieve their climate targets while creating long-lasting economic activity.” GE makes the nacelles — which are as large as a townhouse — at another French factory in the port city of Saint-Nazaire. The company is currently testing the blades and the nacelle in Blyth, England. It is also building a full-scale test Haliade-X turbine in Rotterdam, Holland. “We are truly excited to be selected as a preferred supplier with the most powerful offshore wind turbine on the market by the global market leader,” said Jérôme Pécresse, president and CEO of GE Renewable Energy. “Like Ørsted, we are enthusiastic about the potential of offshore wind, both in the US and globally. As this announcement demonstrates, our significant investment in technology innovation positions us to help our customers lower the cost of energy produced by clean, abundant, reliable offshore wind just as the industry prepares for dramatic growth.” GE wind turbines also power America’s first offshore wind farm, the 30 MW Block Island Wind Farm off the coast of Rhode Island, which runs on Haliade 150-6MW units. There might be more work on the horizon. In the US, seven states on the East Coast have committed to building a total of 20 GW of offshore wind capacity by 2035.

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Kolskaya Wind Farm Largest Renewable Project Beyond the Arctic Circle

Enel Green Power broke ground at the Kolskaya wind project, located in the Russian region of Murmansk. With 201 MW of installed capacity, the facility is the largest wind farm currently under construction beyond the Arctic Circle. The project, owned by Enel Russia, will involve a total investment of around 273 million euros. 74

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he ground-breaking ce re mony was attended by Enel Group’s Head of Europe and Euro Mediterranean Affairs Simone Mori, Enel Russia General Director Carlo Palasciano Villamagna, Governor-elect of the Murmansk region Andrey Chibis, and other representatives of regional and federal authorities. “Kolskaya is our northernmost project, part of a global portfolio that now goes from beyond the Arctic Circle to the southernmost areas of Africa and that circles the world east to west from Australia to the western United States, under the most diverse and challenging climate conditions,” said Antonio Cammisecra, Head of Enel Green Power. “Through the opening of this second construction site in Russia, we are taking the next step in the strengthening of our renewable portfolio in this country. Looking ahead, we are committed to scouting for further renewable

opportunities in Russia while continuing to build and develop our current projects, leveraging on our strong presence and expertise in the area to progressively build a truly low-carbon footprint in Russia.” Enel Russia was awarded the 201 MW Kolskaya wind project in the 2017 Russian Government tender for the construction of 1.9 GW of wind capacity in the country along with the 90 MW Azov wind project, which is currently under construction and due to be commissioned at the end of 2020. In June 2019 Enel Russia was awarded another wind project of over 71 MW, Rodnikovsky wind farm, located in the Stavropol region, and due to be commissioned in the first half of 2024. Enel Green Power is in charge of the development and construction of all the projects. Enel Russia’s overall investment in the three facilities amounts to approximately 495 million euros, underscoring the company’s major commitment to energy 75

mix diversification through zero-emission technologies. This investment is in line with the Enel Group’s overall target to fully decarbonise its generation mix by 2050. The Kolskaya wind farm is expected to be commissioned by the end of 2021 and will be able to generate around 750 GWh per year, avoiding the emission of around 600,000 tons of CO2 into the atmosphere each year. The wind facility will consist of 57 turbines covering a 257-hectare area. Enel Green Power is the global business line of the Enel Group dedicated to the development, construction and operation of renewables across the world, with a presence in Europe, the Americas, Asia, Africa and Oceania. Enel Green Power is a global leader in the green energy sector with a managed capacity of more than 43 GW across a generation mix that includes wind, solar, geothermal and hydropower, and is at the forefront of integrating innovative technologies into renewable power plants.

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Equinor to Develop the Worldâ&#x20AC;&#x2122;s Largest Offshore Wind Farm

RENEWABLES

Photographer: Ole Jørgen Bratland

ogger Bank Wind Farms, which is developing what will become the world’s largest offshore wind farm when built, announced GE Renewable Energy as its preferred turbine supplier. Under the new deal, GE Renewable Energy will supply Dogger Bank with its next generation of offshore technology, the ground-breaking Haliade-X turbine, bringing the world’s most powerful wind turbine to the world’s largest wind farm. The final number of turbines to be installed at Dogger Bank will be confirmed in due course. Dogger Bank Wind Farms is a 50:50 joint venture (JV) between Equinor and SSE Renewables. The overall wind farm comprises three 1.2 GW projects located in the North Sea, approximately 130km from the UK’s Yorkshire Coast. The projects were recently successful in the latest Contracts for Difference (Cf Ds) Allocation Round, the UK Government’s auction for renewable power. SSE Renewables will lead the development and construction phases of Dogger Bank and Equinor will lead on operations once completed. “The joint Equinor and SSE Renewables project team on Dogger Bank is excited to work with GE Renewable Energy to introduce the next generation of offshore wind turbine to the UK, and to be the first European wind farm to install and operate these innovative turbines. Dogger Bank will now be home to the largest offshore wind turbines in the world and to this pioneering low carbon technology, which will play a central role in helping the UK become carbon neutral by 2050,” Paul Cooley, Director of Capital Projects at SSE Renewables, said. “Our success in the Cf D auction was due in large part to the relationships we have built with our supply chain, which enabled the lowest ever strike prices. The Haliade-X represents a step change in turbine technology, and we look forward to working with GE Renewable Energy to maximise innovation and supply chain benefits for the UK,”

RENEWABLES

Dogger Bank Wind Farms Project Director, Bjørn Ivar Bergemo, added. The Dogger Bank projects will have a combined capacity of up to 3.6 GW, making it the largest wind farm in the world. It will be able to provide enough clean, low-carbon energy to power over 4.5 million homes annually, equivalent to around 5% of the UK’s estimated electricity generation. The projects are expected to trigger approximately £9bn of capital investment between 2020 and 2026 into much needed low carbon infrastructure and delivering substantial economic benefits to the UK. “We are very excited to announce this agreement as it gives us the opportunity to bring the world’s most powerful offshore wind turbine to the world’s largest offshore wind market. We have an important role to play in the UK’s offshore wind ambitions and in delivering further carbon emission reductions. Our Haliade-X technology is helping our customers to make offshore wind a more competitive source of clean and renewable energy by reducing the levelized cost of energy (LCOE),” John Lavelle, President and CEO, Offshore Wind, GE Renewable Energy, mentioned. The Dogger Bank wind farm will consist of three projects, Creyke Beck A, Creyke Beck B and Teesside A. The clearing prices for the projects are GBP 39.650 per MWh for Creyke Beck A and GBP 41.611 per MWh for the Creyke Beck B and the Teesside A projects (all in 2012 real prices). The auction results reflect the continued cost reductions and technological developments and the increasing competitiveness of bottomfixed offshore wind. The contracts offer a fixed price for the first 15 years of operation, providing the projects with a long-term predictable revenue stream. “The successful bids for the world’s largest offshore wind development represent a game-changer for our offshore wind business and support the development of Equinor as a broad energy company. A full-scale development of

