Energy Industry Review - April 2019 by Energy Industry Review

COMMENT

Romania, energy player or spectator? W

e are at the middle of the period in which Romania holds the Presidency of the Council of the European Union, and it would be extremely important to make our mark as much as possible on the concrete issues, not just the image, resulting from this situation.

Daniel Lazar

Bucharest is flooded with European officials, and the number of thematic conferences is significant. It is important that our country, which has been complaining over the last few years that it was not included in major European (or at least regional) projects, can re-join the game. Most EU Member States, attending in Bucharest the first informal Energy Council, have signed a joint statement on the development of a smart gas infrastructure for Europe, the document being also assumed and signed by representatives of the European energy industry. At the ministerial meeting of the Regional Energy Cooperation Initiative, hosted in Bucharest, two grant agreements were signed by the European Union for two projects of common interest: rehabilitation and modernization of the gas transmission system in Bulgaria worth EUR 27 million and the interconnection of Greece with Bulgaria in the electricity sector, with a value of EUR 28 million. Even though we have now obtained major funding, let’s not forget that one of the largest grants for the development of the gas infrastructure, EUR 179 million, was received by Romania for the BRUA interconnector. We will not go into details here to see that this project could exclude Austria from the equation, because it’s better to wait for its outcome. 3

The fact is that Europe (and Romania even more so) needs investments, development of energy infrastructure and innovative solutions and technologies. According to Romania’s Energy Minister Anton Anton, adopting the Clean Energy for All Europeans package is an important step for energy transition and decarbonization of the energy system. The gas, electricity and energy storage infrastructure will have to transform itself into a smart tool for supplying consumers and a central pillar of economic and social development. Also, the coupling of the energy and gas markets, along with the digitization of the energy sector as a whole, can make a significant contribution to reducing polluting emissions, with relatively low costs. What is interesting and important at the same time is that the Declaration for a sustainable and smart European gas infrastructure, which is a solid basis to stimulate the potential of natural gas and to use clean resources such as hydrogen, biomethane and synthetic methane in the decarbonization of the energy system, was signed in Bucharest. The document was co-signed by most Member States, as well as industry representatives. This means that Europe is preparing to move to the next level in energy. We wonder whether Romania, as leader in terms of gas production in Europe, is ready for this, considering that only one third of the country’s population currently has access to gas distribution networks. It is important to see how we will be able to capitalize on the important Black Sea resources (among others), so that we are not (again) only spectators at the others large-scale projects...

Content Postponement of GEO 114 enforcement

Opinion The author explains the risks and benefits of this action.

Elements of geopolitics

Opinion In some cases, the lessons of history indicating the lack of social acceptability of a decision - the energy approach for instance - have not been taken into account.

Warning from IOGP

Opinion IOGP draws the attention to the detrimental impacts that the legislative changes introduced by Government Emergency Ordinance 114/2018 create for gas producers in Romania.

Strengthening CCUS implementation in Romania

Digitalization, automation and electrification Interview

Cristian Secosan, CEO of Siemens Romania and Moldova, reveals opportunities provided by the Romanian business environment in the activities covered by Siemens Romania that have attracted investors’ interest and prospects for growth.

EU imports of LNG from the U.S. up by 181%

OMV’s main focus Oil & Gas

By 2025, OMV is targeting more than 600,000 bpd of production, backed mainly by two projects, one in the Western Siberia and the other near the Romanian coast in the Black Sea.

Transgaz’s development plan for NGTS rejected

Opinion

Oil & Gas

At international level, the widespread implementation of this process still suffers from economic impediments, mainly due to decrease in the emission allowances trading price.

With a share of 12.6% of EU-LNG imports in 2019 so far, the U.S. is Europe’s third biggest supplier of LNG. The EU is ready to facilitate more imports of liquefied natural gas from the U.S.

Oil & Gas Transgaz shareholders rejected the financing of the Plan for the Development of the National Gas Transmission System (NGTS) for the period 2018-2027.

Nuclearelectricaâ&#x20AC;&#x2122;s Management Plan for 2019-2022

Power Consolidation of electricity production at Cernavoda NPP, while complying with nuclear security requirements, extension of the life cycle of Unit 1 reactor, continuing the project for the construction of Units 3 and 4, as well as diversification of uranium sources are the main pillars of the Management Plan of the National Company Nuclearelectrica for the period 2019-2022.

A long-term view of natural gas security in the European Union

Batteries, an important part of a fossil-free energy system

Oil & Gas

Renewables

New gas pipeline and LNG projects command high levels of attention, particularly in the context of the European Unionâ&#x20AC;&#x2122;s growing need for imports: its own production is declining; around 100 billion cubic metres (bcm) of long-term contracts expire by 2025.

According to Sebastian Gerhard, Batteries Director at Vattenfall, the share of wind and solar will grow, accompanied by falling costs. New and viable business models for the deployment of battery storage systems will arise.

Optimal role for gas in a net-zero emissions energy system

Environment While achieving 100% greenhouse gas reduction requires large quantities of renewable electricity, by far the most cost optimal role to decarbonise is by combining electricity with renewable gases such as hydrogen and biomethane.

Coal-fired power plants in the Western Balkans

Environment In the Western Balkans there are 16 outdated coal power plants that threaten public health by producing enormous amounts of air pollution, impacting people in the region, the EU and beyond. 5

Thermal power plants in Romania

Analysis Romanian thermal power plants are ageing, they have outdated technologies and most of them risk not complying with the environmental conditions imposed by the European Commission starting with 2021.

IJDELEA MIHAILESCU WINS DEAL OF THE YEAR AWARD FOR ROMANIA

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

Anca Mihailescu (left) at the award ceremony

Digital Manager: Justin Iancu

jdelea Mihailescu won the CEE Legal Matters Deal of the Year Award for Romania at the Deal of the Year Awards Banquet in Budapest for the assistance provided to Black Sea Oil & Gas in relation to its EPCIC Contract with GSP Offshore for the Midia Gas Development Project (the MGD Project). “The significance of the Black Sea Oil & Gas’s EPCIC contract with GSP Offshore was, ultimately, undeniable, and Ijdelea Mihailescu played a critical role in making it happen. We are delighted that the voters recognized and acknowledged the firm’s fine work in this matter,” said CEE Legal Matters Executive Editor David Stuckey. “We appreciated CEE Legal Matters research and selection criteria, that resulted in one of the most objective and prestigious award gala at regional level. This event is an opportunity for us to extend our gratitude to our

team, our clients and peers and, last but not least, to the journalists that recognized our contribution to the gas development sector in Romania”, stated Anca Mihailescu, present at the award ceremony. Last year Ijdelea Mihailescu provided legal assistance to Black Sea Oil & Gas in relation to the Engineering, Procurement, Construction, Installation & Commissioning (EPCIC) Contract for all offshore and onshore facilities and Development Drilling Contract with GSP Offshore for MGD Project, offshore Romania. Over the past eight years, Ijdelea Mihailescu team has been the first option of Black Sea Oil & Gas in relation to the rendering of legal services for all ground-breaking matters in Romania related to the MGD Project, including the setting of the legislative framework required for the project development, the performance of the regulatory procedure and resource capitalization. 7

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NEWS

ROMPETROL MOVES TO INDUSTRY 4.0

ompetrol Rafinare is close to finalizing the implementation of the first phase of Advanced Process Control (APC), a digital solution that will help improve the production activities of the Petromidia Refinery in Navodari. The Refinery is the largest production facility of this kind in Romania and one of the most modern in the Black Sea region. “It is an important step for Romanian crude oil processing business, alignment with international trends in the field, through the implementation and adoption of digital solutions, artificial intelligence to increase profitability, more rigorous control of the obtained products, and operational stability of the units and of the technological flows. All these aspects lead to the fourth industrial revolution – Industry 4.0, and Rompetrol continues to be a local pioneer by launching a comprehensive digital transformation program at the Petromidia Refinery in Navodari,” said Yedil Utekov, General Manager of Rompetrol Rafinare. Amounting to an estimated cost of

about USD 4 million, APC is a complex software for predictive control of units and operational flows, aiming to identify optimal conditions for increasing the capacity, product quality improvement, reducing energy consumption and more effective control of key parameters. APC is based on a thermodynamic and statistical model, which, along with a linear programming technique and an economic performance function, ensures a natural evolution of units’ operation – from manual setting of parameters (temperatures, flows, pressures) to setting desired characteristics for the obtained products (quality, processed raw material, other technical specifications, etc.). The implementation of the digital solution began in 2017 as a pilot project at the Atmospheric and Vacuum Distillation Unit (DAV) – one of the most important units in the processing of crude oil that ensures the raw material for the rest of the installations from the refinery. The benefits generated by APC for this unit amounted to about USD 1.5 million/ year, but also led to stability in operational

activity. The APC implementation program at the Refinery level has been divided into 4 major phases considering the complexity of technological flows, the end of 2020 being established as the deadline for completion of this project. The first phase was initiated in May 2018 and targeted Coker, Gasoline Hydrotreater and Gas Fractionation Units and by the end of this month it is planned the completion of the performance tests. Currently, the impact generated for the three units is positive of about USD 1 million/year. The company initiated in January the second phase of the APC implementation program which included the Catalytic Cracking Unit and Hydrogen Production Unit. The completion of this phase is expected at the end of this year. In addition, in 2019, the third phase (catalytic reforming and jet hydrotreating) will be initiated, and all phases will be operational by the end of 2020, including phase four – Mild Hydrocracking and Diesel Hydrotreating.

ATLAS COPCO HAS ACQUIRED AIR DIFFUSION

tlas Copco has acquired S.A.S. Air Diffusion, a French distributor of compressors for Atlas Copco. Air Diffusion is located in St. Etienne in the southern part of France. The company has around 15 employees. Air Diffusion has a diverse group of small to mediumsized customers in workshops and in the

manufacturing, food and beverage, wood, plastic and foundry industries. “With this acquisition we will increase our coverage in the region”, said Vagner Rego, Business Area President Compressor Technique. “It allows us to increase our service offering and our support to customers”. The purchase price is not material 8

relative to Atlas Copco’s market capitalization and is not disclosed. Air Diffusion is acquired by Exlair S.A.S., which is part of Atlas Copco Holding France. Atlas Copco is based in Stockholm, Sweden with customers in more than 180 countries and about 37,000 employees. Revenues of BSEK 95/9 BEUR in 2018.

LUKOIL CONTINUES SUCCESSFUL APPRAISAL DRILLING AT ERIDU FIELD IN IRAQ

n March 26, Lukoil and Inpex Corporation announced that they have successfully completed testing of the fifth well as part of the appraisal phase at the Eridu field (Block 10) in the southern part of Iraq. The well recorded daily flow rate of more than 1,500 cubic meters of oil from the Mishrif formation and proved the current geological model of the Eridu field as effective. Lukoil continues geological exploration at Block 10. For instance, in the mid-term the company plans to drill and test several appraisal wells, complete 3D seismic surveys at the Eridu field and 2D seismic surveys at the block’s southern and central parts. On March 29, President of Lukoil Vagit Alekperov, on business trip in Baghdad, had a meeting with Prime Minister of Iraq Adil Abdul-Mahdi. The meeting was attended by the Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Iraq, Maksim Maksimov. The parties discussed the current

status of projects, among them the geological exploration at Eridu field in the south of Iraq. Block 10, covering 5.8 thousand square kilometres, is located 120 kilometres away from West Qurna-2 field. Interests in the project: Lukoil – 60% (operator), Inpex Corporation (Japan) – 40%. The Iraqi party to the agreement is represented by state-owned Thiqar Oil Company. The Prime Minister Abdul-Mahdi gave high appraisal of Lukoil’s operations in the country and expressed support for the intention to deliver first production at Eridu field ahead of time. Due to impressive reserves of hydrocarbons, the Republic of Iraq is one of the world’s most promising regions in terms of a potential ramp-up of their production. According to the recent reports, OPEC holds 81.9% of World petroleum reserves. Among OPEC members, Iraq is holding the top 4th crude oil reserves, after Venezuela, Saudi Arabia and Iran (by the end of 2015). In terms of crude oil production, Iraq holds the 2nd place after Saudi Arabia. 9

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NEWS

NEW CO2 EMISSION STANDARDS FOR CARS AND VANS TO REDUCE POLLUTION

he European Parliament recently agreed on CO2 emission standards for new cars and vans in the EU for the period after 2020 – a significant step towards decarbonising and modernising the European mobility sector and put the EU on track to become climate neutral. As a result of the new rules, in 2030, emissions from new cars will have to be 37.5% lower and emissions from new vans 31% lower, compared to 2021. The new CO2 standards are part of the clean mobility package and a stepping stone towards a modernised, and more competitive European transport sector, and the road towards a climate-neutral economy in line with the EU’s commitments under the Paris Agreement. The new rules contribute to implementing the Juncker Commission priority of a resilient Energy Union and a forward-looking climate change policy. “Today’s vote sends a very clear

message: mobility and the transport sector have a crucial role to play in Europe’s transition towards a climateneutral economy. The new targets and incentives will help EU industry embrace innovation towards zero-emission mobility and further strengthen its global leadership in clean vehicles. At the same time, the gradual transition will allow sufficient time for reskilling and upskilling of workers, so that no-one is left behind in this transition. Consumers will save money at the pump, and cleaner cars also mean less pollution and cleaner air for all Europeans,” Commissioner for Climate Action and Energy Miguel Arias Cañete said. • New CO2 emission standards for passenger cars and light commercial vehicles (vans) in the EU for the period after 2020. In 2030, emissions from new cars will have to be 37.5% lower and emissions from new vans 31% lower, compared to 2021.

• Technology-neutral incentive mechanism for zero- and low-emission vehicles to give the market a clear signal for investment in clean vehicles. The incentive covers both zero-emission vehicles, such as battery electric or fuel cell vehicles, and low-emission vehicles having tailpipe emissions of less than 50 g CO2 per km – these are mainly plugin hybrid vehicles equipped with both a conventional and an electric engine. • A strengthened market surveillance system to ensure the representativeness of the official test procedure for determining the emissions with respect to real-world driving, and the extent to which the vehicles placed on the market conform to the reference vehicles tested at type approval. • Several elements aimed at supporting cost-effective implementation of the CO2 targets, such as rules on the use of ecoinnovation technologies and derogations for small manufacturers.

ELDORADO BEGINS PRODUCTION AT ITS FIRST CANADIAN MINE

ldorado Gold has kicked off commercial production at its Lamaque mine located in Quebec, the company’s first operation in the home country, expected to produce between 100,000-110,000 ounces of gold this year. Lamaque underground gold mine in Val d’Or, Quebec, is expected to produce up to 135,000 ounces of the precious metal a year in 2020 and 2021. Lamaque, which the Vancouver-based

company grabbed after acquiring Integra Gold in 2017, has an initial mine life of seven years and its output is set to increase to 125,000-135,000 ounces of gold in 2020 and 2021. The underground mine produces ore from the Triangle-deposit, which is processed at the refurbished Sigma mill. Chief Operating Officer, Paul Skayman, noted the company achieved the key milestone ahead of schedule and said that was “a testament to all of the hard work” that has gone into the project. 10

The deposit is located in the Val d’Or mining camp, at the eastern end of the prolific Southern Abitibi Greenstone Belt. Eldorado said in February the new mine and the resumption of mining and heap leaching at Kışladağ gold mine in Turkey, will take its 2019 production to between 390,000 and 420,000 gold ounces. The company also has mining, development and exploration operations in Greece, Romania, Serbia and Brazil.

EU CLIMATE CHANGE STRATEGY DEBATED IN BUCHAREST

eputy Prime Minister Gratiela Gavrilescu pre sented the EU long-term Climate Change Strategy at the invitation of Romanian Transport Minister Alexandru-Razvan Cuc, in the framework of the Informal Meeting of Transport Ministers, organized by the Romanian Presidency of the Council of the EU, during 26-27 March, in Bucharest. At the proposal of the Romanian Presidency, the long-term EU Climate Change Strategy will be presented in all relevant Council formats (Energy, Transport, Agriculture, ECO-FIN etc.). “Preventing and mitigating the effects of climate change is an essential priority, both for the European Union and for the Romanian Presidency of the Council of the European Union. The effort of reaching the long-term objectives of the Paris Agreement will be an important challenge, but it also offers great opportunities,” Romanian Environment

Minister Gratiela Gavrilescu said. The official said that adequate conditions would be needed at EU level to support transition to a lowcarbon society, to include a wide range of instruments, including financial, to provide the incentives necessary to promote the required investment in technological innovations, as well as increased funding for research and development. “I am confident that the ongoing discussions on this issue will contribute to shaping a long-term EU climate change strategy in line with the objectives of the Paris Agreement,” Gratiela Gavrilescu added. As regards the future of mobility in the European Union, the discussions focused on the role of digitization in planning and managing a European strategy for sustainable mobility and better coordination of Member States’ efforts to reduce greenhouse gas emissions. 11

NEWS

SAUDI ARAMCO UNVEILS NEW 4IR CENTRE

t Aramco’s premises in Dhahran, a remodelled and vastly expanded office wing has been converted into a 4IR Centre, where technological and digital innovation is, in turn, transforming the way in which the company runs its operations. In a global economy that is increasingly leveraging the opportunities afforded by what is known as the ‘Fourth Industrial Revolution’ (4IR), it is essential for industry to tap into the many opportunities and possibilities contained within it. Lagging behind is simply not an option, and Saudi Aramco is effectively blazing a trail in the energy industry with its targeted strategic focus on cuttingedge digital technology. The 4IR Centre will play a pivotal role in uplifting the technical skills of the company’s workforce and bringing advanced technology capabilities to realize Aramco’s digital transformation

vision. The centre will help the company’s operational performance to enable greater efficiencies and significant cost savings, and help further strengthen its global leadership in the oil and gas industry. “We are excited about the potential of the centre. It will play a key role in accelerating the digital transformation across Saudi Aramco, be pivotal in enabling a paradigm shift for our operations through more digital technologies, while unlocking new business and operating models,” says Ahmad A. Al-Sa’adi, Senior Vice President of Technical Services. With its advanced capabilities, extensive access to information, and people-centric environment, the centre is a digital transformation ecosystem for digital solutions throughout the hydrocarbon value chain. It is designed to support the end-to-end use case development throughout its ideation,

prototyping, piloting, and full-scale deployment. Some 2,500 square meters of office space was remodelled in the construction process. The facility features 279 square meters of video walls, with a total of more than 109 million pixels pitch that split into multiple clusters and zones. The AI Hub is focused on developing advanced analytics and machine learning solutions in hydrocarbon related applications. The big data and advanced analytics make use of the innovative solutions in this domain to visualize and predict the performance of critical Saudi Aramco assets. This hub combines inhouse development and external tools to enable its subject matter experts to make timely decisions to improve asset availability, utilization, and efficiency. The value and cost savings realized from these solutions underlines the significant impact on Aramco’s operations and business.

2 BIDS SUBMITTED TO BUILD BULGARIA-GREECE GAS INTER-CONNECTOR

wo candidates have submitted bids to design and build the gas inter-connector pipeline between Bulgaria and Greece, which project the company ICBG opened on April 2. A total of five bidders were shortlisted and invited to make an offer, but only Greece’s J&P Avax and BulgarianItalian consortium, which includes construction companies GP Group and Bolgarstroy alongside Italy’s Bonatti, submitted their bids before the deadline.

ICBG estimates the cost of building the 183km pipeline at 145 million euro and will require construction to be completed in 18 months. The initial capacity of the two-directional pipeline will be for three billion cubic metres of gas. The project company said that it would assess the two bids and expected to pick a winner in May, which would allow construction to begin in June. The pipeline is due to become operational at the end of 2020, when 12

Bulgaria is due to begin deliveries of Azeri gas from the Shah Deniz 2 development. That pressing deadline was the reason why ICBG denied a request by a third potential bidder for more time to submit its offer, one Bulgarian media report said. Also, on April 2, the European Commission said that it approved 33.15 million euro for the pipeline, as part of a four-billion euros package for 25 infrastructure projects throughout the EU.