Dogger Bank will constitute an industrial wind hub in the heart of the North Sea, playing a major role in the UK’s ambitions for offshore wind and supporting the net zero ambition. Excellent wind speeds, shallow waters and scale make Dogger Bank well positioned to deliver low cost renewable electricity to UK homes and businesses,” said Eldar Sætre, CEO of Equinor. “Dogger Bank, together with the recent award for Empire Wind in the US, positions Equinor as an offshore wind major. These projects provide economies of scale and synergies, making us an even stronger competitive force in offshore wind globally. We expect the cost reductions obtained by the industry through continuous project execution and technological innovation will contribute to continued value enhancement,” underlined executive vice president for New Energy Solutions in Equinor, Pål Eitrheim. “We are thrilled at the success of our offshore wind projects at Dogger Bank which combined will be the largest wind farm in the world. Reaching this point has been a culmination of over 10 years of development and it is very exciting to work with Equinor on taking the project forward. We’re confident our wealth of offshore wind experience will enable us to deliver these unique projects. This success demonstrates that offshore wind is the key technology to enable the UK to become carbon neutral by 2050 in the most cost-effective way, whilst also delivering significant economic benefits across the country”, added Jim Smith, Managing Director of SSE Renewables. The joint venture will be seeking nonrecourse project financing to fund the Dogger Bank development. A preliminary market sounding of potential lenders has demonstrated very strong interest for UK offshore wind assets. The partners are planning for final investment decision for the first project during 2020 and first power generation is planned for 2023. Further phases of the Dogger Bank project will be developed thereafter. 78

The joint venture has selected SSE as the lead operator during the project construction phase and Equinor the lead operator for operations. Both companies will second personnel into the execution and operations teams. The Dogger Bank projects will now progress towards a financial investment decision by the end of 2020, after which there will be confirmation of GE Renewable Energy as turbine supplier. Onshore construction is expected to commence in early 2020, and first energy generation is expected in 2023. Dogger Bank Wind Farms is currently preparing for the commencement of onshore works, alongside plans to hold events for local residents and the potential supply chain. The awards were given under the Contracts for Difference (Cf D) competitive auction held by National Grid on behalf of the UK’s Department for Business, Energy and Industrial Strategy (BEIS) which has successfully commissioned 6 GW of offshore wind to reach a target of 30 GW of offshore wind by 2030.

Facts about Dogger Bank • Located more than 130 km east of the Yorkshire Coast in the UK North Sea. • Water depth ranges from 20 m to 35 m. • Each project will have an installed capacity of 1.2 GW. Together, they can cover approximately 5% of the UK’s estimated electricity generation. • The first project is expected to be operational in 2023, and the lease is given for 50 years. • The Wind Turbine Generators (WTG) are expected to be 10+ MW, installed on monopile foundations. • The transmission system will be High Voltage Direct Current (HVDC) due to the long distance to the onshore grid connection point. This will be the first use of HVDC for offshore wind in the UK. • The Contract for Difference is for 15 years and indexed for inflation. After the Cf D support, each project will receive the market price for electricity.

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METALS & MINING

Mining Industry Left Without Minersâ&#x20AC;&#x2122; Lamp

Text by Adrian Stoica

METALS & MINING

Restructuring of the mining industry in Romania, started 20 years ago, has led to the disappearance of over 550,000 jobs and condemning extensive areas to poverty. All activities related to the mining industry, usually located in the same areas, have also been attracted in this decline. Thus, four companies that produced machinery for the mining industry, five institutes of research and design have disappeared and the secondary and higher education that trained specialists in this field has almost disappeared. Some of the mines that have been stopped have become, in time, real ecological bombs because the funds allocated to the closure, rehabilitation of the surfaces and their greening were insufficient. 81

METALS & MINING

Several strategies have been prepared over the years to relaunch mining in Romania, but basically nothing significant has happened. Towns such as those in Jiu Valley, Motru, Rovinari, Baia Sprie, Cavnic, Balan etc. have remained without their only source of income. For example, in Jiu Valley in the early ‘90s there was a population of over 142,000 inhabitants. Restructuring programs have led to the dismissal of approximately 40,000 employees. If we add the entire staff in the horizontal industry dedicated to the mining activity, other 20,000 persons, we realize that overnight an unemployment of over 50% of the active population was generated in the area.

14 Counties and one million people Transformation occurred in the Romanian economy after 1989 and the measures adopted in the mining industry have generated the destruction of the field. In Romania there were 14 mining regions, spread over 16 counties: Arges, Dambovita, Prahova, Caras-Severin, Hunedoara, Alba, Bihor, Cluj, Salaj, Maramures, BistritaNasaud, Suceava, Harghita, Covasna, Bacau and Tulcea. At the time of closure of the mining activity, 155 localities were more than 50% dependent on the revenues provided by the mining activity. All the components of the mining sector were affected, but metalliferous mining was hit the most. While in 2006, there were still over 8,000 persons working in the field, in 2012 their number barely exceeded 2,500. Moreover, there were over one million people working in total in the entire Romanian mining sector before 1990. Among them, 350,000 were direct employees as a result of the mining activity and the rest were working in activities serving this industry.

Mining according to a 16-year-old law Currently, the law governing the mining activity is the Mining Law 85/2003. It was drawn up at a time when Romania was still negotiating its accession to the European Union and in an unfavourable economic context. Although in that period

the European and national trend was of drastic reduction of the mining activity, the law did not treat the aspects that were to occur after the massive cessation of activity. It failed to regulate access to abandoned reserves/resources, the procedures of closure, rehabilitation and greening of the affected areas, and their correlation with the requirements of stakeholders (local communities, environmental authorities, water authorities etc.) was lacking. Thus, currently over 450 exploitation licenses concluded have not been approved by the Government for over 20 years. Functioning continues through legislative contrivances of the type of exploitation permits that do not confer the security necessary for serious investments in the perimeters in exploitation. On the other hand, the related legislation, on environment, water, hazardous mining waste was subsequently promoted through legislative acts that were often in conflict with Law 85/2003.

to give up the mining industry, specialists say. If we were to copy the model applied by other countries that managed to maintain and develop the mining industry, we could request the support of a team of independent external experts. Placed under the coordination of an entity such as the EU or the World Bank, this team, in collaboration with Romanian specialists, could prepare a draft law that, subsequently, would be subject to analysis by all those involved in the sector. At institutional level, the restructuring of the current National Agency for Mineral Resources (NAMR) should also be considered. On the other hand, Romania currently does not have an authority in the field of geology, according to the model of other countries. In turn, we have the Institute of Geology and Geophysics, but it has only some of the attributions of such an authority.

Returning to investments financed by the state

Currently, the mining units part of the Oltenia Energy Complex (lignite) and Hunedoara Energy Complex (hard coal) are still active, where about 17,000 people are working (4,000 in Jiu Valley and 13,000 in Oltenia). At the beginning of the 90s, in Jiu Valley alone, over 45,000 employees worked in 15 mines and quarries, providing 20 million tons of hard coal per year, i.e. the fuel needed for the operation of the two coal-fired power plants, Mintia and Paroseni. Today only four mines are still operational, of which two will cease their activity soon. Thus, over 65% of the coal needed for the operation of Mintia thermal power plant will be imported. The same situation was in the Oltenia mining basin, where the approximately 40,000 employees ensured the operation of all energy groups at the thermal power plants Turceni, Rovinari, Isalnita, Craiova I and II etc. Today, the 13,000 employees and the production capacities remaining activity don’t always manage to cover the need for the operation of the energy groups.

So far, several options have been prepared to amend the Mining Law. The last form put up for public consultation by the Ministry of Economy does not make too much order in this sector. From the start, the proposed draft violates not only Romania’s external commitments, but also the simplest rules of operation of a healthy market economy. In essence, it is proposed to return to state administration of resources/reserves and investments financed from the state budget. In other words, it is intended to return to the period before ‘89, thus having all the ingredients of a fiasco. In 2017, a draft law had been prepared under the auspices of the Ministry of Economy, with the participation of all interested institutions, of academia, of specialists from mining companies, unions etc. For unknown reasons, the Government preferred however to abandon it.

How can the sector be relaunched? Even if the environmental restrictions imposed to the coal-fired energy sector become harsher, Romania cannot afford 82

Romania resorts to coal imports

Copper concentrate production goes to export The mining of non-ferrous metals

METALS & MINING

has not escaped destruction either, the situation here being even more dramatic. The activity has completely disappeared in the historical areas, with millennial mining in the Apuseni Mountains, Baia Mare, Deva etc. Only the exploitation in Rosia Poieni, which belongs to the state-owned company Cuprumin, and some exploitations in Moldavia, operated by private investors, have remained active. The only nonferrous metal produced in the country is copper, but in the absence of processing capacities, which have been destroyed in the meantime, Romania has become an exporter of raw materials. The plants from Copsa Mica, Baia Mare or Zlatna, places where the concentrates were transformed into gold, silver, copper, zinc, lead, iron,

aluminium etc. no longer exist today, so from Romania all the copper concentrate production goes to export, which we import later, at much higher prices, in the form of finished materials.

Chain strategic errors During 1990-2000, when the decision to cease the mining activity in Romania was made, the entire mining had reached a subsidy granted of around USD 6.2bn and operating losses of USD 6.7bn. The subsidy should have represented the difference between the production cost and the delivery price. In reality, the level of subsidy granted by the state to mining companies accounts for only 68% of the

real needs. It should also be mentioned that the real loss was USD 2.8bn, and the difference to USD 6.7bn was represented by ancillary obligations (penalties, excise duties etc.). This situation had been reached because the state sub-financed through subsidies the mining companies. At the end of the ‘90s an extensive analysis of the Romanian mining industry was carried out by a group of foreign specialists who in the end formulated a number of proposals to streamline the sector, but they were neglected. Decisions were sequential, with each government acting without any consistency in decisions. Since 2009, Romania no longer has an approved and assumed mining industry strategy.

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ANALYSIS

Nuclear Energy: A Glimpse into Tomorrow Why nuclear? There is a clear need for new generating capacity around the world, both to replace old fossil fuel units, especially coal-fired ones, which emit a lot of carbon dioxide, and to meet increased demand for electricity in many countries. In 2016, 65.0% of electricity was generated from the burning of fossil fuels. Despite the strong support for, and growth in, intermittent renewable electricity sources in recent years, the fossil fuel contribution to power generation has remained virtually unchanged in the last 10 years or so. Text by Evgenios Zogopoulos 84

ANALYSIS

A short introduction Nuclear energy is the energy in the nucleus (core) of an atom. Atoms are tiny particles that make up every object in the universe. There is enormous energy in the bonds that hold atoms together. Nuclear energy can be used to make electricity, given that this energy can be released. This can happen in two ways: nuclear fusion and nuclear fission. In nuclear fusion, energy is released when atoms are combined or fused together to form a larger atom. This is how the sun produces energy. In nuclear fission, atoms are split apart to form smaller atoms, releasing energy. Nuclear power plants use nuclear fission to produce electricity. Nuclear reactions involve changes in an atom’s nucleus and thus cause a change in the atom itself. Unlike normal chemical reactions that form molecules, nuclear reactions result in the transmutation of one element into a different isotope or a different element altogether. There are two types of nuclear reactions. The first is the radioactive decay of bonds within the nucleus that emit radiation as it decays or transforms to a more stable state. The second is the ‘billiard ball’ type of reactions, where the nucleus or a nuclear particle (like a proton) is slammed into by another nucleus or nuclear particle. In a nutshell, nuclear energy comes from splitting atoms (nuclear fission) inside a reactor which in turn proceeds with heating water, turning it into steam, which eventually turns a turbine and generates electricity. Nuclear energy and fossil fuel energy have similarities in the way they are extracted. The basis behind running a fossil fuel power plant can be illustrated by examining a typical fire. In this instance, organic matter such as wood or natural gas is burned and converted into CO2. In this case, we change which atoms bond to each other and harvest the energy that is released when they reach a more stable configuration (as CO2). In a nuclear power plant, we are doing the same thing: extracting energy from atoms that ultimately gets converted to electricity.

However, in a nuclear reaction, we don’t just rearrange which atoms bond to which. We change the atoms themselves, and the energy released is enormous. In a nuclear reaction, the nucleus of the atom breaks into several pieces and releases an immense amount of energy. This process is known as nuclear fission. The nucleus we break apart for energy in most nuclear power plants is that of the uranium atom, specifically uranium-235 (that number indicates the total number of neutrons and protons in the nucleus). To start a fire, which is an ongoing chemical reaction, we merely need some friction. Ongoing nuclear reactions do not begin so easily. To initiate the chain of reactions that supply us with energy in a nuclear power plant, we must bombard the uranium rod with high-energy neutrons. After we do this, the uranium breaks into two smaller nuclei (e.g. krypton and barium) and ejects several high-energy neutrons that cause more uranium to undergo fission. This chain reaction provides a lot of energy, and the best part is that it does so without emitting any CO2. In fact, the only CO2 emitted due to nuclear power 85

plants is what’s released indirectly from developing the construction materials! How does this compare to other energy sources? Coal power emits the equivalent of 820 g CO2 worth of greenhouse gases for every kilowatt-hour (g CO2eq/kWh) of electricity produced. (A kWh is a standard unit of energy used in billing by electrical utilities). Natural gas has a lower output at 490 g CO2eq/kWh. Nuclear power, gives about a mere 16G CO2/ kWh. This is the lowest of all commercial baseload energy sources.