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NEWS

ROMANIA AND THE ENVIRONMENTAL IMPLEMENTATION REVIEW (EIR)

he 2019 EIR shows that waste management remains a key challenge for Romania, despite formal progress thanks to adoption of the national waste management plan in December 2017. Recycling and resource efficiency are still low if compared to the trend presented in the 2017 EIR. According to the Commission’s ‘Early Warning Report’ (2018), Romania is considered at risk of non-compliance with the 2020 municipal waste recycling target of 50%. The circular economy remains underdeveloped, although it has potential in this area, as confirmed by a conference on this subject in the country in 2017. Additional measures have to be adopted and fully implemented, while awareness of the circular economy needs to increase. With regard to water quality, Romania still needs to improve its water policy

in line with the Water Framework Directive. In addition, it is still struggling to implement the Urban Waste Water Treatment Directive and to improve the quantity and quality of drinking water. Given the very low compliance rates with the 2013 and 2015 intermediate deadlines set in the Accession Treaty, the European Commission decided to launch an infringement procedure. As far as nature conservation is concerned, implementing the Nature Directives remains a considerable challenge. Romania’s Natura 2000 network appears to suffer from the lack of an appropriate administrative capacity framework and the absence of updated knowledge and data. Poor air quality continues to be a problem in the country. The main sources of air pollution come from the transport and energy sectors, in particular fossil fuels/use of domestic solid fuel

by households. Romania could make significant progress towards addressing the problem by: restructuring the energy and domestic heating system (facilitating the integration of renewables, shifting to gas, district heating and pollution controls); traffic measures; and other pollution and prevention control measures. At the same time, serious and structural shortcomings have been identified in the air quality data measured by the Romanian monitoring network and reported to the European Commission. In fact, the situation could be much worse than actually reported. The 2019 EIR shows that Romania continues to rely heavily on EU funds and loan opportunities. Nevertheless, there is a lack of administrative capacity and project preparation/maturation and prioritisation across environmental areas. This hinders the capacity of use of funds which are available and highly needed.

EUROPEAN COMMISSION BUILDING TRUST IN ARTIFICIAL INTELLIGENCE

he EC recently presented next steps for building trust in artificial intelligence by taking forward the work of the High-Level Expert Group. Building on the work of the group of independent experts appointed in June 2018, the Commission launched a pilot phase to ensure that the ethical guidelines for Artificial Intelligence (AI) development and use can be implemented in practice. The Commission invites industry, research institutes and public authorities to test

the detailed assessment list drafted by the High-Level Expert Group, which complements the guidelines. The plans are deliverable under the AI strategy of April 2018, which aims at increasing public and private investments to at least EUR 20 billion annually over the next decade, making more data available, fostering talent and ensuring trust. Artificial Intelligence can benefit a wide-range of sectors, such as healthcare, energy consumption, cars safety, farming, climate change and financial risk 14

management. Artificial Intelligence can also help to detect fraud and cybersecurity threats, and enables law enforcement authorities to fight crime more efficiently. However, Artificial Intelligence also brings new challenges for the future of work, and raises legal and ethical questions. The Commission is taking a threestep approach: setting-out the key requirements for trustworthy Artificial Intelligence, launching a large-scale pilot phase for feedback from stakeholders, and working on international consensus building for human-centric AI.

HIGH SPEED TRANSFERS’ SECOND DAMEN FCS 2710 TO DEBUT WITH SHELL

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break-out for vessels of this type, given that their development was focused on serving the offshore renewables sector,” says HST’s Managing Director Tom Nevin. We’re pleased that a leading oil & gas major like Shell has invested time and money to assess the FCS 2710 for the demands of crew changes for active drilling operations, and all credit to Damen for designing a vessel that works equally well for both.” The strength of the design is demonstrated by the fact that the HST Sofia is essentially identical to the HST Hudson, with just a few minor adjustments to the internal layout. “We will also be using local crews,” Tom Nevin mentioned. “They will be experienced in offshore transfers and comprehensively trained on the HST Sofia. Access will be via Frog crew transfer carrier so, as always, safety will be of paramount importance. We have a local partner in G&L Maritime & NMB as our local agents, which has been of huge importance. We will also receive all the technical support we need from Damen Shipyards Mangalia, which is a few hours north of Varna. In all, this is a very exciting project for HST and we are very happy to be involved.” “Our entire portfolio of crew change vessels has been designed in close collaboration with oil companies and operators,” said David Stibbe, Damen’s Director of Business Development. “Our aim has always been to deliver lower cost, safer and more efficient crew changes. The specifications, performance and operational data of the new FCS 2710 provided the evidence needed to initiate this pilot project. We wish HST and Shell every success with HST Sofia.”

PREDICTIVE MAINTENANCE

K-based crew transfer specialist High Speed Transfers (HST) has announced that its second vessel of Damen’s new FCS 2710 class will be contracted by Shell to support its exploration programme in the Black Sea commencing March 2019. Damen has long been in discussion with Shell and other oil majors on where and how to change the logistical mix for crew change purposes by accessing Damen’s portfolio of marine access solutions. An intensive, multi-disciplinary R&D programme attuned to industry input has resulted in Damen developing vessels that combine increased efficiency and safety with lower costs. HST began discussions via their broker, Clarksons Platou with Shell in mid2018 regarding a collaboration. This initial pilot assessment of the benefits of reducing dependency on helicopters and larger OSVs to move personnel working on active drilling operations represents a paradigm shift for the oil major. Damen’s R&D department worked with Shell and the classification societies to provide the necessary technical data, and Shell has been closely monitoring the operations of the first FCS 2710, HST Hudson, since it entered service in July 2018. The FCS 2710 vessel will be trialled by HST to undertake oil & gas crew transfers to support the Noble Globetrotter II drill ship. The vessel will shortly begin an exploration drilling programme in the Khan Kubrat block, around 70 miles south-east of the Bulgarian port of Varna, where the HST Sofia will be based. “This represents potentially a major

OPINION

Postponement of GEO 114 enforcement T

Dumitru Chisalita Judicial Technical Expert in Oil & Gas

he enforcement of GEO 114, the plan to amend it, the intention to postpone it specifically establish, until today, a honeymoon for the Government of Romania - by keeping in April as well high revenues from VAT and for gas importers, which in absence of these measures probably wouldnâ&#x20AC;&#x2122;t have obtained any money in Romania this month. On March 27, 2019, a draft amendment to GEO 114, with applicability within 4 days, was published on the website of the Ministry of Finance, establishing that the provisions of GEO 114, would be applied in terms of capping the price of gas from domestic production starting with April 1, 2019 to RON 68/MWh (action which in my opinion has an illegal foundation). Thus, gas suppliers have quickly signed gas contracts, given the legal obligations in terms of a number of reports/nominations that had to be carried out 5 days before the end of the month, before the actual delivery - being subject to heavy fines - to Romanian Energy Regulatory Authority (Methodology for the implementation of GEO 114), to Transgaz (Network Code) etc. Thus, suppliers rushed to sign: - Termination of contracts with the former gas suppliers, to be able to sign the contracts with gas producers according to GEO 114/2018; - Contracts for the acquisition of imported gas (according to my estimate 16

the price at which imported gas will be sold in April 2019 in Romania is by up to 30% higher compared to the price at which gas would have been sold in Romania in absence of GEO 114/2018 â&#x20AC;&#x201C; details in the Gas Price Bulletin Vol. 6, Intelligent Energy Association); - Contracts with some end-customers, with price changes under these new contracts, in line with the new prices for the acquisition from domestic production and import. Surprise! On March 28, 2019, another draft amendment to GEO 114/2018 was published on the website of the Ministry of Finance, postponing the application of GEO 114 from April 1, 2019 to May 1, 2019. Surprise no. 2! On March 30, 2019, the Ordinance amending GEO 114/2018 was published in the Official Journal, postponing the enforcement of GEO 114 from April 1, 2019 to May 1, 2019, with the gas price capping being applied only for gas sold to population and thermal energy producers supplying the population.

Consequences 1. Signing the gas acquisition contracts with producers at a price of RON 68/MWh starting with April 1, 2019 is hit by nullity, in conditions in which the GEO will apply only as of May 1, 2019, as producers took care to stipulate that the price of the contract was the price established under GEO 114 and the contract was valid under the terms

OPINION

provided for by GEO 114. But if GEO 114 no longer applies as of April 1, 2019, it means that all contracts with producers are null and void. What does that mean? It means that suppliers have terminated their contracts with other suppliers and they don’t have contracts with gas producers either. Meaning that they remain without gas sources. What does it also mean? It means that the old suppliers - which still have gas (they did not terminate the old contracts with producers) - will have to conclude new gas supply contracts with the suppliers that until yesterday had a gas supply contract, but at a different price. Thus, there is a possibility of speculation, determined by these pseudo-amendments, which will most likely end up in higher prices that suppliers will have to pay for gas purchased in April 2019. Moreover,

there are situations in which suppliers have spent the acquisition money as they paid in advance 100% for gas, they thought they had purchased from producers, remaining for the moment (until the money is refunded) without cash. 2. Signing acquisition contracts for imported gas was not subject to GEO 114/2018, so they remain in force, and create obligations for suppliers to pay and take over the respective quantities. I believe in absence of GEO 114/2018, gas from domestic production was sufficient for the demand in April 2019. In its absence, probably the quantity purchased from import would have been low or zero. Thus, under GEO 114, an artificial demand was created, as well as an artificial increase in the price of imported gas. 3. Signing gas supply contracts

with end-customers, under the terms of GEO 114, was not subject to GEO 114 either, and they must also be observed; thus, there are situations where some suppliers will register losses, following the postponement of the application of the ordinance from April 1st to May 1st. This situation, artificially created: • Does not bring any reduction in gas prices at the level of end-consumers; • Brings benefits for certain players and losses for other players on the gas market; • Also brings benefits to the state budget, as there is another month during which a high price of gas from domestic production will be used, which will determine in April the collection of a higher amount from VAT applied to gas companies.

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OPINION

Elements of geopolitics I

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

propose to start with some of the conclusions of World Energy Outlook 2018, which outlines the most important directions of the international energy sector. 1. Another approach of the energy/ electricity mix in the idea of readjusting this sector in which decarbonization is an essential priority, necessarily comfortable for the future; 2. Innovative policies are necessary to simplify the multitude of contextual variables for which International Energy Agency proposed three years ago three difference scenarios; 3. The period of economic stagnation and even the recession of some of the economies, should not reduce the possibility of making the investments considered by the respective states, investments contained in their specific economic programs. Some specialists have proven with figures that the use of fossil fuels to produce energy is dwindling, not at a fast pace, from a maximum of 69.7%, value recorded in 2012, to 67.3% in 2016. What was named ‘technological revolution,’ found in the photovoltaic and wind energy production processes, has led for the first time in all these years to reaching the 5% rate, i.e. a 1 to 13 ratio compared to the use of fossil fuels. A somewhat quick improvement of this ratio is obviously expected, but some specialists claim that it is only a wishful thinking. An important part of the variables previously mentioned consists of geopolitical components that continue to have an exogenous priority in 18

the entire global energy sector. Basically, these variables define the balance between exporters and importers in an unanimously accepted market dynamics. Currently, the topic with the most complex load is the energy future of the UK in view of approval and signing or not of the Brexit agreement. An exit that will lead to a certain increase in energy prices, on the one hand, as well as to rising London’s reliance on imports, level which will transform England from the ‘Happy Island,’ country that has arrogantly and indifferently treated the EU’s decision on energy, into an area where importers will be very present, on the other hand. Strong decisions made in major cases such as tangled intersections, briefly named by specialists in the sector ‘energy transition,’ usually hit the various components of society with winners and losers, both as commercial operators, as industry, as employees or consumers, as well as territories and political and social tensions. We could give the example, demonstrative in this context, of France’s ‘yellow vests,’ the cause of discontent being the introduction of what we call ‘carbon tax’ on fuel prices, even if it wasn’t very high as value. A name of maximum intellectual force, Sam Frankhauser - professor at London School of Economics and Political Science, has highlighted the importance of climate policies - credible and acceptable from a social point of view. We exemplify with the phrase “the introduction of and enhancement/increase in carbon taxes, normally optimal taxes.” But, from an economic point of view, they could be seen as difficulty, sometimes the cause

OPINION

being public opposition. Different alternative solutions had good and very good results at the level of social acceptability, action supported by a good communication as mediation between an excellent information on the one hand and the introduction of these taxes, on the other hand. In a recent article, a specialist of the French National Centre of Scientific Research, François-Mathieu Poupeau, talks about the need to use more in the so-called ‘energy governance’ process the local institutions, as it was proven, he claims, that getting closer to the different requirements actually represents the collective expectations. Decisions that disregard social impact generate contrary

‘achievements,’ as it has happened in the United States with the bipartisan opposition to the Kyoto Protocol or in France during this period through the obvious opposition of the ‘yellow vests.’ It can be said that in these cases the lessons of history indicating that the lack of social acceptability of a decision - we are talking about the energy approach - cannot have a future, have not been taken into account. The European Union has defined the threshold for the implementation of energy decisions at the level of 2030. It is enough to look at how it works and it is understood that decisions are not necessarily imposed, especially by returning to the Kyoto example. The

protocol has cost around EUR 60 billion so far since 2008, winning as a result, unfortunately, almost nothing. Other renowned energy specialists, Enzo Di Giulio and Stefania Migliavacca, have proposed a quantitative analysis of future carbon dioxide emissions as a benchmark for an ‘Energy-Climate Plan.’ Based on the different assumptions, increasing energy efficiency within the decarbonization of the energy mix includes three scenarios aiming to reduce emissions to 40% by the end of 2030, in light of rising energy consumption (3% in the first half of 2018) and worsening energy transition index, studies developed by the Italian company Enea.

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OPINION

Warning from IOGP Legislative changes introduced by GEO 114/2018

François-Régis Mouton Regional Director Europe, IOGP

e would like to draw the attention to the detrimental impacts that the legislative changes introduced by Government Emergency Ordinance 114/2018 published in the Official Gazette on 29 December 2018 (‘GEO 114’) create for gas producers in Romania. The International Association of Oil & Gas Producers (IOGP) is the voice of the global exploration & production industry. Our Members produce over 85% of Europe’s oil & gas. IOGP supports a well-functioning internal energy market in Europe, in which oil and gas can flow freely across borders. We also engage in discussions on technical issues and strive to make sure that the rules covering financial issues enhance energy market 20

developments. Romania has the potential to become the third largest gas producer in Europe thanks to its offshore reserves in the Black Sea, should it put in place the right policy framework. In our view this prospect is jeopardized by the measures introduced by GEO 114 capping the price for domestically produced gas, introducing sales obligations for gas producers to Romanian consumers, and introducing a 2% turnover contribution to the national regulator. These measures essentially abandon the concept of a free gas market in Romania with impacts also on the wider region. As they stand, they strongly discourage future offshore and onshore investments in Romania. The measures constitute yet another market disruption and over-regulation reducing trust of investors in a stable

OPINION

legislative framework for investments in Romania. Their impact will extend long beyond their intended period of effectiveness. Furthermore, the indirect export ban introduced by GEO 114 through the obligation to cover with priority national household consumption and mandatory allocation to nonhousehold consumption, is against the principles of a fully-integrated internal energy market in the European Union. GEO 114 will also impact the large investment efforts into the infrastructure corridors in the region. As such investments will be extremely challenging to justify or finance without the ability to freely move gas across borders in line with the EU’s Third Energy Package. We also note that according to EU trade law, any derogation from the

principle of free movement of goods, which is not construed strictly and narrowly in accordance with EU law, goes against the EU legal requirements. Finally, with full respect of the right to regulate, please allow us to stress that the monetary contribution of 2% of the turnover achieved from the activities covered by the licenses granted by ANRE seems disproportionate to the operating cost of ANRE, obviously impacts gas producers’ economics of doing business in Romania as it cannot be passed on to end-users. IOGP encourages national legislators to avoid detrimental effects on the development of Romania’s energy resource potential by at least repealing rapidly Articles 124 (11), 124 (12), 124 (13), and 181 (9) of the Electricity

and Natural Gas Law 123/2012 as introduced by GEO 114 and by reducing the contribution to ANRE introduced by Article 2 (31) of Emergency Ordinance 33/2007 to a proportionate level which allows an efficiently acting national regulatory authority to be adequately funded. A stable and predictable legislative and fiscal framework is the core requisite for any investment and is of outmost importance in this capital-intensive industry. IOGP welcomes the opportunity to be a committed partner of dialogue with Romanian authorities in identifying solutions which best meet the needs of all stakeholders involved; the government, the people of Romania and the upstream industry.

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OPINION

Prospects for strengthening CCUS implementation in Romania I

Constantin-Stefan Sava, PhD Senior Geoscientist at GeoEcoMar

t is already well known that the CCS or carbon capture and storage is a way of preventing the accumulation of large amounts of carbon dioxide released by large industrial plants into the atmosphere. Representing the National Institute of Marine Geology and Geoecology GeoEcoMar, I have already presented in the frame of the 2018 SEE Upstream conference the geological storage of CO2, the areas of use, the state of implementation at global and national level, as well as the advantages of the method. The presentation was followed by an interview published in the Energy Industry Review print issue of May 2018. An enlightening example of use for the benefit of the oil and gas industry is that of the United States, where CO2 storage is combined with Enhanced Oil Recovery (EOR). At international level, although there is progress, the widespread implementation of this process still suffers from economic impediments, mainly due to decrease in the emission allowances trading price. CO2-EOR has the most significant 22

commercial potential among utilisation methods leading to permanent storage. Apart the current CCUS projects: ENOS (ENabling ONshore CO2 storage in Europe), ALIGN CCUS (Accelerating Low Carbon INdustrial Growth through CCUS) and ECOBASE (Establishing CO2 enhanced Oil recovery Business Advantages in South Eastern Europe), presented in the mentioned interview, GeoEcoMar is involved in a new HORIZON 2020 project: STRATEGY CCUS (STrategic planning of Regions And Territories in Europe for low-carbon enerGy and industrY through CCUS) which will start at 1 May 2019. The STRATEGY CCUS project team, including GeoEcoMar specialists, will elaborate a detailed plan for comprehensive European CO2 gathering networks and industrial clusters linked to CO2 storage sites via hubs, pipeline networks and shipping routes, with due attention to national and bordercrossing permitting and regulatory issues. Mapping and understanding the nature and longevity of emission sources, identification of transport corridors and performing initial impact assessments, and developing local business models

OPINION

for delivery of CO2 capture, transport, utilisation and/or storage (including the separation of capture, transport, utilisation and storage responsibilities) within promising start-up regions. Industrial clusters may include for example power producers, cement and steel factories, chemical plants, refineries and hydrogen production facilities. A hubs-and-clusters approach could also include the coupling of hydrogen production and CCS, possibly using common infrastructure. The assessment of cost effective (‘bankable’) storage capacity in selected regions is a key component of strategic planning, as it will provide additional certainty that the required CO2 storage capacity will be

available when needed. Due attention has to be given to regions with potential for early onshore storage development (including enhanced oil recovery). Close cooperation with industrial players, as well as engagement with local stakeholders, is paramount. This includes identifying and involving relevant end users and societal stakeholders and analysing their concerns and needs using appropriate techniques and methods from the social sciences and humanities. In order to facilitate direct contacts between representatives of the wellknown companies from oil and gas domain and companies with significative CO2 emissions (>100.000 t/year) from the whole industrial domain: energy, steel,

cement, i.a., as well as with important representatives of the Romanian administrative and political structures, the ECO-BASE project team will organize in Bucharest, on 17-18 September 2019, the international event: ‘ECO-BASE Seminar on Legal and Regulatory Framework of CO2 Utilization (EOR) and Geological Storage - South East Europe.’ The event will address relevant topics such as: Legal and regulatory issues in U.S. and Europe; Legal and regulatory in ‘ECOBASE countries’; Economic evaluation, business case developments and decision making; Decision making processes in the public and private sector; What stops CCUS and what are we going to do about it?

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SETTING THE COURSE Digitalization Automation Electrification At the end of last year, Cristian Secosan took over the position of CEO, Siemens Romania and Moldova. Currently, Siemens Romania means a company with four factories, four researchdevelopment centres and over 2,200 employees, and has become over the years one of the leading providers of cutting-edge technology solutions. Cristian Secosan says about opportunities provided by the Romanian business environment in the activities covered by Siemens Romania that they have attracted investorsâ&#x20AC;&#x2122; interest and there are still prospects for growth.