Historical context In the USA, Westinghouse designed the first fully commercial PWR (pressurized water reactor) of 250 MWe, Yankee Rowe, which started up in 1960 and operated to 1992. Meanwhile the boiling water reactor was developed by the Argonne National Laboratory, and the first one, Dresden-1 of 250 MWe, designed by General Electric, was started up earlier in 1960. A prototype BWR, Vallecitos, ran from 1957 to 1963. By the end of the 1960s, orders were being placed for PWR and BWR reactor units

1114 MW(e), PWR, TURKEY AKKUYU-1 HINKLEY POINT C-1 1630 MW(e), PWR, UK

KURSK 2-1

HAIYANG-1 HAIYANG-2 LENINGRAD 2-1

1126 MW(e), PWR, CHINA 1126 MW(e), PWR, CHINA 1101 MW(e), PWR, RUSSIA

ROSTOV-4 SANMEN-1

CHINSHAN-1 IKATA-2

604 MW(e), BWR, TAIWAN, CHINA 538 MW(e), PWR, JAPAN

LENINGRAD OHI-1

Europe – Western Reactors in operation Reactors under construction

America – Northern

MW(e) net capacity

117 2

Reactors in operation Reactors under construction

396 413 2 563 450 56 643 55 17 881

112 615 2 234

MW(e) total net capacity TWh electricity supplied

America – Latin Nuclear power reactors

MW(e) net

7 2

Reactors in operation Reactors under construction

50 13

MW(e) total net capacity Nuclear power reactors

Reactor-years of operation

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dere

jkhj

fgfg

dere

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dere

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fgfg

dere

D-1

1175 MW(e), PWR, RUSSIA

ROOPPUR-2

1080 MW(e), PWR, BANGLADESH

SHIN-KORI-6

1340 MW(e), PWR, REP. OF KOREA

950 MW(e), PWR, RUSSIA 1157 MW(e), PWR, CHINA

SANMEN-2 TAISHAN-1

1157 MW(e), PWR, CHINA 1660 MW(e), PWR, CHINA

TIANWAN-4 YANGJIANG-5

1060 MW(e), PWR, CHINA 1021 MW(e), PWR, CHINA

925 MW(e), LWGR, RUSSIA 1120 MW(e), PWR, JAPAN

OHI-2 ONAGAWA-1

1120 MW(e), PWR, JAPAN 498 MW(e), BWR, JAPAN

OYSTER CREEK 619 MW(e), BWR, USA

Europe – Central and Eastern Reactors under construction

MW(e) net capacity

112 3

MW(e) net capacity

71 13

Reactors in operation

53 336 10 857

109 819 4 860

Asia – Far East

MW(e) net capacity

113 20

Reactors in operation Reactors under construction

Asia – Middle East and South

t capacity

Reactors under construction

069 365

Africa

MW(e) net capacity

28 15

Reactors in operation

106 226 22 935

8 488 14 392

MW(e) net capacity

2 0

Reactors in operation Reactors under construction

1 860 0

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dere

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dere

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dere

ANALYSIS

of more than 1000 MWe. Canadian reactor development headed down a quite different track, using natural uranium fuel and heavy water as a moderator and coolant. The first unit started up in 1962. This CANDU design continues to be refined. France started out with a gas-graphite design similar to Magnox and the first reactor started up in 1956. Commercial models operated from 1959. It then settled on three successive generations of standardized PWRs, which was a very cost-effective strategy. In 1964 the first two Soviet nuclear power plants were commissioned. A 100 MW boiling water graphite channel reactor began operating in Beloyarsk (Urals). In Novovoronezh (Volga region) a new design – a small (210 MW) pressurized water reactor (PWR) was built. They quickly proceeded with building newer RBMK reactors which would evolve into the standardized model. In Kazakhstan the world’s first commercial prototype fast neutron reactor (the BN-350) started up in 1972 with a design capacity of 135 MWe (net), producing electricity and heat to desalinate Caspian seawater. In the USA, UK, France and Russia a number

of experimental fast neutron reactors produced electricity from 1959, the last of these closing in 2009. Around the world, with few exceptions, other countries have chosen light-water designs for their nuclear power programs, so that today 69% of the world capacity is PWR and 20% BWR. In relation to nuclear power, safety is closely linked with security, and in the nuclear field also with safeguards. Some distinctions apply: • Safety focuses on unintended conditions or events leading to radiological releases from authorized activities. It relates mainly to intrinsic problems or hazards. • Security focuses on the intentional misuse of nuclear or other radioactive materials by non-state elements to cause harm. It relates mainly to external threats to materials or facilities. • Safeguards focus on restraining activities by states that could lead to acquisition or development of nuclear weapons. It concerns mainly materials and equipment in relation to rogue governments. (See also information paper on Safeguards.) 88

No industry is immune from accidents, but all industries learn from them. In civil aviation, there are accidents every year and each is meticulously analyzed. The lessons from nearly one hundred years’ experience mean that reputable airlines are extremely safe. In the chemical industry and oil-gas industry, major accidents also lead to improved safety. There is wide public acceptance that the risks associated with these industries are an acceptable trade-off for our dependence on their products and services. With nuclear power, the high energy density makes the potential hazard obvious, and this has always been factored into the design of nuclear power plants. In the 1950s attention turned to harnessing the power of the atom in a controlled way, as demonstrated at Chicago in 1942 and subsequently for military research, and applying the steady heat yield to generate electricity. This naturally gave rise to concerns about accidents and their possible effects. However, with nuclear power, safety depends on much the same factors as in any comparable industry: intelligent planning, proper design with conservative margins and backup systems, high-quality components and a well-developed safety culture in operations. The operating lives of reactors depend on maintaining their safety margin. A particular nuclear scenario was loss of cooling which resulted in melting of the nuclear reactor core, and this motivated studies on both the physical and chemical possibilities as well as the biological effects of any dispersed radioactivity. Those responsible for nuclear power technology in the West devoted extraordinary effort to ensuring that a meltdown of the reactor core would not take place, since it was assumed that a meltdown of the core would create a major public hazard, and if uncontained, a tragic accident with likely multiple fatalities. In avoiding such accidents, the industry has been very successful. In over 17,000 cumulative reactor-years of commercial operation in 33 countries, there have been only

ANALYSIS

three major accidents to nuclear power plants – Three Mile Island, Chernobyl, and Fukushima – the second being of little relevance to reactor designs outside the old Soviet bloc. The three significant accidents in the 50-year history of civil nuclear power generation are: • Three Mile Island (USA 1979) where the reactor was severely damaged but radiation was contained and there were no adverse health or environmental consequences. • Chernobyl (Ukraine 1986) where the destruction of the reactor by steam explosion and fire killed two people initially plus a further 28 from radiation poisoning within three months, and had significant health and environmental consequences. • Fukushima (Japan 2011) where three old reactors (together with a fourth) were written off after the effects of loss of cooling due to a huge tsunami were inadequately contained. There were no deaths or serious injuries due to radioactivity, though about 19,000 people were killed by the tsunami. These three significant accidents occurred during more than 17,000 reactor-years of civil operation. Of all the accidents and incidents, only the Chernobyl and Fukushima accidents resulted in radiation doses to the public greater than those resulting from the exposure to natural sources. The Fukushima accident resulted in some radiation exposure of workers at the plant, but not such as to threaten their health, unlike Chernobyl. Other incidents (and one ‘accident’) have been completely confined to the plant. Apart from Chernobyl, no nuclear workers or members of the public have ever died as a result of exposure to radiation due to a commercial nuclear reactor incident. Most of the serious radiological injuries and deaths that occur each year (2-4 deaths and many more exposures above regulatory limits) are the result of large uncontrolled radiation sources, such as abandoned medical or industrial equipment. It should be emphasized that a

commercial-type power reactor simply cannot under any circumstances explode like a nuclear bomb – the fuel is not enriched beyond about 5%, and much higher enrichment is needed for explosives. The International Atomic Energy Agency (IAEA) was set up by the United Nations in 1957. One of its functions was to act as an auditor of world nuclear safety, and this role was increased greatly following the Chernobyl accident. It prescribes safety procedures and the reporting of even minor incidents. Its role has been strengthened since 1996. Every country which operates nuclear power plants has a nuclear safety inspectorate which works closely with the IAEA.

Today’s nuclear reality Around 11% of the world’s electricity is generated by about 450 nuclear power reactors. About 60 more reactors are under construction, equivalent to about 15% of existing capacity. In 2017 nuclear plants supplied 2487 TWh of electricity, up from 2477 TWh in 2016.

North America Canada has 19 operable nuclear reactors, with a combined net capacity of 13.5 GWe. In 2017, nuclear generated 89

15% of the country’s electricity. All but one of the country’s 19 nuclear reactors are sited in Ontario. In the first part of 2016 the government signed major contracts for the refurbishment and operating lifetime extension of six reactors at the Bruce generating station. The program will extend the operating lifetimes by 30-35 years. Similar refurbishment work enabled Ontario to phase out coal in 2014, achieving one of the cleanest electricity mixes in the world. Mexico has two operable nuclear reactors, with a combined net capacity of 1.6 GWe. In 2017, nuclear generated 6% of the country’s electricity. The USA has 98 operable nuclear reactors, with a combined net capacity of 99.4 GWe. In 2017, nuclear generated 20% of the country’s electricity. There had been four AP1000 reactors under construction, but two of these have been halted. Over the last 15 years, improved operational performance has increased utilization of US nuclear power plants, with the increased output equivalent to 19 new 1000 MWe plants being built. 2016 saw the first new nuclear power reactor enter operation in the country for 20 years. Despite this, the number of operable reactors has reduced in recent years, from a peak of 104 in 2012. Early closures have been brought on by a combination of factors including cheap

ANALYSIS

natural gas, market liberalization, oversubsidy of renewable sources, and political campaigning.

South America Argentina has three reactors, with a combined net capacity of 1.7 GWe. In 2017, the country generated 5% of its electricity from nuclear. Brazil has two reactors, with a combined net capacity of 1.9 GWe. In 2017, nuclear generated 3% of the country’s electricity.

West & Central Europe Belgium has seven operable nuclear reactors, with a combined net capacity of 5.9 GWe. In 2017, nuclear generated 50% of the country’s electricity. Finland has four operable nuclear reactors, with a combined net capacity of 2.8 GWe. In 2017, nuclear generated 33% of the country’s electricity. A fifth reactor – a 1720 MWe EPR – is under construction, and there are plans to build a Russian VVER-1200 unit at a new site (Hanhikivi). France has 58 operable nuclear reactors, with a combined net capacity of 63.1 GWe. In 2017, nuclear generated 72% of the country’s electricity. A 2015 energy policy had aimed to reduce the country’s share of nuclear generation to 50% by 2025. In November 2017, the French government postponed this target. The country’s energy minister said that the target was not realistic, and that it would increase the country’s carbon dioxide emissions, endanger security of supply and put jobs at risk. Germany is phasing out nuclear generation by about 2022 as part of its Energiewende policy. Energiewende, widely identified as the most ambitious national climate change mitigation policy, has yet to deliver a meaningful reduction in carbon dioxide (CO2) emissions. In 2011, the year after the policy was introduced, Germany emitted 731 Mt CO2 from fuel combustion; in 2015, the country emitted 730 Mt CO2, and

remained the world’s sixth-biggest emitter of CO2. The German government expects to miss its target of a 40% reduction in emissions relative to 1990 levels by a wide margin. The Netherlands has a single operable nuclear reactor, with a net capacity of 0.5 GWe. In 2017, nuclear generated 3% of the country’s electricity. Spain has seven operable nuclear reactors, with a combined net capacity of 7.1 GWe. In 2017, nuclear generated 21% of the country’s electricity. Sweden has eight operable nuclear combined net capacity of 8.4 GWe. In 2017, nuclear generated 40% of the country’s electricity. The country is closing down some older reactors, but has invested heavily in operating lifetime extensions and updates. Switzerland has five operable nuclear reactors, with a combined net capacity of 3.3 GWe. In 2017, nuclear generated 33% of the country’s electricity. The UK has 15 operable nuclear reactors, with a combined net capacity of 8.9 GWe. In 2017, nuclear generated 19% of the country’s electricity. A UK government energy paper in mid2006 endorsed the replacement of the country’s ageing fleet of nuclear reactors with new nuclear build. Construction has commenced on the first of some 12.5 GWe of new-generation plants.

Central and Eastern Europe Armenia has a single nuclear power reactor with a net capacity of 0.4 GWe. In 2017, nuclear generated 33% of the country’s electricity. Belarus has its first nuclear power plant under construction, and plans to have it operating from 2019. The project is financed by Russia. At present almost all of the country’s electricity is produced from natural gas. Bulgaria has two operable nuclear reactors, with a combined net capacity of 1.9 GWe. In 2017, nuclear generated 34% of the country’s electricity. The Czech Republic has six operable nuclear reactors, with a combined net 90