Dear Mr. Secosan, you have recently taken over the management of Siemens Romania. What will be the priorities of the company this year? The strategic directions of Siemens, at global level, are digitalization, automation and electrification. These three areas of development reflect the entire portfolio of Siemens, as well as the major current trends. Locally, I see development potential in all our areas of activity, especially as a result of the increasing interest of companies in digitalization, as well as in the context of dynamics in the recent years of investments in the railway and energy infrastructure.

Despite the often-legislative changes, do you believe Romania is still an attractive market? A predictable fiscal and political framework is definitely vital for investors. If we refer strictly to legislative changes, the essential factors for keeping stability and attractiveness of a market are decisional transparency and a real public consultation. But investorsâ&#x20AC;&#x2122; interest is the result of a complex equation and Romania definitely has some aces up its sleeve, one of them being undoubtedly the quality of the workforce. The IT sector has attracted and

continues to attract players around the world and Romania is already a true pole of research and development in the region. Production in the automotive industry is another field that has had a constant dynamics in the recent years. From a strictly statistical point of view, according to the National Bank of Romania data, foreign direct investments increased slightly in 2018 compared to 2017 and the positive evolution was maintained in January 2019.

LOCALLY, I SEE DEVELOPMENT POTENTIAL IN ALL OUR AREAS OF ACTIVITY, ESPECIALLY AS A RESULT OF THE INCREASING INTEREST OF COMPANIES IN DIGITALIZATION. 26

You have in Romania several factories and development centres. Do you plan to open a new production unit in a near future? Siemens operates in Romania four factories, three in Sibiu and one in Buzias, and four research-development centres, in Brasov, Cluj-Napoca and Bucharest. We do not consider opening new units in the near future, but the existing ones will be continuously developed. The factories operated locally by Siemens have been substantially expanded, two-three years ago. Thus, the area of one of the factories in Sibiu was doubled and in Buzias a third production hall was inaugurated, which increased the area by around 60%. As regards the research and development centres, the activity has been extended in the field of cyber security, with a dedicated team formed last year in Bucharest. Equally, the teams in Brasov and Cluj-Napoca have been strengthened with new specialists.

How many employees does Siemens currently have in Romania? Do you estimate an increase in their number in the following period? Siemens has in Romania over 2,200 employees. We constantly develop our teams, but it is an organic growth, based on the current business needs and not on opening new places of business. In my opinions, success of an employer is measured in the level of satisfaction of employees and the retention of employees rather than in the increase in the number of employees. The fact that we have at Siemens a reduced fluctuation rate, of only a few percent, and quite a few colleagues who have already celebrated 10 and even over 15 years at Siemens, are an important indicator of the fact that we are a real team.

Was last year a good one for Siemensâ&#x20AC;&#x2122; business in Romania? Siemens Romania recorded a positive evolution in the fiscal year 2018 (1.10.2017-30.09.2018), in line with the targets established. We have completed important projects in all areas of activity, from industrial automation and upgrade of power stations to technologies for buildings. Moreover, 2018 also marked the winning of an important contract in the Republic of Moldova. The state-owned company Moldelectrica has selected 27

Siemens Romania for the rehabilitation of 14 substations.

What are the projects you completed and/or started last year? Several important projects were completed last year to which we have also contributed, including: the construction and commissioning of the 110/20 kV substation for the Craiova East Industrial Area, upgrading works at the 400/220/110/20 kV Suceava Substation and the first renewable energy storage project on the domestic market.

The energy system remains a sensitive subject for Romania. We have an outdated base, whether we are talking about production or distribution. What caused this situation?

Over the years, Romania has had several energy strategies. They were all abandoned along the way. How do you explain this situation?

Indeed, the energy infrastructure requires substantial investment, but it does not mean that upgrading does not take place. Modernization of the energy infrastructure is a long-term process and involves a long-term strategy. We will not have a fully modernized infrastructure within two-three years, but we have to take steps in the right direction. If we refer to projects in which we have been involved, two power stations were inaugurated last year, of which one completely new. Moreover, if I look back, in Romania there are around 100 power stations modernized with Siemens equipment, both in the electricity transmission sector and in the distribution sector. Also, there are more and more projects in the field of electricity generation, an important investment being already in the implementation phase. In the same field, another important element is that the technologies used to generate renewable energy have already reached the point where they can be self-sustained, without support schemes. This could generate the second wave of investments in the near future.

A strategy involves assuming it and determination and cannot survive in absence of these two factors. I believe the political element has too often left its mark, which has led to lack of responsibility for the various strategies developed over time. However, there have been some elements of continuity in all the strategies developed, related especially to the major investments and the development of transmission networks.

There are several major investment projects that were included in all the energy strategies, but continue to be only on paper. Why we donâ&#x20AC;&#x2122;t manage to attract foreign investors to complete

INTERVIEW

THE TECHNOLOGIES USED TO GENERATE RENEWABLE ENERGY HAVE ALREADY REACHED THE POINT WHERE THEY CAN BE SELF-SUSTAINED, WITHOUT SUPPORT SCHEMES. THIS COULD GENERATE THE SECOND WAVE OF INVESTMENTS IN THE NEAR FUTURE. them? What are we missing, in your opinion? The lack of legislative and regulatory predictability is an important factor and here we have, unfortunately, some very recent examples. Also, the lack of decisions and the reduced capacity to manage major and complex projects at the level of the major players in the industry make very difficult even the implementation of the few existing projects.

In the last draft of the energy strategy investments in the energy system are estimated at tens of billions of euros. Public-private partnership is the only solution to attract these funds. How can the major companies in the industry be convinced to invest in the Romanian energy system? Public-private partnership is a quite complicated construction and therefore is difficult to implement. In my opinion, this isnâ&#x20AC;&#x2122;t the solution of financing the major strategic projects.

The worst situation is recorded in the heating system, where we have major problems and I refer especially to the large power plants owned by Oltenia Energy Complex and Hunedoara Energy Complex. Will they manage to comply with the new environmental regulations after 2020? Significant investments are needed for compliance and they have to be seen in the context of sustainability of these groups in the future. Also, CO2 emissions and the related mechanisms represent a real threat (in view of huge costs they generate), as well as an opportunity (due to financing possibilities they offer).

Large-scale renewable energy storage would create a major advantage for this type of energy. Does Siemens have storage solutions developed? Storage of energy from renewable sources is definitely vital for ensuring a constant energy flow in the network. Siemens has in its portfolio a smart renewable energy storage solution - Siestorage, which has already been implemented in Romania.

Black Sea gas fields are a major asset of Romania. For now, we are creating the impression that we donâ&#x20AC;&#x2122;t really know what to do with them and authorities are 29

not very communicative with regard to this subject. How do you see the capitalization on this asset by Romania? Black Sea gas fields are a great opportunity for Romania, but to attract investors we must clearly establish the rules of the game. As I said before, predictability is vital for investors and this applies in any field. Currently, there are still many questions as to the framework in which the exploitation projects will be carried out and answers must be given to these questions.

The Smart City concept has gained ground in the recent years and Siemens has solutions developed in this field. In which cities of Romania have you applied them so far? Indeed, municipalities in Romania have embraced this concept and all the major cities have launched pilot projects. But this is only the beginning; the following step is integration of the various components (energy, mobility, health etc.) and this must be achieved based on a strategy allowing the flexible and staged implementation of the various technologies. Thus, a smart city can truly be created, a city providing high quality of life for its inhabitants. Siemens has a portfolio covering all the key areas of a smart city: from e-mobility and smart power grids to smart management of traffic and buildings, with which we are also present in Romania. We have already implemented smart technologies in some cities, but we are talking about punctual projects, which aimed at smart traffic management, public transport, lighting, and not an integrated concept. Also, Siemens teams in the research and development centres in Romania have been involved in extensive research projects in the field of Internet of Things, carried out at European level, the purpose being to create a framework allowing the development of Smart City-type applications. One of these projects is CityPulse. Siemens Corporate Technology team in Brasov has used this platform to build an application that locates buses in the city in real time and based on this data recommends the best routes for users.

SIEMENS HAS A PORTFOLIO COVERING ALL THE KEY AREAS OF A SMART CITY: FROM E-MOBILITY AND SMART POWER GRIDS TO SMART MANAGEMENT OF TRAFFIC AND BUILDINGS.

intersections in India, aims at using artificial intelligence in traffic management systems. Another research project aims at using electric cars as batteries for electricity supply to buildings, by integration in the smart management system of the building, and examples can continue.

What are the cities in Romania that fit best in the Smart City concept?

Please give us some examples of solutions developed by Siemens. A reference project for Siemens expertise in the Smart City field is the Aspern neighbourhood, near Vienna, one of the largest Smart City projects in Europe. Aspern neighbourhood will have over 8,500 apartments and host over 20,000 jobs, by 2028. This integrated project includes e-mobility, smart power grids, smart lighting, infrastructure monitoring and energy management in buildings. At the same time, the project includes an important research component.

Do you have other projects of this type in progress? What are the solutions? Siemens develops and implements at global level a wide range of smart solutions. One of the recent research projects, tested in one of the busiest 30

Each project is important, providing various benefits, depending on the technologies implemented and the priorities of each city, therefore a classification is not relevant. For example, the time spent in traffic can decrease if you use smart traffic management systems, energy consumption can be reduced through a street lighting based on sensors, pollution can decrease by reducing the time spent in the car as a result of using parking applications and electromobility and the list can continue.

OIL & GAS

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

he release of these new LNG figures coincides with European Trade Commissioner Cecilia Malmström’s and Secretary-General Martin Selmayr’s visit to Washington (6-8 March) for meetings with their U.S. counterparts within the Executive Working Group. The implementation of the different elements of the Joint Statement of Presidents Juncker and Trump was one of the topics addressed. The recent developments on LNG trade attest to the European Union’s continued commitment to deliver on all aspects of the 25 July agreement. With a share of 12.6% of EU-LNG imports in 2019 so far, the U.S. is Europe’s third biggest supplier of LNG. The

European Union is ready to facilitate more imports of liquefied natural gas from the U.S., if the market conditions are right and prices competitive. This will allow U.S. exporters to further diversify their European markets whilst contributing to the EU’s objectives of security of supply and diversification. Currently, U.S. legislation still requires prior regulatory approval for liquefied natural gas exports to Europe. These restrictions need to be addressed and U.S. rules made easier for U.S. liquefied natural gas to be exported in larger quantities to the EU. Current figures show that: • Compared to the period before the 25 July 2018 Joint Statement, cumulative EU imports of U.S. LNG 32

are up by 181% at 7.9 billion cubic meters until early March 2019; • In terms of the EU’s total imports of LNG, the U.S. share was 12%, over the last six months, compared to 2.3% before the Joint Statement and since the first U.S. LNG cargo to Europe in April 2016; • In the month of January 2019, EU imports of U.S. LNG from the U.S. were 1.3 billion cubic meters, up from 102 million cubic meters compared to the same month in 2018. In February 2019 total U.S. LNG imports amounted to 0.6 billion cubic meters. To further explore and discuss the strengthening of the transatlantic strategic cooperation with respect to

OIL & GAS

The European LNG infrastructure

Gas pipeline projects

Tornio Manga

Gas storage projects Terminals for LNG Operational Project of common interest

Tahkoluoto/Pori Rauma

Operational and expansion planned

Hamina-Kotka

Nynäshamn

Under construction

Lysekil

Riga LNG

Gothenburg

Planned

Tallinn/Paldiski

Klaipėda Teesside Cork

Shannon

Świnoujście Brunsbüttel

Isle of grain

Milford Haven - South Hook Milford Haven - Dragon

Dunkerque

Montoir de Bretagne El Musel Mugardos-El Ferrol

Rotterdam Zeebrugge

Porto Levante

Krk

Panigaglia

Bilbao Fos Tonkin

Fos Cavaou

Toscana Oﬀshore

Barcelona Sagunto Sines

Cartagena

Alexandroupolis Porto Empedocle

Huelva

Tenerife LNG

Revithoussa Delimara

Vasilikos

Arinaga

energy, as agreed in the July 2018 Joint Statement, the EU and the United States are organising the first EU-U.S. Energy Council High-Level Forum in Brussels. The event will take place on 2 May under the theme: “Towards large-scale U.S. LNG exports to the EU’s gas market: competitive pricing, infrastructure invest ments and technological innovation”. The EU has co-financed or committed to co-finance LNG infrastructure projects worth over EUR 656 million. In addition

Further Imports of U.S. soya beans by the to the existing 150opportunities billion cubic meters European Union increased by security 112% over of spare capacity in the EU, the EU is In addition to being an insurance policy against threats to the of the current market year (July-December supporting eight LNG projects, which gas supply, LNG can contribute to the fight against climate change. LNG is 2 a good solutionbyforanother air pollution the maritime sector, meeting compared to as theit allows same period in will increase capacity 22 in 2018), themeters standards of the International Organization on of maritime the Maritime previous year. With a share 75% of billion cubic by 2023. emissions, continues especially to fordeliver sulfur (SOx) and beans nitrogen (NOx) the oxides the EU soya imports, U.S. and remains The Commission sulphur cap (0.50% Europe’s number one supplier. on the 25global July 2018 agreement. Onin182020). imports of produces U.S. soya up beans January 2019, the Commission adopted LNG-powered ships could be part ofEuropean the answer as LNG to are bound to increase even further, proposals for negotiating directives for its 80 % less emissions than fuel oil. In the EU €135 million have been already the decision the European trade talks invested with the in United States: of one Motorways theonSea following (MoS) on LNG maritimeby projects. conformity assessment and one on the Commission to authorise the use of U.S. soya beans for biofuels. elimination of tariffs for industrial goods. 1. Liquefied natural gas tanker 2. Offshore liquid natural gas terminal, Świnoujście, Poland

3. Liquefied natural gas transport, Spain © iStock

OIL & GAS

January 2019 recorded the largest volume ever of EU-U.S. trade in liquefied natural gas (1.3 billion cubic meters).

U.S.-EU LNG cargos per year

Surge in U.S.-EU LNG trade

2016

U.S. exports to the EU

2017

10%

2018

11%

January 2019

32%

EU imports from the U.S. 2018

2019

December 2018 and January 2019 saw the biggest arrival of cargos to the EU ever

2017

2018

January 2019

16%

* Data until 05 March 2019. Source: European Commission.

EU and U.S. in the global liquefied natural gas market The global liquefied natural gas market is becoming increasingly fluid and competitive. Between 2017 and 2023, global liquefied

Background market. addition, the following actions gasThe coming to the EU. TheAgency EU is natural gas trade is expected to grow by more than In 100 billion cubic meters, from 391 to 505. International Energy

are key to facilitating imports: seeking similar The liquefied global liquefied expects natural gasnatural imports gas to Europe to increase by almost 20% by 2040 compared to 2016 levels.treatment from the U.S. side, in particular as regards the market is becoming increasingly fluid removal of the requirement for prior and competitive. Between 2017 and Development of liquefied natural gas approval of liquefied natural gas 2023, global liquefied natural gas trade U.S. EU exports to the EU. is expected to grow by more than 100 capacities in the EU and in the U.S. billion cubic meters, from 391 to 505. The EU has well developed liquefied The current figures show that The • Biggest International Energy in Agency about imports of after U.S. liquefied gas producer the world natural gas import capacities, • 2ndwith biggest gas consumer the U.S. natural gas to expects liquefied natural gas imports to 150 billion cubic meters currently spare. the EU have been increasing: Europe to increase almost 20% by At the same time, given• their strategic Since the shipment of U.S. • Growing gas by production Rapidly declining• domestic gas first production 2040 compared to 2016 levels. importance for diversification, current liquefied natural gas to the EU • Increasingand gas imports (today2016, 70% today of demand); The increasing gas production in capacities are being expanded in April EU imports the U.S. and the start of U.S. liquefied new capacities are being need • Increasing gas exports to diversify imports to improve security of the developed in of liquefied natural gas from natural gas exports to the EU in 2016 the Adriatic Sea (on the supply island of Krk United States have already reached have improved the security of gas in Croatia), in the Baltic Sea, notably 7.9 billion cubic meters (bcm). is significantly increasing EU has strongly • developed LNG import supply• U.S. in Europe and globally. Europe isits LNG in Poland, and in the •Mediterranean Since early 2016, the EU has export infrastructure infrastructure currently importing around 70% of the Sea in Greece. This would allow for a with massively received available around capacity 85 liquefied (utilisation rate 26%) gas it needs, and this share is expected to significant increase of liquefied natural natural gas cargoes from the U.S. increase in the coming years. Liquefied gas imports to the EU. • Additional LNG terminals In 2017 Europe represented in development, natural gas is also an important part of The U.S. currently has 39 billion more than 10% of total U.S. LNG some with EU support the EU’s diversification strategy; and cubic meters of liquefaction capacity exports, up from 5% in 2016. In as the second biggest single gas market and is foreseen to add a further 80 billion 2018 as whole, the share of Europe in the world after the U.S., the EU is cubic meters by 2023, while expanding the U.S. LNGthe exports wasof11%, The increasing gas production in the U.S. and the start of U.S. LNG exports to the EU in 2016inhave improved security gas therefore an attractive option for the U.S. its liquefied natural gas export terminals. however, taking into account the supply in Europe and globally. Europe is currently importing around 70% of the gas it needs, and this share is expected to increase in the coming years. LNG is alsotoanEurope important• partRegulatory of the EU’s restrictions diversification second biggest market In order to increase imports time since the single Joint gas Statement bystrategy; the U.S.and as the in the world the EU natural is therefore an need attractive the EU U.S. has no further, U.S. after pricestheforU.S., liquefied only, Europe represented a share of to beoption lifted.forThe gas need to be competitive on the EU nearly 26%. non-market barriers for U.S. natural Natural gas plays a central role in the EU energy system - including in the context of the clean energy transition - accounting for 23% of energy demand. 34

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

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OMV’s main focus USD 4bn for projects in Abu Dhabi and more than 600,000 bpd by 2025 The Austrian energy group OMV is confident about future growth following investment commitments of USD 4 billion (Dh14.68 billion) for projects in Abu Dhabi. This includes a stake in Adnoc Refining as well as in the development of sour gas fields and an offshore concession. By 2025, OMV is targeting more than 600,000 bpd of production, backed mainly by two projects, one in the Western Siberia and the other near the Romanian coast in the Black Sea.

“It is an upgrading of our downstream capacity by 40 per cent. We are expecting that we continue to develop the prime location in Ruwais in the next few years to further increase capacity. This is what I promised my friend Sultan (Sultan Al Jaber, CEO of Adnoc), that we have to stretch the dollar and we will stretch the dollar in refinery. This means profitability of refinery will be improved in this excellent cooperation between European champion OMV and Abu Dhabi champion Adnoc.” OMV is also partnering with Adnoc in the Ghasha sour gas concession (with a 5 per cent stake) as well as the Sarb and Umm Lulu (20 per cent stake) offshore concession. “Adnoc is one of the best partners I can find in the industry. The company has a clear strategy, they are trying to internationalise their business. They are sailing together with highly competent, hi-tech partners. We are honoured to be part of that story.”

e are talking about USD 1.5 billion for the participation fee of Sarb and Umm Lulu, USD 2.5 billion for a 15 per cent share in Adnoc Refining,” stated Rainer Seele, CEO of OMV, during a recent phone interview with Gulf News from Vienna. “So, if you take these two, there is already a cash commitment of USD 4 billion from OMV. Then of course, we are going to spend in further development of these assets and also hundreds of millions in the field developments. These projects are the main focus… but OMV has always advertised to do more with Adnoc as we are such brilliant partners.” The USD 2.5 billion transaction with Adnoc on its refining unit will close in the third quarter, the CEO said, adding it will have an immediate cash contribution boosting the company’s performance. 36

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maintenance activities, OMV will meet 500,000 target.” By 2025, the firm is targeting more than 600,000 bpd of production, backed mainly by two projects, one in the Western Siberia and the other near the Romanian coast in the Black Sea. The company also has assets in Malaysia with a production of 10,000 barrels per day and plans to increase it to 60,000 barrels per day by 2023.

On the oil prices and trade tensions between China and the U.S. On the outlook for oil prices, Rainer Seele estimates the global benchmark Brent will average USD 65 per barrel this year, which is lower than last year. “What I can see is the market preparing to come back into balance. The momentum and psychology in the market is more concerned about the demand side than supply side, especially with what’s going on with the trade conflict between the U.S. and China. “Whenever there is a positive signal in trade talks, you see the volatility of oil price goes in the right direction and the price goes up. Traders are waiting for numbers on stocks, traders are waiting to check the discipline in OPEC — whether or not this agreement will be executed like in 2018, where OPEC managed extremely well.” On trade tensions between China and the U.S., he said it could impact global GDP growth as well as oil demand. “We are expecting oil demand growth this year to be one million barrels per day, plus or minus. If U.S. and China have no agreement and the trade conflict escalates, we will see much less than one million barrels per day of oil growth as China is running the show in additional growth in oil demand.”

“We are expecting oil demand growth this year to be one million barrels per day. If U.S. and China have no agreement and the trade conflict escalates, we will see much less than one million barrels per day of oil growth as China is running the show in additional growth in oil demand.”

EUR 500mn in innovative energy solutions by 2025

Rainer Seele, CEO of OMV

Ambitious targets OMV is targeting 600,000 barrels per day (bpd) of oil by 2025, from the current 427,000 bpd. Production will jump to 500,000 barrels per day this year depending on the situation in Libya, the CEO mentioned. “Right now, Libya is shut since the end of the last year — that means our production of 30,000 barrels per day is missing. The day Libya comes back into action and if we don’t have any 37

OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. With Group sales of EUR 23bn and a 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 114TWh. 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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Transgaz shareholders rejected the development plan for NGTS In the General Meeting of Transgaz Shareholders held on 12 March, the financing of the Plan for the Development of the National Gas Transmission System for the period 2018-2027 was rejected.

ith 1672809 votes in favour, representing 19.092550% of the total number of expressed votes, with 7088765 votes against, representing 80.907370% of the total number of expressed votes, and with 7 abstentions, representing 0.000080% of the total number of expressed votes, does not approve on this date the financing of the 2018 – 2027 Ten Year Network Development Plan,” a communique of the company informs. The document also mentions that 2018-2027 TYNDP is necessary to be supplemented with information regarding investments ensuring the development of the transmission network on the territory of Romania, investments in the current infrastructure and investments necessary for meeting the commitments

to the European Commission (such as the achievement of interconnections at the volumes and within the technical parameters assumed), and regarding the tolerability of the financial effort undertaken. According to 2018-2027 TYNDP, Transgaz had planned total investments of EUR 1.9bn to expand the gas transmission system. The most important project of the plan is BRUA (Bulgaria - Romania - Hungary Austria interconnector), phase I - worth EUR 478.6mln, phase II - which will require EUR 68.8mln, followed by phase III - worth EUR 530mln. Other major projects target development on Romania’s territory of the southern transmission corridor, to take over gas from the Black Sea coast, for which the amount of EUR 360mln is 38

allocated. To develop the gas transmission system in the eastern part of Romania, investments of EUR 174mln will be allocated, and for NTS interconnection with the T1 transit pipeline and reverse flow in Isaccea another EUR 101mln will be spent. At the same time, interconnection with Ukraine will cost EUR 125mln and that with Serbia - EUR 42mln. “By achieving the targets established in the 10-year Development Plan, 20182027, Transgaz aims to become a gas transmission operator on the international gas market, with an upgraded, smart national transmission system, integrated at European level and with a modern management system aligned with the international performance standards and legislative regulations,” the document presented to shareholders reads.

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S.N.G.N. ROMGAZ S.A. The company is listed on Bucharest Stock Exchange and GDRs are transacted on London Stock Exchange. Romgaz undertakes geological exploration in order to discover new gas reserves, produces methane by exploiting the reservoirs included in the company portfolio, stores natural gas (link is external) in the underground deposits,

interventions, workover and special operations on wells and technological transport.

Romgaz is the largest natural gas producer and the main supplier in Romania. 39

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A long-term view of natural gas security in the European Union The security of European natural gas supplies has rarely been far off the political agenda. New gas pipeline and LNG projects command high levels of attention, particularly in the context of the European Union’s growing need for imports: its own production is declining; around 100 billion cubic metres (bcm) of long-term contracts expire by 2025; and there is some upside for gas consumption – at least in the near term – as coal and nuclear plants are retired. We estimate that the EU will have to seek additional imports by 2025 to cover up to one-third of its anticipated consumption.

Text by Peter Zeniewski - WEO Energy Analyst

t the moment, Russia is sending record volumes to Europe while LNG utilisation rates remain relatively low. Limits to European production capacity and import infrastructure (with over half of pipelines operating at monthly peaks above 80%) may contribute to market tightness over the coming years, particularly if Asia continues to absorb the ramp up in global LNG liquefaction capacity. Over the long-term, our projections in the latest World Energy Outlook suggest that Russia is well placed to remain the primary source of gas into Europe. LNG imports are projected to grow, as new

suppliers – notably the United States – increase their presence on international markets and more European countries build LNG regasification capacity. However, Russia is still projected to account for around one-third of the EU’s supply requirements through to 2040. But import dependence is only one part of the gas security equation. Less attention is being paid to three issues that may, in the long run, have an even greater impact on gas security in the European Union: how easily gas can flow within the European Union itself; how patterns of demand might change in the future; and what role gas infrastructure might play in a decarbonising European energy system. 40

A liberalised internal gas market Whether or not gas can flow easily across borders within the European Union is a key focus of the EU’s Energy Union Strategy. On this score, our analysis suggests that the internal market is already functioning reasonably well: around 75% of gas in the European Union is consumed within a competitive liquid market, one in which gas can be flexibly redirected across borders to areas experiencing spikes in demand or shortages in supply. Bidirectional capacity has been instrumental in this regard. That said, there are a few areas where markets and physical interconnections need further development. For example, roughly 80 billion cubic metres (bcm),

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or 40%, of the EU’s LNG regasification capacity cannot be accessed by neighbouring states, and some countries in central and southeast Europe still have limited access to alternative sources of supply. On the whole, our projections suggest that targeted implementation of the European Union’s Projects of Common Interest (PCI) and full transposition of internal gas market directives can remove remaining bottlenecks to the completion of a fully-integrated internal gas market, thereby enhancing the security and diversity of gas supply. With LNG import capacity and pipeline projects like the Southern Gas Corridor increasing Europe’s supply options, the gas market in an ‘Energy Union’ case can build up its resilience to supply shocks while enabling short-term price signals, rather than fixed delivery commitments, to determine optimal imports and intra-EU gas flows. However, this cannot be taken for granted. If spending on cross-border gas infrastructure were frozen and remaining contractual and regulatory congestion persists, then peak capacity utilisation rates would rise alongside the growth of European gas imports: around half of the EU’s import pipelines would run at maximum capacity in 2040 in this

Counterfactual case, compared with less than a quarter in an Energy Union case. Whether higher utilisation of the EU’s gas ‘hardware’ poses a security risk depends in large part on the strength of the ‘software’ of the internal market. The marketing of futures, swap deals and virtual reverse flows on hubs can remove the physical element of gas trading, while also allowing volumes to be bought and sold several times before being delivered to end-users. Along with more transparent rules for third party access to cross-border capacity, this might preclude some of the need for additional physical gas infrastructure and, in time, enable gas deliveries to be de-linked from specific suppliers or routes. Infrastructure investment decisions therefore require careful cost-benefit analysis, particularly as the debate about the pace of decarbonisation in Europe intensifies.

Security and demand A second issue for long-term European gas security is the composition of demand. Winter gas consumption in the European Union (October-March) is almost double that of summer (AprilSeptember). The majority of this additional demand is required for heating 41

buildings; this seasonal call is the primary determinant of gas infrastructure size and utilisation. In the IEA’s New Policies Scenario, ambitious efficiency targets are projected to translate into a retrofit rate of 2% of the EU’s building stock each year, starting in 2021. Together with some electrification of heat demand, this would lead to a 25% drop in projected peak monthly gas demand in buildings by 2040. This reduction in demand from the buildings sector more than offsets a 50% increase in peak gas demand for power generation, which is needed to support increasing amounts of electricity generated from variable sources, notably wind. Along with gradual declines in industrial demand, the net effect by 2040 is a reduction in monthly peak demand for gas by almost a third. Such a trajectory for gas demand has significant commercial implications; reduced gas consumptions in buildings would lead to an import bill saving of almost EUR 180 billion for the EU as a whole over the period 2017-2040. However, it also poses challenges for mid-stream players – e.g. grid and storage operators as well as for utilities: • For grid operators, structural declines in gas demand for heating means that

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the need for additional infrastructure is more uncertain, and what already exists may see falling utilisation (as discussed in WEO 2017). Capacity-based charges to end users typically contribute the most to cost recovery, and underpin the maintenance of the system. But, over time, higher operating costs for ageing infrastructure might need to be recovered from a diminishing customer base at the distribution level. This may further reinforce customer fuel switching over the long term. • For storage operators, the slow erosion of peak demand for heating implies an even more pronounced flattening of the spread between summer and winter gas prices, further challenging the economics of seasonal gas storage.

• For utilities, with the anticipated declines in nuclear and the phasing out of coal-fired power plants in Europe, alongside the growth of variable renewable electricity, gas-fired power plants need to ramp up and down in short intervals in order to maintain power system stability. This flexible operation means a reduction in running hours but a continued need to pay for a similar amount of fuel delivery capacity (whether or not the gas itself comes from import pipelines or short-term storage sites).

A new set of questions for Europe’s gas infrastructure The debate on Europe’s gas security has tended to concentrate on external 42

aspects, mainly the sources and diversity of supply. But the focus may be shifting to internal questions over the role of gas infrastructure in a decarbonising European energy system, and the system value of gas delivery capacity. A key dilemma is that, while Europe’s gas infrastructure might be needed less in aggregate, when it is needed during the winter months there is – for the moment – no obvious, cost-effective alternative to ensure that homes are kept warm and lights kept on. The amount of energy that gas delivers to the European energy system in winter is around double the current consumption of electricity. Moreover, the importance of this function and the difficulty of maintaining it both increase as Europe proceeds with

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decarbonisation. As the European Union contemplates pathways to reach carbon neutrality in the Commission’s latest 2050 strategy, options to decarbonise the gas supply itself are gaining traction – notably with biomethane and hydrogen (we will be exploring these options in WEO 2019). In order to stay relevant, natural gas infrastructure must evolve to fulfil

additional functions beyond its traditional role of transporting fossil gas from the wellhead to the burner tip. Traditional concerns around security of supply of course remain relevant, but there are more things to value than volume. The security of the future gas system will increasingly depend on its versatility, flexibility, and the pricing of ‘externalities’ such as carbon emissions, air pollution 43

or land use. Europe’s gas infrastructure is an undoubted asset. But, like many other pieces of energy infrastructure, it will need to adapt to the demands of sustainable development. Source: IEA (2019), ‘Commentary: A long-term view of natural gas security in the European Union’. All rights reserved.

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Lukoil to allocate USD 50,000 for community projects P

rahova Chamber of Commerce and Industry (CCIPH) on April 2nd hosted the public dialogue event organized by Petrotel-Lukoil refinery, whereby Vladimir Gherasimov - Head of Regional Policy Division, Lukoil - presented the social responsibility actions, as well as its plans for the future. The company’s representatives have proposed to have regular meetings with community representatives to find out from them what are the projects of major interest in which the refinery might get involved, being the third action of this kind. “Petrotel-Lukoil is a constant presence in the tops of the most prestigious companies in the county, which is confirmed by both awards received over time at the Gala of Prahova Top Companies and nationally. The company, an extremely important member of Prahova Chamber of Commerce and Industry, is also a major player in the local economy, being the second in Prahova in terms of turnover. Petrotel-Lukoil, which this year celebrates 115 years, supports financially several organizations, as well as local public authorities, medical centres or cultural institutions,” CCIPH President Aurelian Gogulescu mentioned. “This is a program that has been implemented so far only at the refinery in Perm, where the current CEO of PetrotelLukoil - Alexey Kovalenko - was in charge.

The program was initiated in 2005 and it takes place annually since then. Following this program, over 2,000 jobs were created. Now we want to implement it in other refineries of Lukoil Group. It is a program of sustainable development of cities, in line with the global pact of the UN and has an echo at educational, environmental and labour, managerial, human capital and energy efficiency level. NGOs, museums, schools, universities, but not companies can apply within the program. The total fund of this program in Romania is USD 50,000 and will be managed by Petrotel-Lukoil and Lukoil Romania,” Vladimir Gherasimov mentioned. The company will soon announce the 44

modality of accessing the information regarding the social projects’ competition. Recording and selection of projects will take place during May - July, while winners will be announced during August - September. In Prahova County the program will be managed by PetrotelLukoil and in Bucharest and other cities in the country - by Lukoil Romania. Also attending the public dialogue were directors of schools and high schools in Ploiesti, Petroleum-Gas University, representatives of associations and NGOs, partners of projects financed by the refinery, Prahova Environmental Protection Agency, as well as several representatives of local administration, civil society and press.

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Norway’s Sovereign Investment Fund vs. Romania’s Sovereign Development and Investment Fund While Romania has been planning for several years to set up a Sovereign Development and Investment Fund, in which profitable energy, oil and gas companies would contribute with money, in midMarch a news reached the headlines of the international economic media. It refers to the decision of Norway’s Sovereign Investment Fund to give up part of the investments in oil companies.

Text by Daniel Lazar

reated to manage the money surplus resulting from oil activities, the Norwegian fund will drop part of the investments that have turned it into the largest fund in the world, with a value of over USD 1,000 billion. The Government has proposed, at the recommendation of the Central Bank of Norway, to remove from the fund’s portfolio assets held in exploration and production (E&P) companies, with the argument that the move would

reduce risks generated by the fluctuation of oil prices on the country’s economy. In turn, energy companies, other than those classified as activating in the exploration and production sector, will not be affected by the measure. “The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline. Therefore, it is better to sell companies that explore and produce oil and gas, rather than selling a broadly diversified energy sector,” Norway’s Finance Minister Siv 46

Jensen said. The Central Bank proposed, in 2017, the sale of fund’s shares in all oil and gas companies in the portfolio, valued at the time at approximately USD 37 billion. According to Government’s plan, which needs Parliament’s approval, shares in integrated energy companies, such as Royal Dutch Shell and ExxonMobil, will not be sold. The Global Fund for Government Pensions, the official name of the fund created to manage cash surplus resulting from oil activities, had

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shares in 9,158 companies in 73 countries at the end of last year, accounting for 1.4% of the value of global listed companies. In Romania, the fund held shares in banks and companies valued at USD 102.5 million, up by USD 15.74 million relative to the end of 2017. On the other hand, Norway’s fund has reduced to less than half its exposure on Romanian government bonds, reaching a portfolio of USD 31.49 million, from USD 71.98 million in December 2017. Last year, Norway’s fund increased its shareholdings in Banca Transilvania, BRD, Digi and OMV Petrom, became again shareholder in MedLife, but diminished its stakes in Electrica, Romgaz and liquidated its shares in Transgaz. In 2018, the fund had a yield of USD 131 billion, amid favourable developments of stock exchanges around the world that led to an increase in the value of the fund’s portfolio.

Return on investment of 13.7% Norway’s sovereign fund informed that in 2017 it generated a return on investments equivalent to 13.7%, double compared to the return of 6.9% recorded in 2016. “The fund’s cumulative return since inception has passed 4,000 billion Norwegian crowns (UD 511.18 billion). One out of four crowns of return was generated in 2017, after a very strong year for the fund,” said in a press release Yngve Slyngstad, CEO Norges Bank Investment Management, the division of the Central Bank of Norway that manages the sovereign investment fund. “Again, our equity investments returned strongest with a return close to 20%,” Yngve Slyngstad mentioned. The equity stock of the fund generated a return of 19.4% in 2017, while investment in fixed income instruments generated a return of 3.3% and real estate investments had a return of 7.5%. The largest equity investments of Norway’s fund are in Apple Inc., worth NOK 66 billion, followed by a portfolio of shares in Nestle worth NOK 51 billion and shares worth NOK 50 billion

in Royal Dutch Shell. In terms of fixed income investments, the largest portfolios of the fund are made up of U.S., Japanese and German government bonds. At the end of last year, shares accounted for 66.6% of Norway’s Sovereign Investment Fund portfolio, close to the 70% target, while investments in fixed income instruments accounted for 30.8% of the portfolio and the remaining 2.6% was invested in real estate. Last year, the Norwegian government withdrew NOK 61 billion from the sovereign fund, after the collapse in the oil price in 2016 forced the Oslo authorities to resort to money from the sovereign investment fund for the first time.

What happens in Romania? In Romania, the Ministry of Finance (MFP) published a draft on the establishment of the Sovereign Development and Investment Fund (FSDI), which refers to an annex on companies that will be part of the fund. “The expenses with the fees and tariffs required for the establishment of FSDI are borne from the state budget, through the budget of the Ministry of Finance General Shares, for 2019, estimating an impact of about RON 600 thousand for these expenses for the year 2019,” the explanatory memorandum shows. The FSDI would also include a number of companies in the energy sector, including Engie Romania S.A., the Electricity Distribution and Supply Company - Electrica S.A., E.ON Energie Romania S.A., OMV Petrom, the National Gas Company Romgaz S.A., Oltenia Energy Complex or Midia Thermal Power Plant. FSDI is authorized to contract loans, including through the issue of bonds. FSDI operations are funded from the following sources: income earned from dividends received from the companies in which it holds shares; income from the trading of financial instruments issued by other entities; operations with its own financial instruments; income from the sale of shareholdings in the portfolio; 47

loans, including through the issuance of bonds; other sources provided by law. In order to accomplish its core business, FSDI can: establish companies as sole shareholder or shareholder with other participants in any form of company established by the applicable company law; participate in the financing of the companies in which it is a shareholder by participating in the increase of the share capital through loans or other forms of financing; sell shares in the portfolio, under the law; sell, acquire and maintain in its own portfolio financial instruments in accordance with its own investment policies. FSDI, whose headquarters will be in Bucharest, will not invest in the share capital of the project company in the case of PPP projects. FSDI aims to develop and finance from own funds and on-lending costeffective and sustainable investment projects in various economic sectors, through direct participation or other investment funds or investment companies, either alone or together with other institutional or private investors, including through participation in publicprivate partnerships and the management of own financial assets, in order to obtain profit. FSDI is wholly owned directly by the Romanian State throughout its operation, and the rights and obligations stemming from the FSDI’s sole shareholder are exercised on behalf of the Romanian State by the Ministry of Finance. According to the explanatory memorandum, the draft legislation will have an impact on the state budget revenues starting with 2019, reducing the revenues to the state budget with the value of dividends received by the FSDI in the account of the shares transferred to the FSDI portfolio. This influence will be recovered in the years following the first year of operation by collecting the dividends that FSDI will pay to the state, as sole shareholder according to the decision of the General Meeting of Shareholders on the distribution of profits and establishment of dividends.