capacity of 3.9 GWe. In 2017, nuclear generated 33% of the country’s electricity. Hungary has four operable nuclear reactors, with a combined net capacity of 1.9 GWe. In 2017, nuclear generated 50% of the country’s electricity. Romania has two operable nuclear reactors, with a combined net capacity of 1.3 GWe. In 2017, nuclear generated 18% of the country’s electricity. Russia has 36 operable nuclear reactors, with a combined net capacity of 28.0 GWe. In 2017, nuclear generated 18% of the country’s electricity. A government decree in 2016 specified construction of 11 nuclear power reactors by 2030, in addition to those already under construction. At the start of 2019, Russia had six reactors under construction, with a combined capacity of 4.9 GWe. The strength of Russia’s nuclear industry is reflected in its dominance of export markets for new reactors. The country’s national nuclear industry is currently involved in new reactor projects in Belarus, China, Hungary, India, Iran and Turkey, and to varying degrees as an investor in Algeria, Bangladesh, Bolivia, Indonesia, Jordan, Kazakhstan, Nigeria, South Africa, Tajikistan and Uzbekistan among others. Slovakia has four operable nuclear reactors, with a combined net capacity of 1.8 GWe. In 2017, nuclear generated 54% of the country’s electricity. A further two units are under construction, with the first unit due to enter commercial operation before the end of the decade. Slovenia has a single operable nuclear reactor with a net capacity of 0.7 GWe. In 2017, Slovenia generated 39% its electricity from nuclear. Ukraine has 15 operable nuclear reactors, with a combined net capacity of 13.1 GWe. In 2017, nuclear generated 55% of the country’s electricity. Turkey commenced construction of its first nuclear power plant in April 2018, with start of operation expected in 2023.

Asia Bangladesh started construction on

ANALYSIS

the first of two planned Russian VVER1200 reactors in 2017. It plans to have the first unit in operation by 2023. The country currently produces virtually all of its electricity from fossil fuels. China has 45 operable nuclear reactors, with a combined net capacity of 43.0 GWe. In 2017, nuclear generated 4% of the country’s electricity. The country continues to dominate the market for new nuclear build. At the start of 2019, 13 of the 57 reactors under construction globally were in China. In 2018 China became the first country to commission two new designs – the AP1000 and the EPR. China is commencing export marketing of the Hualong One, a largely indigenous reactor design. The strong impetus for developing new nuclear power in China comes from the need to improve urban air quality and reduce greenhouse gas emissions. The government’s stated long-term target, as outlined in its Energy Development Strategy Action Plan 2014-2020 is for 58 GWe capacity by 2020, with 30 GWe more under construction. India has 22 operable nuclear reactors, with a combined net capacity of 6.2 GWe. In 2017, nuclear generated 3% of the country’s electricity. The Indian

government is committed to growing its nuclear power capacity as part of its massive infrastructure development program. The government in 2010 set an ambitious target to have 14.6 GWe nuclear capacity online by 2024. At the start of 2019 seven reactors were under construction in India, with a combined capacity of 5.4 GWe. Japan has 37 operable nuclear reactors, with a combined net capacity of 36.1 GWe. At the start of 2019, only nine reactors had been brought back online, with a further 17 in the process of restart approval, following the Fukushima accident in 2011. In the past, 30% of the country’s electricity has come from nuclear; in 2017, the figure was just 4%. South Korea has 23 operable nuclear reactors, with a combined net capacity of 22 GWe. In 2017, nuclear generated 27% of the country’s electricity. South Korea has four new reactors under construction domestically as well as four in the United Arab Emirates. It plans for two more, after which energy policy is uncertain. It is also involved in intense research on future reactor designs. Pakistan has five operable nuclear reactors, with a combined net capacity of 1.4 GWe. In 2017, nuclear generated 6% 91

of the country’s electricity. Pakistan has two Chinese Hualong One units under construction.

Africa South Africa has two operable nuclear reactors, with a combined net capacity of 1.8 GWe, and is the only African country currently producing electricity from nuclear. In 2017, nuclear generated 7% of the country’s electricity. South Africa remains committed to plans for further capacity, but financing constraints are significant.

Middle East Iran has a single operable nuclear reactor with a net capacity of 0.9 GWe. In 2017, nuclear generated 2% of the country’s electricity. The United Arab Emirates is building four 1450 MWe South Korean reactors at a cost of over USD 20 billion, and is collaborating closely with the International Atomic Energy Agency and experienced international firms. Emerging nuclear energy countries as outlined above, Bangladesh, Belarus, Turkey and the United Arab Emirates are

ANALYSIS

all constructing their first nuclear power plants. A number of other countries are moving towards use of nuclear energy for power production. (For more information, see page on Emerging Nuclear Energy Countries). In addition to commercial nuclear power plants, there are about 225 research reactors operating in over 50 countries, with more under construction. As well as being used for research and training, many of these reactors produce medical and industrial isotopes. The use of reactors for marine propulsion is mostly confined to the major navies where it has played an important role for five decades, providing power for submarines and large surface vessels. At least 140 ships, mostly submarines, are propelled by some 180 nuclear reactors and over 13,000 reactor years of experience have been gained with marine reactors. Russia and the USA have decommissioned many of their nuclear submarines from the Cold War era. Russia also operates a fleet of four large nuclear-powered icebreakers and has three more under construction. It is also completing a floating nuclear power plant with two 40 MWe reactors adapted from those powering icebreakers for use in remote regions.

Ambitious goals Nuclear power is essential for energy, environment, and the economy. There is a clear need for new generating capacity around the world, both to replace old fossil fuel units, especially coal-fired ones, which emit a lot of carbon dioxide, and to meet increased demand for electricity in many countries. The OECD International Energy Agency publishes annual scenarios related to energy. In its World Energy Outlook 2018 there is an ambitious ‘Sustainable Development Scenario’ which is consistent with the provision of clean and reliable energy and a reduction of air pollution, among other aims. In this decarbonization scenario, electricity generation from nuclear increases by

almost 90% by 2040 to 4960 TWh, and capacity grows to 678 GWe. The World Nuclear Association has put forward a more ambitious scenario than this: The Harmony program proposes the addition of 1000 GWe of new nuclear capacity by 2050, to provide 25% of electricity then (about 10,000 TWh) from 1250 GWe of capacity (after allowing for 150 GWe retirements). This would require adding 25 GWe per year from 2021, escalating to 33 GWe per year, which is not much different from the 31 GWe added in 1984, or the overall record of 201 GWe in the 1980s. Providing onequarter of the world’s electricity through nuclear would substantially reduce carbon dioxide emissions and have a very positive effect on air quality. There is also tremendous focus on upgrading the already existing reactor capacity.