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Gazprom increased by 25% gas prices for the Republic of Moldova Russian energy group Gazprom increased by approximately 25% tariffs for gas supplied to the Republic of Moldova, according to the contractual formula of periodic recalculation of prices linked to crude oil. The increase is valid from the beginning of the year, but it became public only now, after the elections. The new structure of the National Regulatory Authority for Energy (ANRE) should adjust the domestic tariffs, because otherwise the debt of importer Moldovagaz to Gazprom will increase spectacularly. The question is when and how it will do it?

he announcement on the price increase, effective almost three months ago in Chisinau, was made not by the National Regulatory Authority for Energy the institution responsible for the establishment of tariffs, but by the press. Online economic publication Moldstreet.md made the announcement, requesting the information from Moldovagaz and publishing it in midMarch. According to ANRE’s former Director General, Victor Parlicov, this price increase had been known for one

month, but “nobody wanted to give bad news before the elections.” The online publication Mold-street. md anticipated the price increase since the election campaign, describing in an article its premises: “gas tariffs could increase significantly after the elections, as the import price went up during 2018 by about one third - from USD 215 per thousand cubic meters to USD 283 - while the calculation of the average tariff for the entire year 2018 included an average price of only USD 178 per thousand cubic meters. The financial deviation amounts to 700 million.” ANRE said at the time that the 48

information was ‘false,’ also denying that it would plan to increase tariffs in the near future. Reacting to the information already officially confirmed about the increase by 25% for imports, to almost USD 240 per thousand cubic meters, ANRE tried to calm consumers. Through the voice of one of its directors, Stefan Creanga, former parliamentary committee president, recently appointed director at the agency, ANRE said the increase in tariffs was not imminent, as it was not known how prices would look like in the following quarters. Justifying the fact that it had hidden,

OIL & GAS

for electoral purposes, the increase in import prices, the agency has sent a press release stating that, in fact, it had not received yet a request from the supplier to increase the tariffs. Energy expert Victor Parlicov says gas prices are never announced on January 1, but in February, because it is about the calculation of the average price for delivery to Eastern European countries and it is taken over from the audited reports of Gazprom. So, it takes time. The same happened in this case - the price was already known in mid-February. The fact that it wasn’t communicated before the elections obviously has an electoral connotation: nobody wanted to give bad news before the elections. “Formally, these issues are not linked. But I do not exclude the involvement of politics and its capacity

to control Moldovagaz’s management,” Victor Parlicov explained. At the same time, the question is whether the two entities will be able to avoid the tariff increase, in the following period, as one of the new directors of ANRE seems to have suggested. “Indeed, the procedure involves that the operator addresses ANRE after the adjustment of tariffs and it’s true that Moldovagaz, once the price was confirmed in February, had to address ANRE with the request to adjust tariffs to be able to maintain its infrastructure and meet its obligations to Gazprom. The fact that it failed to do so, it’s about a non-formal relationship between the Democratic Party (DP) and Moldovagaz management and DP’s interest not to have price increases before the elections. But this year we will have elections all

year. Local elections are coming. We will see how Moldovagaz and ANRE behave. For me it is obvious that ANRE will continue to behave as a political tool of DP, therefore, based on an indication coming from the party, it will increase or reduce the price - they will do what they are told,” the expert also mentioned. Suspicions of political control over ANRE existed at the last gas tariff change, last spring, but the agency was criticized the most for the decision to implement the new tariff, by 20% lower, retroactively. The current increase in import prices is however a minus for President Igor Dodon, who has made repeated promises to decrease gas prices, especially after he had obtained for the Republic of Moldova the observer status within the Eurasian Union dominated by Russia.

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ENVIRONMENT

Gas for Climate – A path to 2050 The optimal role for gas in a net-zero emissions energy system

A study recently published, performed by Navigant for the Gas for Climate consortium, serves as a follow-up to their study published in 2018, including a greatly expanded scope and analysis. While achieving 100% greenhouse gas reduction requires large quantities of renewable electricity, by far the most cost optimal role to decarbonise is by combining electricity with renewable gases such as hydrogen and biomethane. Renewable gas adds value in the heating of buildings, for high temperature industrial heat, providing flexibility in electricity production alongside wind and solar and in heavy transport.

sing around 2900TWh or approximately 270 billion cubic meters of renewable methane and hydrogen in a smart combination with renewable electricity saves society EUR 217 billion across the energy system compared to reducing gas to an absolute minimum. Existing gas infrastructure is indispensable in transporting this renewable and low carbon gas to the various demand sectors. Gas infrastructure can be used to transport both hydrogen and biomethane in 2050. The Navigant experts foresee an initial important role for blue hydrogen (carbonneutral hydrogen produced from natural

gas with carbon capture and storage), to grow the developing hydrogen market including in new applications. Towards 2050, with increased levels of renewable electricity and falling costs, renewable green hydrogen will gradually replace blue hydrogen, achieving in the end a fully renewable energy system. “The new Gas for Climate study shows that gas and its infrastructure will play an indispensable role in the future decarbonised energy system together with electricity infrastructures. We support the transition to a fully renewable energy system in which biomethane and green hydrogen will play a major role in a smart combination with renewable 50

electricity while recognising that blue hydrogen can accelerate decarbonisation efforts in the coming decades,” the CEOs of the nine Gas for Climate members said in a joint statement. The purpose of this study is to assess the cost-optimal way to fully decarbonise the EU energy system by 2050 and to explore the role and value of renewable and low-carbon gas used in existing gas infrastructure. This is being done by comparing a ‘minimal gas’ scenario with an ‘optimised gas’ scenario. The study is an updated version of the February 2018 Gas for Climate study, with an extended scope of analysis. The current study adds an analysis

ENVIRONMENT

3. 4.

Quantities of gas used per sector and resulting energy system cost savings in the “optimised gas” scenario versus the “minimal gas” scenario.

of EU energy demand in the industry and transport sectors. It also includes an updated supply and cost analysis for biomethane and green hydrogen, including dedicated renewable electricity production to produce hydrogen, and an analysis on power to methane. Finally, it assessed the potential role of blue hydrogen, natural gas combined with carbon capture and storage (CCS) or carbon capture and utilisation (CCU). Both the ‘minimal gas’ and ‘optimised gas’ scenarios arrive at a net-zero emissions EU energy system by 2050. The scenarios both assume a significant increase in renewable electricity (wind, solar PV, and some hydropower). The main difference between the scenarios is the role of renewable and low carbon (or ‘decarbonised’) gas, and the role of biomass power. The ‘minimal gas’ scenario decarbonises the EU energy system assuming a large role for direct electricity use in the buildings, industry

and transport sectors, with some biomethane being used to produce high temperature industrial heat. Renewable electricity is produced from wind, solar and hydropower, combined with solid biomass power. The ‘optimised gas’ scenario also has a strongly increased role of direct electricity in the buildings, industry and transport sectors. Yet it concludes that renewable and lowcarbon gas will be used to provide flexible electricity production, to provide heat to buildings in times of peak demand, to produce high temperature industrial heat and feedstock, and to fuel heavy road transport and international shipping.

Study’s main conclusions 1. Full decarbonisation of the energy system requires substantial quantities of renewable electricity in both study scenarios. Electricity production will more than double and renewable 51

electricity production from wind and solar-PV will increase ten-fold compared to today. Strong growth in wind and solar PV requires dispatchable electricity production by either solid biomass or gas. Battery seasonal storage is unrealistic even at strongly reduced costs. Full decarbonisation of high temperature industrial heat requires gas in both scenarios. Existing gas grids ensure the reliability and flexibility of the energy system. They can be used to transport and distribute renewable methane and hydrogen. It is possible to sustainably scale-up renewable gas–biomethane, power to methane and green hydrogen–at strongly reduced production costs. Blue hydrogen produced from natural gas combined with CCS can be a scalable and cost-effective option. Because green hydrogen is still expensive today and because its ramp-up is linked to the speed of growing wind and solar capacity to necessary levels, an early scaleup of blue hydrogen can accelerate decarbonisation. The ‘optimised gas’ scenario allocates 1,170TWh renewable methane and 1,710TWh hydrogen to the buildings, industry, transport, and power sectors. This equals about 270 billion cubic metres of natural gas (energy content). Compared to the ‘minimal gas’ scenario, the use of gas through gas infrastructure saves society EUR 217 billion annually across the energy system by 2050. The ‘minimal gas’ scenario requires 809TWh of (probably partly imported) solid biomass power, nine times more than the 89TWh in ‘optimised gas’. The future energy system can become fully renewable, with blue hydrogen being replaced by renewable green hydrogen towards 2050–2060 following a large scaleup of wind and solar.

ENVIRONMENT

Gross electricity generation in both scenarios compared to EU-28 power mix in 2014

These conclusions are in line with the results of the 2018 Gas for Climate study. Especially conclusions 1-3, the biomethane scale-up potential mentioned under conclusion 5, the large energy system cost savings under point 7 and the large role for solid biomass power under point 9 are similar to what was concluded in the previous study. The current study shows larger gas volumes (2900TWh versus 1000TWh) and energy system cost savings (EUR 217bn versus EUR 138bn annually) following a more extensive analysis into hydrogen supply and into energy demand in industry and transport. As shown in the graph below, cost savings per unit of energy are highest in the heating of buildings, where renewable gas is used combined with electricity in hybrid heat pumps in buildings that are connected to gas grids today. Also, the use of renewable gas in electricity production generates significant energy system savings because it avoids costly investments in solid biomass power or even costlier battery seasonal storage. Using less solid biopower in ‘minimal gas’ would increase the costs of this scenario and therefore increase the cost savings by implementing ‘optimised gas’. The total annual costs amount to more than two trillion euro in both scenarios. Most of these costs are not additional costs related to decarbonisation but are regular energy system costs and transport

vehicle costs that exist today as well. For all relevant uses of energy, Navigant chose the scope of the cost estimates that enabled it to perform a fair cost comparison between the two scenarios. This means that the study included all energy production costs for both scenarios, yet for road transport it includes road vehicle and fuel costs, while for aviation it only includes fuel costs because the costs for aeroplanes will be similar in both scenarios. Also, cost for upgrades in the electricity transmission grid are fully included, while low voltage distribution is not because strong electrification in both scenarios would result in similar grid replacement costs. It can safely be concluded that the EUR 217 billion euros cost savings in the ‘optimised gas’ scenario are a substantial share of additional costs beyond ‘business as usual’ energy system costs. In addition to substantial reductions in additional energy system costs, the ‘optimised gas’ scenario has non-cost related benefits including promoting rural employment from increased biomethane production and avoiding unnecessary new overhead powerlines that could meet societal opposition. Although reduced compared to today, the EU will still require large quantities of energy in 2050. In our 2050 scenarios domestic sources of coal and nuclear are (almost) phased out, raising the question where required energy will be 52

produced. Today, the EU imports more than 50% of its energy. In theory it is feasible to produce all required energy in both study scenarios domestically within the EU by 2050. However, producing renewable energy in other parts of the world can be an attractive alternative, and it is more likely that international trade in energy will continue to exist. This could include imports of solid biomass in the ‘minimal gas’ scenario or imports of green hydrogen in the ‘optimised gas’ scenario. The ‘optimised gas’ scenario includes only renewable gas to show that it is possible to achieve net-zero emissions by 2050, with no remaining role for lowcarbon gas. Yet because the costs of green and blue hydrogen can be similar by 2050, there could still be a role for blue hydrogen. Blue hydrogen can grow the use of low-carbon hydrogen in coming years, allowing faster decarbonisation. Towards 2050, natural gas will be phased out and blue hydrogen would increasingly be replaced by green hydrogen and renewable methane. The speed by which green hydrogen can replace blue hydrogen depends on how fast all direct electricity demand can be produced from renewables and how fast additional renewable electricity generation capacity is constructed beyond that. It furthermore depends on whether policy makers will limit the use of blue hydrogen by 2050. Any large scale-up of green hydrogen production

ENVIRONMENT

An overview of renewable gas volumes and the production and integration costs

prior to the moment when all demand for direct electricity is covered by renewable power results in indirect increases in fossil electricity generation. This study analyses the optimal 2050 decarbonised energy system; it does not include detailed analysis on the way to get there. In developing the system towards the desired 2050 state, it can be effective to transport blended methane and hydrogen through gas grids in coming years with hydrogen shares of up to 10% in transported gas, while gradually creating dedicated hydrogen transport grids by retrofitting part of the existing gas grids. Likewise, while by 2050 biomethane adds more value in buildings and electricity production and light transport can be expected to be electrified, it can make sense to continue to use bio-CNG in transport today to create an initial market for sustainable biomethane, and to accelerate transport decarbonisation.

Further details on key study conclusions Large increase in renewable electricity Full decarbonisation of the EU energy system in a cost-optimal way requires substantial quantities of renewable electricity in both study scenarios. Renewable methane and hydrogen pro vide cost-effective dispatchable power Either solid biomass, large-scale battery seasonal storage or renewable or low-carbon gas is required to provide dispatchable electricity production once wind power and solar PV are scaled more than tenfold by 2050. Renewable methane and hydrogen supplied through gas infrastructure provide dispatchable electricity and offer seasonable storage in a cost-effective way. Biomethane and power to methane Biomethane and power to methane can supply up to 1,170TWh at strongly 53

reduced costs, consisting of 1,010TWh of biomethane and 160TWh of power to methane. Navigant’s analysis shows that by 2050 all biomethane can be zero emissions renewable gas, in the sense that any remaining lifecycle emissions can be compensated by negative emissions created in agriculture on farms producing biomethane. Based on the assessment of potential biomethane cost reductions the study concludes that production costs can decrease from the current EUR 70–90/ MWh to EUR 47–57/MWh in 2050. These costs reflect large-scale biomass to biomethane gasification close to existing gas grids, as well as more local biomethane production in digesters. An assessment of the feasibility of increasing renewable methane production by methanation of CO2 captured in biogas upgrading showed that this technology could increase the renewable methane potential although costs will remain somewhat higher than biomethane or hydrogen costs. Navigant’s assessment on the biomethane potential has not significantly changed from its 2018 analysis, now 95bcm instead of the previous 98bcm of natural gas equivalent. In response to questions and comments on the uncertainties of the supply of sustainable silage when implementing Biogasdoneright (winter silage cropping) throughout Europe the potential in southern Europe versus countries with a more moderate climate is now differentiated. Navigant performed a deeper analysis of the availability of woody biomass for biomethane, including short-rotation plantation wood cultivated on abandoned farmland. Green hydrogen Dedicated wind and solar PV generation could produce green hydrogen as the main product. Navigant found that there is large theoretical potential of offshore wind and solar PV, going beyond the estimated 2050 EU renewable power projection. This means that the technical potential

ENVIRONMENT

for green hydrogen production is virtually limitless. However, there are considerations such as the land use change risks associated with an increase in non-rooftop solar PV and competing sea uses to offshore wind that will limit the green hydrogen potential. The costs of hydrogen based on dedicated renewable electricity can come down to about EUR 52/MWh. Navigant found that pipeline transport of green hydrogen is the most economical and that shipping hydrogen will likely remain expensive due to high costs of liquefaction. While imports of hydrogen to the EU are possible, the most likely option would be hydrogen produced in neighbouring regions (e.g. North Africa) being transported to Europe through pipelines. Mixing hydrogen with methane is possible but is unlikely to be the optimal solution by 2050. Blue hydrogen as a valuable temporary energy carrier Navigant concludes that the technical potential for blue hydrogen based on using permanent carbon capture and utilisation (CCU) in the EU is small. However, blue hydrogen based on applying CCS can be scaled up to very large quantities within a relatively short timeframe to 1,500TWh, or 142bcm natural gas equivalent. However, limited political acceptance today is a barrier to scaling up CCS. To increase political acceptance, policymakers can ensure that blue hydrogen plays a role as a bridge fuel to achieve net-zero emissions faster compared to a fully renewable system. To ensure that blue hydrogen will be a netzero emissions gas in 2050, the remaining 5–10% of uncaptured CO2 needs to be compensated elsewhere in the energy system by then. This can be done by using biomethane in combination with CCS. In 2050, the estimated cost of blue hydrogen is comparable to green hydrogen. This means that pro-active policy to ensure the greening of hydrogen supply is required. 2050 demand for electricity and gas in both study scenarios

Renewable and low-carbon gas supply and demand in the “optimised gas” scenario

The ‘minimal gas’ and ‘optimised gas’ scenarios both require a large increase in renewable electricity. Also, full decarbonisation of high temperature industrial heat requires a share of renewable gas in both study scenarios. Yet significant differences between both scenarios exist. In the ‘optimised gas’ scenario, existing gas infrastructure is used to transport and distribute 1,170TWh renewable methane and 1,710TWh hydrogen to the EU buildings, industry, transport, and power sectors. This corresponds to a 2050 gas consumption of 272 billion cubic metres of natural gas equivalent (in terms of energy). The ‘minimal gas’ scenario assumes that gas infrastructure would be mostly decommissioned and flexibility in the electricity system will be either provided by expensive solid biomass power or even more expensive battery seasonal storage. Battery storage remains expensive compared to gas grid storage, even if battery costs reduce to EUR 60,000 per MWh of storage capacity by 2050. It should be noted that renewable methane use is supply-driven whereas hydrogen use is demand driven. Furthermore, hydropower and liquid biofuel are supply54

driven and direct electricity consumption throughout the energy system is demand driven. Electricity production and heating of buildings Navigant analysed the possible role of hydrogen and biomethane in electricity production and heating of buildings based on the updated supply potentials. The outcomes differ little from the previous study. In both ‘optimised gas’ and ‘minimal gas’ scenario most buildings will by 2050 be heated by all-electric heat pumps, and both scenarios assume increased levels of district heating. In the power sector, now also hydrogen is used for dispatchable electricity generation. For heating of buildings, in the ‘optimised gas’ scenario all buildings with gas connections today will continue to use gas by 2050, mainly biomethane and some hydrogen used during periods of peak demand in hybrid heat pumps, in combination with electricity. Gas consumption per building will be much lower by 2050 compared to today. The ‘minimal gas’ scenario assumes that only all-electric heat pumps and district heating will be available.

ENVIRONMENT

Industry Navigant assessed the expected 2050 energy demand in the iron and steel, ammonia and methanol, and cement and lime industries, as well as the optimal net-zero emissions energy mix. The assessment concluded that industrial low temperature heat will be mostly based on direct electricity in both study scenarios. High temperature industrial heat is mainly provided by hydrogen in both scenarios, plus some biomethane and hydrogen as industrial feedstock. CCS will be needed to reduce process emissions, for example, from steelmaking and cement production. The difference between both scenarios is that in ‘minimal gas’ green hydrogen is produced at industrial sites, not requiring gas infrastructure, whereas in ‘optimal gas’ green hydrogen is produced close to large-scale (offshore) electricity generation and transported to demand hubs using existing gas infrastructure. Transport Navigant also assessed scenarios to fully decarbonise EU transport by 2050 and the potential role for renewable and low-carbon gas, focusing on road transport (passenger cars, trucks, and buses), shipping, and aviation. Shipping and aviation include domestic and intraEU shipping and aviation, as well as intercontinental fuelling and bunkering. We conclude that EU transport energy demand can be reduced by half in both study scenarios from today’s 4500TWh to about 2100TWh by 2050. Light road transport (passenger cars, light commercial vehicles) and domestic shipping will be primarily electric in 2050 in both study scenarios. Long-distance heavy transport requires fuels with a high energy density, meaning that direct use of electricity (from batteries) is less suitable for international shipping and aviation. In heavy road transport and international shipping, hydrogen and bio-LNG dominate in the ‘optimised gas’ scenario while large quantities of biodiesel are used in the ‘minimal gas’ scenario. Aviation will continue to use kerosene,

being a mix of bio jet fuel and synthetic kerosene in both scenarios. While multiple parallel fuelling options are implemented locally, the energy mix for long-haul truck transport, shipping, and aviation must be internationally uniform. It is not feasible for one country to fuel ships with liquified biomethane (bio-LNG) while a neighbouring country offers biodiesel. In aviation, the two most promising renewable fuels, bio jet fuel and synthetic kerosene, can use the same fuelling infrastructure as today.

Maintaining gas infrastructure generates EUR 217 billion in annual energy system cost savings The European gas transmission and distribution (T&D) network consists of approximately 260,000 km of high-pressure network of which 200,000 km are operated (mainly) by transmission system operators (TSOs), plus approximately 1.4 million km of medium and low-pressure pipelines operated by distribution system operators (DSOs). Gas infrastructure ensures the reliability and flexibility of the energy system. Navigant expects gas transmission and distribution networks to still have a valuable role by 2050, transporting biomethane and hydrogen. In both scenarios described in this study, volumes of gas used in networks are lower in 2050 than in 2019. Still, the use of gas in existing infrastructure will generate significant net energy system cost benefits. Compared to the ‘minimal gas’ scenario, the use of this gas through existing gas infrastructure saves society EUR 217 billion annually across the energy system. Cost savings per unit of energy are highest in the heating of buildings, where renewable gas is used combined with electricity by means of hybrid heat pumps, in buildings that are connected to gas grids today. Also, the use of renewable gas in electricity production generates significant energy system savings because it avoids costly investments in solid biomass power or even costlier battery seasonal storage. 55

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ENVIRONMENT

Coal-fired power plants in the Western Balkans 16 units polluting more than 250 EU thermal power plants 56

ENVIRONMENT

According to the report ‘Coal and Chronic Pollution – Europe’s Economy and Health Benefit from EU Action in the Western Balkans’ by the Europe Beyond Coal Movement under the aegis of the Health and Environment Alliance (HEAL) and published by HEAL, CAN Europe, Sandbag and the CEE Bankwatch Network, the Western Balkans are a great source of pollutions due to the 16 technological coal-fired thermal power plants. In 2016, the cumulative SO2 and PM2.5 emissions of the 16 coalfired thermal power plants (total capacity of 8.7 GW) in the Western Balkans were roughly equal to the emissions of the 250 coal-fired power stations (156 GW) in the EU. The EU Member States bordering the Western Balkan countries, such as Italy, Romania, Hungary and Bulgaria, bear the highest medical costs. These include some of the poorest Member States, which have lower health budgets and have difficulties in bearing the costs of cross-border air pollution due to coal. Text by Adrian Stoica 57

ENVIRONMENT

n the Western Balkans there are 16 outdated coal power plants that threaten public health by producing enormous amounts of air pollution, impacting people in the region, the EU and beyond. Every year they cause 3,000 premature deaths, 8,000 cases of bronchitis in children, and other chronic illnesses costing both health systems and economies a total of EUR 6.1-11.5 billion. The EU bears the majority of the health costs amounting to EUR 3.15.8 billion, while the economic burden on the Western Balkan countries is estimated to be EUR 1.9-3.6 billion every year, according to the quoted report. Air pollution, from fossil fuelled power plants or other emitters, knows no borders. Coal power plants in the Western Balkan countries - Bosnia and Herzegovina, Macedonia, Montenegro, Kosovo and Serbia - whilst not members of the European Union, add to its air pollution by emitting alarmingly high levels of pollutants that travel long distances. The biggest impacts are found in neighbouring Romania, Italy, Hungary, Bulgaria, Greece and Croatia, but also in countries further afield such as Poland, Germany, Czech Republic and Austria. Air pollution caused by energy production, transport and households is a persistent and harmful public health concern in the EU countries and the number one environmental threat to health across Europe. In fact, the problem of poor air quality is so severe, with most EU member states failing to keep air quality standards, that the European Commission has taken legal action on excesses of particulate matter (PM) against 16 countries to protect its citizens from air pollution. In 2017, the EU Court of Justice (ECJ) ordered Bulgaria to take action to improve the quality of its air. The Court ruling states that Bulgaria not only failed to meet the binding EU air quality standards, but also remained inactive in improving it. Bulgaria now faces severe financial

penalties should it not improve the country’s air quality. In 2018, Poland became the second country to be found in breach of EU air quality legislation by the ECJ. In 2018 the European Commission referred six countries to the ECJ: Hungary, Italy, and Romania for persistently high levels of particulate matter (PM10), and France, Germany, and the United Kingdom - for breaching nitrogen oxides (NOx) limits. While governments in the EU struggle to reduce air emissions to keep air quality standards, additional and harmful pollution travels into the EU from five neighbouring Western Balkan countries: Bosnia and Herzegovina, Macedonia, Montenegro, Kosovo and Serbia, a fact that is often overlooked. This pollution comes mainly from the region’s fleet of old and hugely polluting lignite coal power plants. As this report’s modelling shows, the EU countries most impacted by Western Balkan coal pollution are those directly adjoining them. Often these are the same EU countries already failing to meet clean air standards, making it much more difficult to design local actions to clean up the air. But EU countries further away are impacted too.

EU citizens bear the brunt of health impacts More than half of the number of premature deaths in 2016 caused by emissions from Western Balkan coal power plants occurred in the EU: 2,013 of the total 3,906 premature deaths afflicted the EU population, while 1,239 deaths occurred within the Western Balkans and 654 elsewhere. In the Western Balkans, Serbia suffered the biggest health impacts from the region’s coal pollution: 570 premature deaths. In Romania, 380 people died early in 2016, closely followed by Italy with 370 premature deaths. Coal plants in the five Balkan countries also contributed to disease and ill health: their emissions caused a total of 8,516 cases of bronchitis in children and 2,023 cases of bronchitis in adults. Of those, 38% of cases of bronchitis in children (3,272) and 50% 58

of cases (1,007) in adults occurred in the EU. Asthmatic children living in the EU suffered from asthma symptoms for a combined total of over 36,400 days in 2016, (the total number of days was 86,200) caused by polluting Balkan coal plants. Chronic coal pollution in the Western Balkans also harmed European productivity with an estimated total of 3,047 hospital admissions and over 1.16 million lost working days in the EU and Western Balkan countries during 2016. In the EU alone, the total was 1,418 hospital admissions and over 600,000 lost working days.

Unnecessary and preventable health costs The health impacts occurring in the EU due to the Western Balkan coal emissions are a huge burden on health systems, not to mention the strain they put on those affected and those caring for them. Results modelled on emissions from the Western Balkans coal plants in 2016 show that the total damage to health is estimated to be in the range of EUR 6.1 to EUR 11.5 billion, according to ‘Chronic coal pollution - EU action on the Western Balkans will improve health and economies across Europe’ report. More than half of these health costs relate to people and countries in the EU (EUR 3.1 to 5.8 billion), a third (32%) to Western Balkan countries (EUR 1.9 to 3.6 billion) and around 17% of the total health damage cost appears in other countries such as Ukraine, Turkey, Egypt and Russia. These huge costs are paid for by citizens and countries in the form of increased national healthcare budgets and personal costs for individual treatment. They also create economic losses through reduced productivity. EU countries bordering the Western Balkan countries, such as Italy, Romania, Hungary and Bulgaria, bear the biggest health cost burden. They include some of the least well-off EU countries with lower total health budgets and reduced ability to pay the costs of transboundary air pollution from coal. This exacerbates health, social and economic inequalities.

ENVIRONMENT

Bulgaria and Croatia’s health budgets are the most heavily impacted. Costs needed to cover the health impacts of Western Balkan coal pollution amount to EUR 0.3-0.7 billion. For Bulgaria this is the same as 10%-18% of the country’s total health expenditure in 2016. For Croatia (costs of EUR 0.2-0.4 billion), it amounts to 8%-14% of total health expenditure in 2016. In Romania additional health costs caused by Western Balkan coal pollution reach EUR 0.5 to 1.1 billion per year. That equals 7%-13% of total health expenditure in 2016.

Decarbonisation for a healthy energy system With seven EU member states now coal-free, and 10 more planning to end electricity generation from coal by 2030, the coal phase out in the EU is well underway. 2018 saw additional plant closures and announcements while, in its recent long-term climate strategy draft, the European Commission called for netzero emissions by 2050 - meaning a coalfree Europe. Western Balkan countries should equally strive to achieve full decarbonisation of the power sector by 2050 to ensure adequate climate action, less air pollution, improved health of their citizens, decreased healthcare costs and increased productivity. However, today they suffer from rampant energy poverty and heavily centralised energy systems that rely on old, energy intensive and polluting lignite power plants. Renewable energy is a readily-deployable solution. With the steady decrease in costs of renewable energy sources (RES), they are now, in many places, cheaper to develop than new coal capacity. To introduce renewable energy into an energy system, certain preconditions or changes in regulatory frameworks are needed. Moreover, since renewables have higher upfront investment costs than conventional units such as coal or lignite, smart financing is needed to reduce costs. Western Balkan governments have expressed their political commitment to implement the Paris Agreement on climate change. According to Agora

Energiewende, an energy think tank: “The EU is pushing for an integrative, economy-wide approach to climate and energy policy-making consistent with the EU acquis, particularly as four Western Balkan countries are candidates for EU accession and two are potential candidates. Also, the Western Balkan countries have close geographical and political ties with Central and East European and with South East European member states of the EU and engaging the WB countries on the clean energy transition will narrow the EU/non-EU divide”. This will further alleviate the alarming impact of the region’s energy systems on air quality and public health across Europe.

About the authors This report was researched and written by: Vlatka Matkovic Puljic (Health and Environment Alliance (HEAL)); Dave Jones and Charles Moore (Sandbag); Lauri Myllyvirta and Rosa Gierens (Greenpeace); Igor Kalaba (Climate Action Network, CAN Europe); Ioana Ciuta and Pippa Gallop (CEE Bankwatch Network); Sonja Risteska (Agora Energiewende). Responsible editor: Genon K. Jensen, Health and Environment Alliance (HEAL). The Health and Environment Alliance (HEAL) is the leading not-forprofit organisation addressing how the environment affects human health in the European Union (EU) and beyond. HEAL works to shape laws and policies that promote planetary and human health and protect those most affected by pollution, and raise awareness on the benefits of environmental action for health. HEAL’s over 70 member organisations include international, European, national and local groups of health professionals, not-for-profit health insurers, patients, citizens, women, youth, and environmental experts representing over 200 million people across the 53 countries of the World Health Organization European Region. 59

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POWER

2018, the year of record transactions in the power and utilities sector G

lobal power and utilities transactions attained an all-time high in 2018, increasing 28% in overall deal value to USD 256.3bn with a record volume of 546 deals, according to the EY report Power transactions and trends Q4 2018. Transactions in Europe contributed most to power and utilities deal value in 2018, with USD 126.5bn in deals, an increase by 2.5 times from the USD 50.3bn seen in 2017. Renewables continued to be a large driver of deal volume, with 253 deals that accounted for 46% of deal volume across all regions and representing 19% of total deal value (USD 48.3bn). In 2018, five multibillion-dollar integrated utility deals generated USD 32bn (32%) of total deal value in the Americas.

U.S. - the largest investments, China - the largest investor In terms of capital flows, the U.S. remained the most attractive target country, with capital invested in 2018 totalling USD 81.4bn, including USD 55.1bn of domestic transactions and USD 26.3bn of foreign investments. Canada invested USD 20.2bn in the US (67.3% of Canada’s total investment activity), with

only USD 6.1bn of domestic investment. China was the top foreign investor, investing USD 34bn in foreign countries with USD 32.6bn targeted at Europe. “2018 was an exceptional year in global power and utilities transactional activity, driven by large scale M&A and portfolio optimization. While corporates conducted 70% of all transactions and accounted for 80% of total deal value, there was tremendous interest from financial sponsors as well. We also saw the new energy market continue to grow in both scale and importance driven by consumer demand and regulations. As we move into 2019, we expect a continued interest in renewables, energy storage and electric vehicle (EV) infrastructure investments,” said Miles Huq, EY Global Power & Utilities Transactions Advisory Leader.

Energy storage, the new challenge In 2018, the Americas power & utilities sector deal value fell by 3% to USD 98.9bn, driven by a 7% decline in the US, while the rest of the region recorded a year-on-year increase of 22%. Looking forward, expected changes in energy policies of Brazil, Mexico and Colombia could encourage investment demand in these countries. In February 2018, the U.S. Federal Energy Regulatory Authority 60

(FERC) introduced Order 841, which will allow for the opening up of markets to energy storage resources and is expected to drive investments in energy storage in the U.S.

Increased targets in Europe European Union (EU) energy market reforms, including raising 2030 renewable energy targets, mandating CO2 caps on transport and removing capacity payments for fossil fuel generation, are set to accelerate the clean energy transition.

Decline in Asia-Pacific deals Asia-Pacific recorded a 36% decrease in deal value, down to USD 29.7bn from USD 46.7bn in 2017. More than half (USD 15.4bn) of the deal value was on generation assets, driven by two multibillion deals worth USD 9.5bn. “In 2019, as interest rates increase, macroeconomic conditions hang in the balance and political tensions weigh heavily on investors, we anticipate challenging M&A conditions. The market may shift to favour lenders over borrowers, with an increasing level of sophistication required to identify and secure strategic investment opportunities,” Miles Huq underlined.

Bauma 2019: 100 anniversary highlights th

Kaeser Kompressoren is turning 100 in 2019. Under the motto ‘Tradition and Innovation’, the company’s stand will feature many highlights from its comprehensive range of portable compressors.

Kaeser also has exciting innovations in store such as the newly developed M59. Thanks to its light-weight construction, this 5 m3 compressor weighs in at less than 750 kg despite a low-emission motor (European emissions stage) with a diesel particulate filter and a large fuel tank – even with the addition of the optional after-cooler. That means that it can be towed without an overrun brake and is easy to handle on building sites. And of course, visitors to the stand can get first-hand information on the transition of the entire European product range to Emissions Stage V and the latest product launch in the 400 V e-power programme. With the opening of Bauma, Kaeser will be ready to start shipping the new M255E with a powerful, energy-efficient IE4 electric motor, rated at 160 kW. The subject of Industrie 4.0 in combination with the Mobilair product range will also be prominently featured. As in the past, visitors will be guided to the spacious Kaeser stand, at its familiar location at FM.708/15+17, in the Central Outdoor Exhibition Area, by the legendary BAUMA tower with brightly coloured Mobilair PE enclosures.

hen a big anniversary coincides with a Bauma year, it calls for something special at the Kaeser stand in Munich. The Coburg-based compressed air specialist has come through in a big way. Its Bauma 2019 stand will present a cross-section of the Mobilair portable compressor range, with flow rates of 1–46 m³/min, driven by diesel, electric and petrol engines in the 7.5 to 450 kW power range – from the compact M13 hand-towable compressor to Kaeser’s portable powerhouse: the dry-running, ‘oil-free’ M500-2.

KAESER KOMPRESSOREN S.R.L. Address: 179 Ion Mihalache Blvd., 011181 - Bucharest Tel.: +40 21 224 56 81 Fax: +40 21 224 56 02 Web: www.kaeser.com Email: info.romania@kaeser.com

Lightweight M59: The brand-new HATZ diesel motor from the M59 is a perfect fit for the Made in Germany concept.

POWER

Nuclearelectricaâ&#x20AC;&#x2122;s Management Plan for 2019-2022 Top priorities: Refurbishment of Unit 1 and construction of reactors 3 & 4 Text by Adrian Stoica

POWER

Consolidation of electricity production at Cernavoda NPP, while complying with nuclear security requirements, extension of the life cycle of Unit 1 reactor, continuing the project for the construction of Units 3 and 4, as well as diversification of uranium sources are the main pillars of the Management Plan of the National Company Nuclearelectrica for the period 2019-2022.

he objectives proposed under the current mana gement plan and measures for their implementation are based on the high performances obtained in the operation of Cernavoda Nuclear Power Plant (Cernavoda NPP), the natural reduction of the remaining lifetime of the 210,000 effective operating cycle established under the original project, as well as the production of fuel within company’s branch, Pitesti Nuclear Fuel Plant (FCN Pitesti). The management plan complies with corporate governance principles and is adapted to the primary purpose for

which it was proposed, namely to achieve the assumed objectives.

Consolidation of production at Cernavoda NPP Nuclearelectrica supplied in 2018, through Cernavoda NPP, 18% of the national electricity consumption, with a capacity factor of 92.37%, exceeding by far the level of 80% established according to the initial project. The intensive operation of the two reactors at Cernavoda NPP, while maintaining the level of excellence in operation, involves for the next four years the necessity of implementing compensatory measures 63

to keep energy production at a stable level, with a minimum of shutdowns, while complying with nuclear safety rules, the quoted document mentions. For this, the company aims to ensure a physical production of at least 9.6 million MW, by implementing the annual investment programs necessary to ensure the operation of the power plant in compliance with the nuclear security rules, carrying out the preventive maintenance programs developed in order to implement the LTO concept for Cernavoda NPP, ensuring the human resources necessary for the operation of the power plant, completing the

POWER

Post Fukushima program, maintaining radioactive emissions at the level of internal regulations, lower than the legal ones, and ensuring the necessary cash flows for the operation of the power plant.

Preparing lifetime extension The components of the nuclear reactor of CANDU 600 power plants (as Unit 1) were designed for a lifetime of 210,000 hours of operation at rated output (Effective Full Power Hours), which translates into an operational duration of about 30 years at a capacity utilization rate of 80%, which will be reached at the end of 2023. Over the past two years, due to the fact that several CANDU units are close to the limit of the 210,000 EFPH, the nuclear industry has made a number of research into the timing of the components of the reactor assembly and the aging mechanisms that affect them, in order to extend their lifetime beyond the limit estimated by the designer of the reactors - AECL (currently Candu Energy), with a result that could reach 245,000 EFPH for U1.

Updating the long-term strategy for DICA The current strategy on assuring the intermediary storage of spent fuel provides for the possibility to continue the construction of MACSTOR 200 modules to the 14 modules inclusively, if the environmental permit is not obtained for MACSTOR 400 by 2020, after obtaining it following to move to the construction of these new modules. Currently, nine MACSTOR 200 modules are completed and modules 10 and 11 - also MACSTOR 200 - are under construction. Given the recent amendments to the environmental legislation and the request of the Ministry of Environment to link the documentations for DICA and CTRF, it is necessary to review the development strategy of intermediary storage facilities, moving to MACSTOR 400 starting with module 18, with completion provided for early 2027. In this context,

the environmental permit and the construction permit for the modification of DICA project (switch to M400 and site extension) must be available no later than 2025. This means that the steps necessary for obtaining the environmental permit are no longer necessary before 2022.

Diversification of uranium sources The Strategy for the diversification of sources of supply with raw material necessary to produce nuclear fuel was approved April 2018, strategy providing that SNN would purchase on the international market uranium octoxide - U3O8, following to be stored and processed by the National Uranium Company (CNU). To this end it is considered to qualify this year several manufacturers of natural technical uranium concentrate (CTU) necessary to produce nuclear fuel. Thus, CNCAN authorization will be obtained for the import of 3kg samples from the selected suppliers, which will be tested at the Nuclear Fuel Plant (FCN) in Pitesti.

Refurbishment of Unit 1 of Cernavoda NPP In order to achieve this goal, a number of studies and support analyses will be carried out to reduce as much as possible the uncertainty margin. Evaluation of the status of structures, systems and components of the power plant - Condition Assessment - is the first and the most important study through which, based on information obtained from design, manufacturing, installation, history of operation and maintenance, as well as from the discussions with the operational staff (system engineers, components engineers, maintenance staff etc.) the evaluation of degradation mechanisms, aging management programs and financial evaluation of the proposed solution (repair, replacement, improvement) for all structures, systems and components of the power plant are made. The public procurement procedure for contracting this study was launched by SN Nuclearelectrica, estimating the 64

signing of the contract in June 2019. Also, in order to prove the feasibility of the Refurbishment Project, in addition to the study on â&#x20AC;&#x2DC;Assessment of the status of structures, systems and components of the power plantâ&#x20AC;&#x2122;, it is envisaged to contract additional studies whose results will be included in the feasibility study.

Construction of Units 3 and 4 The revised strategy of continuing the Project of Units 3 and 4 of Cernavoda NPP by organizing an investor selection procedure provides for the creation of a joint venture company (JVCo) between SNN and China General Nuclear Power Corporation - CGN (selected investor), to which the value invested by SNN in EN subsidiary will be transferred. JVCo will be set up in order to re-check, under current conditions, the feasibility of the project, evaluate the assets and make the decision regarding the contracting of engineering, procurement and construction works (EPC), obtain the permits and approvals necessary for staring works, including regarding the support measures to be granted to the project, subject to national and Community legislation, and make the final investment decision.

Strengths, Weaknesses The SWOT analysis carried out highlighted in the weaknesses chapter the dependence on unique suppliers for raw material (heavy water, technological water and uranium dioxide), low negotiating power with critical equipment/service providers, rigidity in the supply chain process of the legislative framework, discrimination against competitors in Europe, because of the restrictive legislation, but also the bureaucracy and non-optimized organizational structure of the company. The strengths chapter highlights operational stability and excellence, predictability of operating and maintenance costs, expertise in the nuclear energy industry and sales activities, and last but not least, highly qualified specialists.

We found your new destination: DALLAS

There you go Dallas has a rich history rooted in ranching, farming, and oil production. It has become home to numerous insurance corporations and banks, making it an important business and financial center.

Throughout the summer season, Air France will operate up to 5 weekly flights, in an Airbus A330-200 aircraft equipped with the latest cabins.