Long-term trends in capacity While nuclear power plants are designed to be safe in their operation and safe in the event of any malfunction or accident, no industrial activity can be represented as entirely risk-free. The long-term operation (LTO) of established plants is established by significant investment in such upgrading. The safety of operating staff is a prime concern in nuclear plants. Radiation exposure is minimized by the use of remote handling equipment for many operations in the core of the reactor. Other controls include physical shielding and limiting the time workers spend in areas with significant radiation levels. The use of nuclear energy for electricity generation can be considered extremely safe. Every year several thousand people die in coal mines to provide this widely used fuel for electricity. There are also significant health and environmental effects arising from fossil fuel use. To date, even the Fukushima accident has caused no deaths, and the IAEA reported in June 2011: “To date, no health effects have been reported in any person as a result of radiation exposure.” Subsequent WHO 92

and UNSCEAR reports have supported this. It was not until the late 1970s that detailed analyses and large-scale testing, followed by the 1979 meltdown of the Three Mile Island reactor, began to make clear that even the worst possible accident in a conventional western nuclear power plant or its fuel would not be likely to cause dramatic public harm. The industry still works hard to minimize the probability of a meltdown accident, but it is now clear that no-one need fear a potential public health catastrophe simply because a fuel meltdown happens. Fukushima has made that clear, with a triple meltdown causing no fatalities or serious radiation doses to anyone, while over two hundred people continued working on the site to mitigate the accident’s effects. Fossil fuels have a host of problems themselves. The by-products from burning fossil fuels are toxic pollutants that produce ozone, toxic organic aerosols, particulate matter, and heavy metals. The World Health Organization has stated the urban air pollution, which is a mixture of all of the chemicals just described, causes 7 million deaths annually or about 1 in 8 of total deaths. Furthermore, coal power plants release more radioactive material per kWh into the environment in the form of coal ash than does waste from a nuclear power plant under standard shielding protocols. This means that, under normal operations, the radioactive waste problem associated with one of the most mainstream energy sources in use actually exceeds that from nuclear energy. In fact, on a per kWh of energy produced basis, both the European Union and the Paul Scherrer Institute, the largest Swiss national research institute, found an interesting trend regarding the fatalities attributable to each energy source. Dangers associated with nuclear power are, in many ways, different from the dangers we face from other methods of getting energy. This might explain why fear of nuclear power persists and why the above fatality rates may surprise you. However, we know that nuclear energy does not produce the greenhouse gases

ANALYSIS

that fossil fuels have been producing for over a century. Research also concludes that the more familiar dangers from using fossil fuels claim far more lives. Furthermore, with the advent of modern reactors such as the pebble-bed reactor and careful selection of plant sites, nuclear accidents like the one in Fukushima are actually not possible. When balanced with these notable benefits, the problems associated with nuclear power do not justify its immediate dismissal as a potential energy source for the world.

Welcome to the nuclear dark side Meltdowns like the ones in Fukushima or Chernobyl released enormous amounts of radiation into the surrounding communities, forcing hundreds of thousands of people to evacuate. Many of them may never come back. There is still no safe, reliable solution for dealing with the radioactive waste produced by nuclear plants. Every waste dump in the U.S. leaks radiation into the environment, and nuclear plants themselves are running out of ways to store highly radioactive waste on site. The site selected to store the U.S.’s radioactive waste — Yucca Mountain in Nevada — is both volcanically and seismically active. Nuclear risks to the environment: a nuclear disaster leads to immediate soil pollution and environmental pollution, contaminating all regions nearby for years. Even if we are told loud and clear that nuclear power plants are ultrasecure sites, is there really a safe nuclear facility? Human error, a climatic event or a technical failure are all possibilities for triggering a nuclear catastrophe. From an environmental point of view, many risks are still poorly taken into account, especially during the treatment of nuclear materials and waste. What happens to these radioactive substances, created every day to produce electricity (uranium, plutonium…)? When they cannot be stored in specialized, numerous and saturated centers, the most dangerous substances (i.e. those that will take thousands of years to become ‘non-

toxic’) will simply be buried deeply! Thus, in 2016, the State gave the green light for the continuation of the project of industrial center of geological storage (Cigeo) in Bure. But you can imagine that toxic materials, which cannot be recycled, will not remain wisely in depth, but will inevitably rise to the surface, with the consequences that we already know: contamination of water and soils for years and over large areas. Nuclear risks to health: if nuclear power plants affect the environment, they also play a role in the increase of diseases in certain regions via radiation. This is how it kills our cells, causes cancers or even malformations. Can we speak of a mere coincidence between the nuclear experiments in Polynesia and the exponential increase in thyroid cancer in women during this same period and still today? Nuclear risks in the territory: we all remember the Chernobyl accident or the more recent Fukushima accident. But many other disasters have occurred since then, in nuclear power stations but also during the storage and/or transport of radioactive materials. Today, 80% of the nuclear power plants in operation in the world are over 20 years old. A power plant with a lifetime of only 30 years, a major challenge awaits us… The signs are already visible for a few years already and very recently, the fruit of an aging French nuclear: • At the beginning of February 2017, the Cattenom nuclear power plant in the Moselle (inaugurated in 1986) had to deal with a major fire which did not affect “any sensitive zone of the plant”… A week later, declares itself. Luxembourg is prepared to co-finance the closure and conversion of the Cattenom power plant itself for fear of being “wiped off the map”! On February 9, 2017, the Flamanville nuclear power plant (also in 1986) experienced a fire start and an explosion in one of the engine rooms, causing the intoxication of five people. If there would be no environmental risk according to the prefecture, this was not the case in 2014… 93

After an unsuccessful attempt to restart, the Tricastin nuclear power plant (1980) experienced several detonations and an impressive smoke release. If EDF certified on that day that there had been no release into the environment, it returned to its statement one year later and eventually confessed that there were indeed radioactive releases of tritium. In view of these various recent events (and the list is still long), the safety of nuclear power in France is becoming even more worrying.

Conclusion There has not been a more scrutinized and yet promising technology than nuclear energy. It is true that, as with almost every technological breakthrough, the initial idea was designed for sinister intentions; the Japanese can surely attest to that. The Japanese can also attest very well in what happens when accidents around this subject happen and indeed Fukushima has been a terrible blow environmentally. Just because we cannot even fathom the scale and measure the effects of the meltdown yet, it does not mean that they do not exist; we should not wait for the radioactive sharks with tentacles to come out and chase us for dinner just to admit that the Pacific is suffering due to Fukushima. The Japanese though, as the Ukrainians (after Chernobyl) and admittedly the rest of humanity have shown resilience, ability to learn from their mistakes, hunger for progress and an almost limitless demand for energy. This can all help make nuclear energy sustainable and primarily safe. The progress in the field of nuclear safety has been not just significant but immense and it is proven that it can be an almost limitless and safe source of energy. Either way, as the world leaps forward, we, the humans, must decide how we want to envision and incarnate it. Nuclear energy offers us a window indeed through which we get a glimpse into tomorrow: it will either be a sustainable and safe habitat or an apocalyptic radioactive wasteland.