POWER

Hydro-QuĂŠbec plans to invest in Romania Text by Daniel Lazar 66

POWER

priority field for the development of bilateral economic cooperation between Romania and Canada is the energy industry. Specifically, reaching the table of Romanian authorities is the proposal of Canada’s Hydro-Québec to invest in the field of power production and transmission grid in Romania. Romanian Minister for the Business Environ ment, Trade and Entrepre neurship Stefan-Radu Oprea on March 26 met in Bucharest with H.E. Kevin Hamilton, Ambassador of Canada to Romania, and H.E. Stéphane Dion, Ambassador of Canada to Germany, special envoy to Europe of Canada’s Prime Minister Justin Trudeau. On this occasion, the Romanian diplomat appreciated the excellent bilateral relations between Romania and Canada, appreciating the advantages provided to the business environment by the Comprehensive Economic and Trade Agreement between the EU and Canada (CETA), which has already brought an increase in Community exports to Canada, as well as new business opportunities for EU companies, with a focus on SMEs. Priority in cooperation between the two countries is also held by the aeronautical industry, the naval industry - with the supply of equipment, components and spare parts, the textile industry, the wood and the food industries. “CETA has led to the elimination of 98% of customs duties for Romanian exporters and importers, the opening of the Canadian services market for Romanian companies, the opportunity to participate in tenders for public contracts in Canada, the protection of Romanian creativity and research, the encouragement of investments between Romania and Canada, facilitating the access of Romanians with high qualifications to the Canadian market,” Stefan-Radu Oprea said. The Minister also talked about Romania’s priorities during the

Presidency of the Council of the European Union in the commercial field. He highlighted the modernization of the World Trade Organization, the commercial relations between the European Union and the U.S., the advance and conclusion of commercial negotiations with third states (especially with strategic partners such as the South-American trading block Mercosur, Mexico, Australia, New Zealand, Vietnam etc.), as well as commercial aspects on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union. CETA is the most ambitious trade agreement between the EU and Canada, which reduces taxes and facilitates the export of goods and services, an agreement that benefits individuals and businesses in both the EU and Canada. More than 300 Romanian companies export to Canada, many of them being small and medium enterprises; Canada is the third non-EU partner for trade services. Romania’s economic and trade relations with Canada are based on interests in the export of products such as: steel bars, electrical machinery and equipment, knitwear, rubber, furniture, wines and alcoholic beverages, bio foods, equipment and subassemblies for the aeronautics industry, shipbuilding and ship repair, IT-specific products, oil machinery and spare parts, hydraulic turbine components, as well as pottery and porcelain products, glass products, footwear, clothing and pharmaceuticals. The main categories of products imported by Romania from Canada are: mineral products, aircraft, machinery and appliances, electrical equipment and chemical industry products. Hydro-Québec is a Canadian company producing and distributing electricity and is owned by the Government in Québec. Hydro-Québec has an annual revenue of approximately EUR 10bn and about 20,000 employees. According to information on its own website, Hydro-Québec is one of the largest energy producers in the world. 67

Temporary solutions for on-site steam generation Complete and safe solutions including all required accessories and 24/7 service. Contact us 24/7 +40 728 500 607 www.atlascopcorental.com

CONSTRUCTION

Heat insulating panels and turnkey premises have increased TeraSteel’s exports Text by Daniel Lazar

eraPlast Company, the largest entity of the Group, is currently one of the largest PVC processors in Romania and one of the leading producers of materials for installations, constructions and design markets. The product portfolio of the company comprises three business lines: Installation & Design, Window profiles and Granules. In the past years the company has invested over 36 million euros in developing and upgrading the production facilities. Currently the Company operates in TeraPlast Industrial Park, located in the unincorporated area of Bistrita Municipality, with an area of over 20 hectares. TeraSteel, part of TeraPlast Group, last year recorded an increase by over 53.7% in exports, amid expansion to the Serbian market. Moreover, the company posted two-digit growths for all categories of products in 2018. Thus, the volume of sandwich panel sales increased by over 54% compared to 2017, of galvanized profiles by 25% and that of turnkey

solutions in the form of industrial premises, logistics or storage spaces - by over 15% in value. Turnkey premises are a modular, durable product, easy to assemble and relocate, adaptable to a wide range of needs and requirements, in line with building trends in the industry. “Increasing the production capacity, enriching the portfolio of products and expansion on the Serbian market had a decisive contribution to the favourable evolution of the company over the past year, the results of 2018 being a proof in this regard. Expertise in the field and the dedicated team of professionals are the drivers of successes achieved in 2018 and will support our ambitious plans for development in the following years. We also have by our side a solid network of partners, so we are confident that our performance will continue, in terms of both sales and profitability,” said Cosmin Patroiu, CEO of TeraSteel. In 2018, the sandwich panels market was strongly influenced by the dynamics recorded in the civil engineering and industrial construction sector, the 68

company relying on growth of this segment for the following period as well. “For Romania we expect an increase by 3-5% in the panels market, while the growth pace for Serbia is estimated to reach 10%. Through our presence in Serbia we consolidated our position on the regional markets and in 2019 we plan to continue this expansion of the distribution network,” Cosmin Patroiu said. For 2019, TeraSteel targets a business growth by over 15%, amid investments in the industry, launching new products and advance of foreign investment, which will generate growth in the demand for products in TeraSteel’s portfolio. In 2017, the company has expanded its presence in the regional markets, through TeraSteel Serbia, the first factory opened abroad after 1990 and fully owned by a private Romanian company. Following the expansion in Serbia, TeraSteel has become an important player on the panels market in the region, exporting to over 25 countries in Central and South-Eastern Europe.

RENEWABLES

Batteries, an important part of a fossil-free energy system Energy storage will be the grease in the renewable-energy machinery.

Climate change requires a rapid redesign of our energy landscape. The German federal government has therefore ordained that the share of renewable energies in electricity supply must be expanded to 65 per cent by 2030. The climate goals of other European countries are similarly ambitious. For example, Sweden aims to meet its electricity demand entirely from renewables by 2040, and across the EU the share of renewable sources in the electricity, heat and transport sectors is targeted at 32 per cent by 2030.

Text by Gunhild Nasner

omplex requirements for the power system must be met in order to implement the necessary electrification in all sectors. Here the focus is on system services that will keep the frequency and voltage on the grids stable even with the increasingly volatile infeed of renewables. Up to now this task has primarily

been handled by conventional power plants. In the future, distributed plants with high flexibility, such as battery storage facilities, can increasingly help to improve the integration of wind and solar power. According to Sebastian Gerhard, Batteries Director at Vattenfall, the share of wind and solar will grow, accompanied by falling costs. New and viable business 70

models for the deployment of battery storage systems will arise.

Batteries and renewables: an ideal combination Hybrid power plants combine wind or solar power generation with battery storage at the same location. â&#x20AC;&#x153;This combination has lots of

RENEWABLES

advantages. Generation, storage and grid connection use the same infrastructure, and they can be operated more economically thanks to synergy effects. Hybrid facilities with battery storage contribute to grid stability, and they can offer wind farm operators an alternative business model when the statutory subsidy from the EEC expires after 2020,” says Sebastian Gerhardt. Vattenfall’s largest battery storage system is a 22-megawatt flagship project at the Pen Y Cymoedd onshore wind farm in Wales, which went live in 2018. The lithium ion battery storage system provides operating reserve for stabilisation of the transmission grid (Enhanced Frequency Response, EFR), as well as insights from the joint management of wind power generation and storage technology. At the Princess Alexia Wind Farm in the Netherlands, 88 BMW i3 batteries are integrated into a mega battery to store wind energy. A combination of wind and solar power with battery storage is planned for the Haringvliet Wind Farm near Rotterdam. There a 12-megawatt battery is expected to provide primary operating reserve starting in 2020. In Hamburg-Curslack, a wind farm combined with battery storage has been operating since September 2018. This storage reserve power plant, which was built as part of the major project NEW 4.0 – Norddeutsche EnergieWende, will be used to research possibilities for the system integration of renewable energies. Coupling with battery storage optimises electricity supply from the wind farm, so shutdowns of wind power plants in grid overload situations should be avoided as much as possible in the future. Sebastian Gerhard outlines further possibilities for the deployment of battery storage systems: “We want to work together with the project partners Nordex and the Hamburg University of Applied Sciences to develop models for innovative system services. That involves reserve capacity to offset short-term variations in the grid frequency. In future, renewables in combination with battery storage could

provide these services based on market demand.”

Battery partnership: battery storage as a tailored solution for customers Another ideal use case for battery storage is data centres. These customers have a specific power demand, a specific load profile, and strict requirements for uninterruptable power supply. Battery storage systems can be an alternative to diesel generators for backup power. In combination with an agreement for electricity supply with green power, data centres can be operated without dependency on fossil fuels. These ‘green power purchase agreements’ (PPAs) – long-term agreements for electricity supply with green power that are concluded directly between an electricity customer (buyer) and a plant operator (seller) – will play an increasingly significant role in a market environment that will have to manage without EEC subsidies in the future. Many companies have set ambitious climate goals, and with a PPA they can improve their CO2 exposure and contribute to the energy transition. Deployment of batteries for peak shaving can also be worthwhile for especially power-intensive industrial companies. Under peak load conditions, electricity is taken from the battery storage system instead of the electricity grid. The first customer for which Vattenfall installed a peak shaving system in 2018 is a large logistics company in the Hamburg area. Batteries are also suitable for mobile deployment. At the first climate-neutral world ski championship this year, a mobile battery storage system from Vattenfall allowed skimobiles and electric vehicles to be charged with green power at all times. In addition, Vattenfall also offers batteries for use in networks. The Swedish Business Unit Network Solutions is currently exploring ways to balance fluctuations in the network with the use of batteries. In this way, batteries could help avoid regional network bottlenecks. 71

The future of battery storage: more potential applications, more storage Batteries can take on a wide variety of tasks. Along with storing and supplying electricity, these include system services for grid stability, balancing power services, peak shaving, and ensuring uninterruptable power supply. “Other potential applications for batteries will also be conceivable in the future,” says Gerhard. “For example, batteries can very easily transport energy from one point to another. Batteries can also be used to give plants blackstart capability. In addition, large scale balancing services for power trading are conceivable, which could mean faster energy exchange market to avoid costs from unbalanced grids. However, today this sort of very large and very energy-dense battery deployment is too expensive. Aside from the cost factor, the batteries currently available on the market are not suitable for this deployment. The constant load cycles are very energy intensive, and they impact the service life,” he says. Another consideration is that deployment depends on the regulatory framework at the respective location and there are currently no market incentives for such applications. The potential applications for battery storage on the way to an energy world without fossil-based power generation also require further technological development in several respects. Research is needed on the efficient deployment of the various battery types, and battery quality must be improved. Finally, future deployment of battery storage systems must be marketable, which means the costs must be significantly lower and the general conditions need to be optimised. “Electromobility has massively boosted battery storage technology. Many companies, including us, are applying their expertise to enhance marketability and generation capacity. As a result, Europe is now developing into a major R&D centre for storage technologies,” Sebastian Gerhard concludes.

METALS & MINING

Topics of global importance in the steel industry on the OECD agenda in Paris Documents of interest to the European Union (EU) in the field of commercial policies and international trade, affecting the steel industry, were debated in Paris on 25-26 March at its 86th Session of the Steel Committee of the Organization for Economic Cooperation and Development (OECD). Text by Daniel Lazar

omania supported, during the event, the points of view of the EU, being a constant presence at OECD meetings. On the other hand, mandate to the

rotating Presidency of the Council of the EU gives Romania the opportunity to capitalize on the current status, as associate of the OECD Steel Committee, to prove the abilities as partner that brings added value to decisions adopted 72

at European and global level. The status and prospects of global economy in general and steel market in particular, the latest developments of the steel production capacities, the investment activities in the field at global

METALS & MINING

level and long-term implications of development of production capacities, as well as the analysis of the future supply and demand balance in the steel industry were among the main topics debated on the first day of the session. In this context, the developments of the steel industry and challenges that industrial policies impose on steel producers were also addressed from the perspective of representative employersâ&#x20AC;&#x2122; associations from various regions of the globe. Participants were updated on the latest evolutions in the field of trade and commercial policies, including non-tariff barriers, which concern the steel industry. On that occasion, the OECD Secretariat of the Trade and Agriculture Directorate informed the Steel Committee of the ongoing work of the OECD Trade Committee Working Group on measures distorting trade

flows in the steel and steel raw materials sectors. An important document on the agenda was the Programme of Work and Budget (PWB) for 2019-2020 of the Steel Committee. It included the assessment of links between government interventions, production capacities and steel trade, in order to identify the most appropriate approaches and methodologies that could help improve and prevent existing trade barriers. The evolution of works of the Global Forum on Steel Excess Capacity (GFSEC) was also brought to discussion. At the same time, as part of the Programme of Work and Budget (PWB) 2019-2020, the OECD Secretariat presented to the members of the Steel Committee information on the status of projects under way, state-owned enterprises, structural adjustment and

industry restructuring and market consolidation models. The second day of the session was dedicated to discussions on links between the steel industry and environmental issues. Business approach formulas were presented, allowing behavioural change and technological solutions and contributing to sustainable practices in the steel industry. The International Energy Agency (IEA) has made an update to the Global Iron & Steel Technology Roadmap. Discussions were also held on sectoral policies, which could help motivate steel producers adopt better practices for more environmentally friendly production. There were also extensive discussions on the agenda of the session regarding the global relationship strategy of the Steel Committee for the coming period.

METALS & MINING

Rovina gold-copper mine Status updates and project progress

uro Sun Mining recently provided a corporate update and comment on the current strategy regarding development of the ten million gold equivalent ounce Rovina Valley Project. The Preliminary Economic Assessment (PEA) outlines a robust project producing on average 108,000 oz of gold and 13.3 million lbs of copper per year for 12 years (139,000 Aueq ounces per annum) in phase one of development exploiting the Colnic deposit initially. Colnic currently hosts only 29% of the exploitable resources at Rovina Valley Project. Initial CAPEX for Colnic is estimated at USD 339 million. This is primarily allocated at USD 33 million for capitalized pre-stripping and USD 264 million for the 7.2 million ton per annum processing plant. As the project will be built with dry stack tailings, not wet tailings, the sustaining CAPEX will be quite low for operations of this size. Typically, significant sustaining capital is allocated to tailings dam lifts throughout the life of mine, which are not the case in a dry stack operation. Rovina Valley Project has been designed to be one of the most environmentally responsible gold projects globally due to the lack of wet tailings facility and without the use of cyanide

anywhere in the project. In order to meet these strict standards, the decision for dry stack tailings with no cyanide was undertaken by both the company and the Government of Romania. The company would have a lower capital budget and lower operating costs if a traditional wet tailings facility were to be built. Using cyanide in a closed circuit would have generated higher recoveries and therefore higher tax revenues for the government. “Rovina is a clear example of a project that’s meets today’s investor mandate for Environmental Social Governance (ESG) companies in which to invest. A conscientious decision was made by both Euro Sun and Romania to make this a better environmentally and socially responsible project and not just to maximize profitability at the expense of all stakeholders,” President & Chief Executive Officer G. Scott Moore stated.

PROJECT OVERVIEW Location & access The Rovina Valley Project covers 27.68 km² in west-central Romania, approximately 300 km northwest of the capital city of Bucharest. This historic mining district known as the ‘Golden Quadrilateral’ is one of the largest goldproducing areas in Europe where it is estimated more than 55 Moz of gold have been produced since the Roman period 74

(ca 2000 yrs ago). The Rovina Valley property is accessible year-round via a paved two-lane highway from the historic gold mining town of Brad followed by secondary paved roads which pass through the town of Criscior and onward to the village of Bucuresci. Mineral resources The measured & indicated mineral resources of 10.84 million ounces of gold equivalent are based on three porphyry deposits that define a north-northeast trend over a distance of 7.5 km. The Rovina Porphyry is the northern-most deposit, followed by the Colnic Porphyry, and the Ciresata Porphyry located the furthest south. Background In November 2018, the Mining License for the Rovina Valley Project granted to SAMAX Romania srl (100% owned by Euro Sun Mining), was fully approved by six senior cabinet ministers and the Prime Minister of Romania. In addition to key permitting activities, the company is completing an optimized mine plan which will form the basis of a new PEA, expected to be completed by the end of Q1 2019. This study will be further developed into the Bankable Feasibility Study targeted for completion by year-end.

Just START Subscribe now, it’s only € 60 for 1 year! Why subscribe to Energy Industry Review? Stay informed and keep in touch with Romania’s and the regional energy community. We will take you on a journey with interviews, analyses, various points of view, technical and innovative solutions & ideas to grow and expand your business. Why advertise in Energy Industry Review? You will get featured on the desk of the most important company representatives. The market will know what you do and who you are! E: office@energyindustryreview.com P: +40 (0)344 143.530

TECH

A1 chooses Nokia as partner to deploy 5G in Austria A1 and Nokia announced on March 26 they have signed a contract to expand nextgeneration 5G mobile communications in Austria. The contract reinforces the long-standing partnership between A1 and Nokia which has included the successful expansion of 3G and 4G/LTE mobile networks and the roll-out of Austria’s largest fibre-optic network.

he contract includes both Nokia’s 5G radio access and cloud-native 5G core technology. With this innovative network technology, A1 ensures seamless highperformance service and excellent user experience over wireless, fixed or converged networks, meeting the diverse and demanding network requirements for connecting people and things. “Together with Nokia, we will leverage the full potential of 5G,” says A1 CEO Marcus Grausam. “We rely on a trusted and long-standing partner with whom we have already successfully implemented numerous major projects. Now the starting signal has been given for the Austria-wide deployment of the A1 5G network, which will open up new worlds of applications and transform business models.” The innovative power of A1 and Nokia in 5G has already been demonstrated. After intensive testing, A1 has presented

5G applications for industry and implemented Austria’s first campus network for Vienna Airport. In Gmünd, the first 5G city in Austria, data transfers on the A1 Network were carried out in January 2019. “Jointly with A1, we have demonstrated the capabilities of 5G and our unique end-to-end portfolio on a number of occasions, and now the time has come to roll it out and bring it to reality. We are more than ready and feel honoured that A1 chose Nokia as its trusted partner for this important step into the digital future,” Peter Wukowits, head of Nokia Austria, mentions. 5G is characterized not only by peak data rates up to 10 Gigabits per second, but also by extremely low latency and high energy efficiency. 5G creates the basis for ultra-reliable real-time communication between mobile devices, be it smartphones for online gaming, augmented or virtual reality, robots in digital factories or self-driving cars and 76

thus for innovation in various areas such as mobility, transport and Industry 4.0.

About Nokia Nokia develops and delivers the industry’s only end-to-end portfolio of network equipment, software, services and licensing that is available globally. Its customers include communications service providers whose combined networks support 5.7 billion sub scriptions, as well as enterprises in the private and public sector that use Nokia network portfolio to increase productivity and enrich lives. Through its research teams, including the world-renowned Nokia Bell Labs, Nokia is leading the world to adopt endto-end 5G networks that are faster, more secure and capable of revolutionizing lives, economies and societies. Nokia adheres to the highest ethical business standards as it creates technology with social purpose, quality and integrity.