Ministerul Energiei

WPC EXPERT WORKSHOP October 21st - 22nd, 2019 BUCHAREST

HC Increasing Recovery Efficiency in the Mature Fields. Methods and Technology for Cooperation Good business | Efficiency | Sustainability The WPC Expert workshop organized by the Romanian and Iranian National Committees of the World Petroleum Council in Bucharest is of high importance for the oil producing countries. Implementation of Enhanced and Improved Oil Recovery methods (EOR/ IOR technologies) enable to almost double recovery from many mature fields and increase the oil recovery factor to 4560%. The world-class experts representing the industry and academia will discuss the present status, new challenges and future prospects of implementation of conventional and innovative technologies based on EOR/IOR. • Prof. Anatoly B. Zolotukhin from Gubkin Russian State University (National Research University) of Oil and Gas, Moscow, VP WPC, will present several examples of improved oil recovery (IOR) methods deployment coupled with innovative technologies assisting in increasing their efficiency. Uncertainty in reservoir characterization is an important parameter affecting the reservoir performance. Among the tasks considered are: separate and

combined deployment of a smart injector and the thermal EOR method; use of ‘smart’ water to enhance efficiency of chemical flooding; optimization of production performance of a ‘super well’ (horizontal well with multi-stage the multi-stage hydraulic fracturing). As shown in the paper, the use of innovative technologies can significantly reduce the impact of uncertainty in the reservoir characterization on the reservoir performance and increase its efficiency. • Mature oilfields are still the major contributors to world oil supply. And they are of even greater importance for National Oil Companies. In China, over 80% of oil production is from brown fields. Averagely, the water cut is over 90% with recovery factor 30-45%. Waterflood is the dominant methodology in developing mature oilfields, and it could have higher oil recovery. In Mr. Liu Yuzhang, Director of Senior Consultants Office, RIPED, CNPC, CPC WPC presentation, proven techniques and innovative methodologies such as ‘Iogging While Injection’, ‘Pre-gelled polymer beads’ and ‘cast effective short radius side track’ will be introduced for rejuvenating the brown oil fields. 94

• The Southwest Partnership on Carbon Sequestration (SWP), one of seven large scale CO2 sequestration projects sponsored by the U.S. Department of Energy under its regional partnership program, is currently conducting its Phase III study, and has completed its injection period with storage of over 700,000 tonnes of CO2 at an active commercial-scale carbon capture, utilization and storage (CCUS) project. All CO2 stored during the injection period is anthropogenic, sourced from a fertilizer and an ethanol plant, and would have otherwise entered the atmosphere. In his paper, Dr. Robert S. Balch, Director Petroleum Recovery Research Center, New Mexico Tech US, presents an overview of the SWP project at the end of its injection period. Key developments discussed include: A summary of the interrelationship of monitoring activities, such as tracer studies, with geologic and geophysical model building; the optimization required to maximize storage while providing the greatest oil production incentive to the field operator; and the evolution of risk assessment over the course of the project.

World Conference for Inspection and Maintenance Robotics 2019 The global Inspection & Maintenance Robotics community will gather in Rotterdam for the second edition of the World Conference for Inspection and Maintenance Robotics.

22-23 October 2019 De Doelen Rotterdam, The Netherlands

The conference will focus on the use of robotics for Inspection, Maintenance, Repairs and Cleaning in the following industry segments: Oil and Gas Road & Rail Chemical Public & Civil Infrastructure Energy Ports & Maritime Infrastructure Aerospace Water Infrastructure

Join us and register now: https://www.sprintrobotics.org/conference/ 95

EVENT

Black Sea Oil & Gas Region Industry Takes Action in the Face of Uncertainty

In Romania, the sudden legislative changes brought a lot of uncertainty for the offshore, onshore, and infrastructure projects. In Bulgaria, exploration campaigns are underway, while the government is standing at the infrastructure crossroad. Ukraine and Georgia are opening new onshore and offshore licensing rounds, but investors donâ&#x20AC;&#x2122;t know what to expect from new markets. Despite all the uncertainty, the industry in the region is not afraid to take action. The first offshore project was launched in Romania, BRUA and other major infrastructure projects are under construction, while low-cost onshore production projects across the region are booming.

The recent Global Oil and Gas Upstream Capital Expenditure Outlook by Key Countries and Companies to 2025 summarized new planned and announced upstream projects for 2019 2025 period. Romania ranked 3rd in Europe with an estimated USD 4.7 billion in spending following Norway and UK. Pelican South block announced by ExxonMobil and OMV with 2,427 US mln estimated project cost is among largest upstream project by Capex. In Ukraine American, Canadian, and Ukrainian companies will invest USD 430 million in oil and gas fields exploration. The 7th annual Black Sea Oil & Gas conference in Bucharest, 23 - 24th of October, gathers international oil & gas 96

companies, governmental and regulatory representatives, and local project owners for an intense 2-day program covering regulatory changes, updates on development and production projects, and technological challenges in the Black Sea. If you are interested to meet all regional stakeholders in one place and get the latest industry updates directly from them book your calendar for this event. Among attending companies: OMV Petrom, Black Sea Oil & Gas, Romgaz, Ukrtransgaz, Ukrgazvydobuvannya, Serinus Energy, Trident Acquisitions, White Stream, EBRD, Grup Servicii Petroliere and Transgaz. More information about the event â&#x20AC;&#x201C; https://www.globuc.com/blackseaoilgas

OCTOBER’S READING

Practical Optimization of Petroleum Production Systems The Definitive Resource for Systematically Discovering Value in Your Existing Oil or Gas Field

ractical Optimization of Petroleum Production Systems, by Burney Waring, is filled with stories of problems and solutions in producing fields, health-checking tools, best-practices, worked examples, tips, and techniques that you can put to use immediately. It also describes proven methods for successful implementation of the Production System Optimization process into any asset or company.

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Burney Waring explains to Managers, Reservoir Engineers, Production Engineers and Facility Engineers working for producing assets: • Where to find the lowest cost production in their field; • The four main steps of the PSO process and the rare and critical fifth step; • Why your data quality may be very poor and how to improve it; • Who needs to know the 4 Pillars of Measurement (it’s probably not who you think); • How to quantify how badly your decisions are hurt by poor data; • The best approach to getting company resources to improve your data; • The links between surveillance and value; • Five methods of surveillance and how to best use them; • How to get the best surveillance possible with the least work using models; • Why and how to easily automate surveillance;

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• • • •

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Multiple methods for using visualization in surveillance; Why finding ‘the optimum’ during optimization is the wrong goal; The four things you need to know before optimizing; The best places to find optimization opportunities; Two common misunderstandings that often hurt optimization; Three simple optimization tools for multi-discipline teams; How to best present PSO opportunities for approval and implementation; The best methods for look-backs and reviews; What will ultimately stop your PSO effort and how to keep it going; A methodology to implement better PSO in your team and company.

About the author Burney Waring practiced and studied optimization of oil and gas fields for 29 years, becoming one of Royal Dutch Shell’s top 120 upstream engineering experts before becoming a successful global optimization consultant. He has taught thousands of new and experienced engineers and led a wide variety of global projects and asset reviews. In this book, Burney Waring shares his expertise in capturing hidden value within existing fields with engineers and asset leaders. 98