+ pixel hoto and digital products

An elite project from Energy Industry Review focused on corporate, industrial and commercial photography

energyindustryreview.com 77

TECH

Infosys to open new Digital Innovation Centre in Romania Infosys, a global leader in next-generation digital services and consulting, recently announced it will be opening a new Digital Innovation Centre in Bucharest, Romania at an event attended by local government officials and university representatives. The centre will focus on developing offerings for clients based on cutting-edge digital technologies including Cloud, Big Data, Artificial Intelligence and Machine Learning. 78

TECH

nfosys will invest in training programs for both its current employees and new hires. These training programs will focus on several key competencies including user experience, Cloud, Big Data, digital offerings, core technology skills and computer science skills. The company has also announced that it is entering into an agreement with the University of Bucharest and the University Politehnica Bucharest to form a strategic partnership for technology innovation and Romanian workforce development; including joint training courses, scholarships and research. The training programs for Romania will leverage the learnings and best practices the company has developed through decades of experience running the Infosys Global Education Centre, one of the world’s largest corporate universities, located in Mysore, India. Infosys also plans to open a new Cyber Defence Centre in Bucharest this summer. The Centre will provide end-toend 24/7 cybersecurity services to help European and global clients progress on their digital transformation journey. Services include cyber forensics, ethical hacking, security analytics, threat detection and response. The centre in Bucharest will be vital to delivering services across the European region, given GDPR and other country-specific data regulation requirements. Currently Infosys, which was recently recognised as a Top Employer in Europe, has operations across 15 European countries, employing more than 12,000 people. The company works with both European and global clients in a range of industries, including financial services, healthcare, life sciences, business process management, utilities, manufacturing and retail. “Our Digital Innovation Centre in Bucharest marks an important step forward for Infosys as it further expands its presence across Europe, improving our ability to serve both our regional and global clients. By partnering with key local academic institutions, we are creating organic talent pools in Romania that do not exist in the market today. By training and developing a highly skilled workforce in Romania, we can help close the digital skills gap in the region and contribute to the Romanian and European economy,” Ravi Kumar S., President, Infosys, said. “Europe is a hotbed for innovation, and the next generation of workforce is keen to develop its skills and knowledge in the digital age, through the best training and hands-on experience. We’ve partnered with Infosys so that young Romanian specialists can work and train with the best-in-class Infosys experts at the new centre to become more skilled and better prepared to help shape Europe’s digital future,” Mircea Dumitru, Rector of the University of Bucharest, mentioned. “IT services is a huge growing industry in Romania and this new Digital Innovation Centre offers a great opportunity for students and professionals alike to develop their skills, find new career prospects and enhance cutting-edge digital technologies across industries in Romania and Europe. From an economic perspective, I would like to underscore the rapid-paced growth

“Our Digital Innovation Centre in Bucharest marks an important step forward for Infosys as it further expands its presence across Europe, improving our ability to serve both our regional and global clients. By partnering with key local academic institutions, we are creating organic talent pools in Romania. By training and developing a highly skilled workforce in Romania, we can help close the digital skills gap in the region and contribute to the Romanian and European economy.” Ravi Kumar S., President of Infosys

patterns of both our countries, with India being the fastest growing economy in the world and Romania mirroring at an EU level. In this positive context we should take full stock of all opportunities to further consolidate the extended partnership between Romania and India. Moreover, the economic growth of our country in the last couple of years represents an open invitation to pre-eminent investors and companies like Infosys to bring added value and open new economic opportunities,” Ana Birchall, Vice Prime Minister of Romania, added. 79

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Safetech Innovations launches its first proprietary cybersecurity solution Safetech Innovations, the cybersecurity leader on the Romanian information security market, launches its first proprietary cybersecurity product â&#x20AC;&#x201C; iSAM, the Information Security Automation Manager. The launch comes after 18 months of work of the dedicated team of cybersecurity experts and programmers and an investment of EUR 550,000, out of which approximately 70% was provided through the European Regional Development Fund, the 2014-2020 Competitiveness Operational Programme. 80

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SAM solution allows the companies’ information security managers to better manage the cybersecurity within their organization, by automating certain processes, providing real-time updates about the level of cybersecurity protection and allowing early detection of cybersecurity threats. The solution primarily targets large companies from the finance and banking and finance, healthcare, transportation, energy, utilities as well as digital infrastructure sectors, since it provides legislative cybersecurity compliance that is applicable to these industries. More specifically, iSAM helps the companies to be compliant with different regulations currently applicable in Romania – Law 362/2018 on ensuring the high level of security of networks and information systems, Romanian Financial Supervisory Authority (ASF) Norm 4/2018 regarding the management of operational risks, the National Bank of Romania (BNR) regulation 3/2018 regarding the monitoring of the financial markets and

payment instruments infrastructure as well as the General Data Protection Regulation (GDPR). The key functionalities of the application developed by Safetech include: inventory of all the business processes and informatics systems in one place, management of politics and standards of security within the organization, continuous analysis and management of risks and vulnerabilities as well as the management of cybersecurity incidents, including cyberattacks. The solution automatizes some of the activities of the Information Security Officers as well as helps organize the cybersecurity management that is usually scattered onto several departments, thus saving time and aligning the practices used in a company. The platform also allows the security officers to generate almost instantly reports, showcasing the level of cybersecurity within the organization as well as provides tools for the management of the key security and risk indicators. “iSAM was developed having in mind the key challenges that both private and public institutions face nowadays – lack of available human resources, ever-changing digital environment as well as the necessity to comply with numerous regulations in place, both at the EU and local level. iSAM is a tool that allows the security officers manage in its entirety the cybersecurity processes of one institution, through one dedicated application. The main advantage of iSAM is that it does not only merely monitor and analyse the security indicators, but it also provides tools to act in case of imminent security threats, such as cybersecurity attacks. We are proud of the product and we believe that it is a much-needed product on the Romanian market that will help implement the highest levels of security within different organizations,” said Victor Gansac, CEO of Safetech Innovations. iSAM is available for testing and purchasing as of March 26. The development of iSAM solution is in 81

line with Safetech’s strategy to optimize its revenue streams as well as improve the position on the local cybersecurity market. Starting this year, Safetech will reduce the sales of third-party IT solutions in order to focus progressively on delivering proprietary cybersecurity services and products to its clients. In 2019, subject to available financing, the company is ready to develop its next proprietary solution. Earlier this year, Safetech announced it is considering listing on Bucharest Stock Exchange in order to attract fresh capital. Established in 2011, Safetech Innovations is currently the only dedicated information security company on the Romanian market, specialized in the field of cybersecurity and implementation of cybersecurity solutions. Safetech Innovations’ services include data protection, identification of vulnerabilities and risks, implementation of cybersecurity solutions and measures, response to cybersecurity incidents as well as creation of organizational culture oriented towards safety. The company offers a ‘cybersecurity one stop shop’, able to assist organizations in increasing their cyber resilience and solving any cybersecurity problems that could arise. Safetech Innovations has a large portfolio of clients, having worked with more than 20 key institutions from the financial and banking sector, local energy and utilities companies as well as international players such as ArcelorMittal. Safetech operates the sole Computer Emergency Response Team (CERT) in Romania, available to clients from both public and private sectors that offers continuous monitoring of cybersecurity threats and intervention in case of security incidents. STI CERT is accredited at the European level by Trusted Introducer and offers 24/7 monitoring system, alerting, incident management and forensic. Safetech is also the only Romanian company that is partner to NATO’s Industry Cyber Partnership.

ANALYSIS

Thermal power plants in Romania How to cope with new European pollution standards Romanian thermal power plants are ageing, they have outdated technologies and most of them risk not complying with the environmental conditions imposed by the European Commission (EC) starting with 2021. Romania last year submitted the Integrated National Energy and Climate Change Plans (NECP), but the document, in addition to setting too little a target for renewable energy, also envisages a reduction in coal production capacities.

Text by Adrian Stoica 82

ANALYSIS

viability estimated at approximately 40 years in the case of coalfired power plants. Withdrawing such a low number of units over the following decade would only be possible through major investments in upgrading those remaining operational, but most companies are barely able to cover their operating costs.

ECP are instruments created within the reviewed regulation of the Energy Union, aimed to support the Member States of the European Union (EU) in planning the climate and energy sectors. These plans are developed over a ten-year period, replacing other reference documents in this area. The government document has caused great dissatisfaction, the main reason being the too small target for the share of renewable energy in final energy consumption, of only 27.9%. According to a recent analysis conducted by Bankwach Romania Association, ambiguity remains one of the main issues of the NECP. An example in this regard is that it is already anticipated that in 2020 coal-fired capacity will be 3.7 GW, by 2.2 GW lower than the one currently available in the system. This decrease is not explained anywhere in NECP, nor did the Ministry of Energy or any operator announce the closure of any unit by the end of this year. In addition, by 2030, other units with a capacity of 500 MW are expected to be withdrawn. This slow reduction in coal-fired capacities is inexplicable, the authors of the study point out, given that the average age of coal units in Romania is 42 years, so most of them will not be able to make profit. The calculations underpinning the elaboration of the NECP are based on the National Energy Strategy, which provides for the construction of a new 600 MW unit at the Rovinari Thermal Power Plant. According to the quoted analysis, if this unit is built, it will probably never be profitable. Expenses with fuel, with CO2 emission allowances and limestone will consume 82% of total revenue, while the remaining available is insufficient to cover other costs (wages, operating costs) and even less to make a profit. The reduced target for the share of energy produced from renewable sources is not the only surprising element of the NECP. Equally striking is the evolution of coal-fired installed capacity. The installed capacity will drop from 3,212 MW in 2020 to 3,212 MW in 2030. An unexpected forecast, the analysis points out, for two reasons: a sudden decrease should take place in 2019. According to Transelectrica data, the total coal-fired installed capacity available on 01.02.2019 is 5,915 MW, by over 2 GW more than NECP estimates for 2020 - 3,752 MW. Although there are some units that have not operated in recent years, their combined power is below 1.3 GW, which means that some facilities used today will be decommissioned. However, neither the Ministry of Energy nor Transelectrica or operators of thermal power plants have announced any scheduled withdrawal for 2019 (or for any other moment). Only 540 MW will be withdrawn for a decade after 2020. The coal-fired installed capacity will diminish slightly by 2030, but this evaluation is questionable, the authors claim, for several reasons.

Climate objectives Limiting global warming to 1.5 degrees Celsius will only be possible if energy systems are radically transformed to zero emissions by 2050. Romania seems to be failing to take concrete steps to achieve this goal, given the unchanged reliance on coal dependence for electricity generation.

The new EU pollution standards The new EU pollution standards (BAT - Best Available Techniques), adopted in July 2017 and which will come into force in 2021, impose stricter limits on the air emissions of certain pollutants from large combustion plants - including sulphur dioxide (SO2), nitrogen oxide (NOx) and dust. Many units in Romania cannot fall within the existing limits, although they benefit from several derogations. This is largely due to the fact that operators cannot afford the necessary investments. Therefore, Romania violates the European legislation in the field. In 2017, the EC sent to Romania a letter of formal notice, as 4 thermal power plants were operating without integrated environmental permit. In fact, the issue of authorizations for these thermal power plants was not possible, since the pollution reduction technologies were missing. In 2018, another letter was sent to Romania, as emissions of sulphur dioxide and dust from Govora 2 and Deva 2 coal-fired power plants â&#x20AC;&#x153;significantly exceed the limits provided by the national ceilings.â&#x20AC;? No thermal power plant in Romania has requested yet a derogation from the new limits provided by the Industrial Emissions Directive. The most probable explanation for this insignificant decrease in the coal-fired installed capacity is due to the fact that estimates in NECP are based on the National Energy Strategy, published by the Ministry of Energy. The document provides for 4 priority projects, including the construction of a 600 MW lignite unit on the Rovinari thermal power plant site. Many thermal power plants in Romania are still benefiting from derogations from the emission limits for different pollutants by 2020, through the National Transition Plan (NTP). This allows plants to comply with the emission limit values applicable to them on 31.12.2015, which are higher than those set by the Industrial Emissions Directive, as long as the total national emissions drop from one year to another below a certain ceiling (for example, from 9,496 tons in 2016 to 3,960 tons in 2019 for sulphur dioxide). Some units have also benefited from other derogations, for example, through the Accession Treaty of Romania or the Large Combustion Plants Directive, but they have expired.

Age The average age of coal-fired units in Romania is 42 years, their age varying between 32 and 52 years. It means that in 2030 the average age will reach 53 years, exceeding the economic 83

ANALYSIS

THERMAL POWER PLANTS IN ROMANIA Almost all coal-fired power plants in Romania are owned by the state, with the exception of those in Bacau (operated by Thermoenergy Group) and Iasi (Veolia). Govora is owned by Valcea County Council and the rest are companies where the majority shareholder is the Ministry of Energy: Drobeta operated through RAAN; Craiova, Isalnita, Turceni and Rovinari are managed by Oltenia Energy Complex (CEO); Mintia (Deva) and Paroseni - by Hunedoara Energy Complex (CEH). The last two companies also exploit lignite and hard coal mines.

Bacau: 60 MW, in conservation (not working in the recent years);

Turceni 5: 330 MW (could meet the environmental requirements imposed as of 2021);

Iasi: 60 MW, compliance deadline for SO2, NOx emissions - 30.06.2020 (could meet the environmental requirements imposed in 2021);

Turceni 6: 330 MW (not working in the recent years); Turceni 7: 330 MW (could meet the environmental requirements imposed as of 2021);

Craiova 1: 150 MW, compliance deadline for NOx emissions - 30.06.2020 (upgrade is necessary that probably it will not be able to afford);

Govora 3: 50 MW, without integrated environmental permit, compliance deadline for SO2, NOx, PM emissions - 30.06.2020 (upgrades are necessary that probably it could not afford);

Craiova 2: 150 MW, compliance deadline for NOx emissions - 30.06.2020 (upgrade is necessary that probably it will not be able to afford);

Govora 4: 50 MW, without integrated environmental permit, compliance deadline for SO2, NOx, PM emissions - 30.06.2020 (could meet the environmental requirements imposed as of 2021);

Isalnita 7: 315 MW, compliance deadline for NOx emissions - 30.06.2020 (upgrade is necessary that probably it will not be able to afford);

Drobeta 1: 60 MW, bankruptcy;

Isalnita 8: 315 MW, compliance deadline for NOx emissions - 30.06.2020 (upgrade is necessary that probably it will not be able to afford);

Drobeta 4: 60 MW, bankruptcy;

Rovinari 3: 330 MW, compliance deadline for NOx emissions - 30.06.2020 (could meet the environmental requirements imposed as of 2021);

Drobeta 6: 60 MW, bankruptcy;

Drobeta 5: 60 MW, bankruptcy;

Paroseni 1: 50 MW, without integrated environmental permit (upgrades are necessary that probably it could not afford);

Rovinari 4: 330 MW, compliance deadline for NOx emissions - 30.06.2020 (could meet the environmental requirements imposed as of 2021);

Mintia 2: 210 MW, without integrated environmental permit (upgrades are necessary that probably it could not afford);

Rovinari 5: 330 MW, in modernization (upgrades are necessary that probably it could not afford);

Mintia 3: 235 MW, without integrated environmental permit, compliance deadline for SO2, NOx, PM emissions - 30.06.2020 (upgrades are necessary that probably it could not afford);

Rovinari 6: 330 MW (could meet the environmental requirements imposed as of 2021); Turceni 1: 330 MW (not working in the recent years);

Mintia 4: 210 MW, without integrated environmental permit, compliance deadline for SO2, NOx, PM emissions - 30.06.2020 (upgrades are necessary that probably it could not afford);

Turceni 3: 330 MW, compliance deadline for NOx emissions - 30.06.2020 (could meet the environmental requirements imposed as of 2021);

Mintia 5: 210 MW, without integrated environmental permit, compliance deadline for SO2, NOx, PM emissions - 30.06.2020 (upgrades are necessary that probably it could not afford);

Turceni 4: 330 MW, compliance deadline for NOx emissions - 30.06.2020 (could meet the environmental requirements imposed as of 2021)

Mintia 6: 210 MW, without integrated environmental permit, compliance deadline for NOx, PM emissions - 30.06.2020 (upgrades are necessary that probably it could not afford).

SOURCE: TRANSELECTRICA NOTE: COAL-FIRED INSTALLED CAPACITY ON 01.02.2019

ANALYSIS

Non-operating thermal power plants

again. Given that CEO was strongly affected by the increase in the price of CO2 emission allowances and that it should upgrade other units by 2021, the completion of this investment remains uncertain. Govora 3: There are currently three large combustion plants (LCP) operating on the Govora thermal power plant site. One of them was switched to gas, another was modernized to continue to operate on coal and the last - Govora 3 - has not undergone any upgrade work and has record emissions. Moreover, together with Minitia 2, it has exceeded the NTP ceiling for SO2 and dust, emitting more than all plants included in the plan. Given that there are no plans to upgrade Govora 3 and that the thermal power plant can rely on other two plants to continue production, this unit will most likely be the first to be withdrawn. Mintia: Unit 2 is the only plant of the thermal power station that does not benefit from derogations from the emission limits under NTP. It is due to the fact that the regulations of LCP Directive do not apply to it, with the condition of operating maximum 20,000 hours until December 31, 2015. But this did not happen. According to the latest Annual Environmental Report, this unit operated for 1,270 hours in 2017 alone, clearly violating Directive 13. The report further states that “for unit 2, CEH did not make a decision on definitive withdrawal from operation before initiating insolvency proceedings (...) Unit 2 was started in July 2017 for tests.” The other units of Mintia thermal power plant have not been upgraded either. The National Energy Strategy mentions that, besides unit 3, the other plants will be withdrawn. The national gas company Romgaz has also announced an intention to build in the near future a gasfired unit on the site of Mintia thermal power plant. Paroseni: Together with the other thermal power plant of CEH - Mintia - Paroseni is still operating illegally, in absence of an integrated environmental permit. CEH is in a poor economic condition, managing at the same time 4 non-profitable hard coal mines. After many delays, things started to move last year at Paroseni, when an investment of EUR 65 million to reduce SO2 emissions was started. However, it is no clear whether the other limit emissions under the new EU pollution standards will be met, given that the unit does not have the technology of selective non-catalytic reduction of nitrogen oxides (SNCR).

Bacau: The coal-fired unit in Bacau was used in the past to supply heat to the city. For this, Bacau currently uses a gas-fired unit. Although the coal-fired unit has been in conservation for years, the company does not plan to decommission it “until a local/national strategy of clarification of the situation is published,” according to a communique from 2017. Turceni 1 and 6: Unlike the other units operating on the site, units 1 and 6 in Turceni have not been upgraded over the past two decades. A wet desulphurization system for flue gas was built for unit 6, but because more costly investment was needed to streamline the unit, the company decided in 2016 to connect unit 7 to the desulphurization system and dismantle unit 6. The operator of Turceni power plant announced in 2016 that it would dismantle unit 1 as well, repeating the announcement in 2018, but this has not happened yet. Drobeta: The power plant operator, RAAN, has gone bankrupt since 2015. To ensure the city’s heating, the municipality has rented two boilers since 2016 and plans to build a gas unit as a long-term solution. In turn, electricity is no longer produced.

Unsafe thermal power plants Isalnita: Although CEO has invested in both units of the power plant to meet emission requirements, their future is uncertain. These facilities are the oldest lignite units in Romania, operating 300,000 hours each since 1967. In addition, in order to meet the new EU pollution standards for 2021, CEO prioritizes investments for the other thermal power plants it manages - particularly Rovinari and Turceni. In 2016, the company announced that unit 8 would be closed by 2019, but during 2017 and 2018 this announcement has turned into “the thermal plant will especially use unit 7.” Craiova: These are the most recent units of CEO, being put into operation in 1987 and 1989, respectively. Consequently, no rehabilitation works have been executed. Upgrading will become necessary, as the units have over 150,000 hours of operation to date and an age of 30 years. Moreover, additional emission reduction measures will be needed to meet the new EU pollution standards, which will lead to an increase in total costs. Starting from this consideration, as in the case of Isalnita, CEO will prioritize the Rovinari and Turceni thermal plants, which are more efficient. A potential advantage of this thermal power plant is that it produces heat for Craiova, one of the largest cities in Romania and an important industrial centre, so that probably at least one unit will remain functional or will be switched to natural gas if necessary. Rovinari 5: The unit was closed in February 2015 for rehabilitation in order to increase efficiency and meet emissions requirements. The upgrade was due for completion in 2430 months, but suffered further delays. In February 2019, the project was completed at a rate of 45% and was delayed once

Safe thermal power plants 2020 Iasi: The relatively low capacity thermal power plant in Iasi is operated by Veolia, the French transnational utility company. Although the unit is old enough, the company may decide to switch it to natural gas. Unlike the other thermal power plants mentioned above, the fact that CET Iasi II has an integrated environmental permit valid and has been upgraded to reduce pollution is an advantage. The thermal power plant also supplies heat to the city with the fourth largest population in Romania and therefore receives a cogeneration bonus amounting to a total of RON 27 million in 2017. 85

ANALYSIS

Rovinari 3, 4 and 6: This thermal plant is the most efficient of those operated by CEO. Built between lignite mines, fuel is shipped directly onto the conveyor belts to the thermal power plant, so transport costs are significantly reduced. However, all quarries managed by CEO will need to be expanded to continue production, and mining machinery also needs modernization, so costs will increase over time. CEO plans to invest in these units to meet the new EU pollution standards and the integrated environmental permit which had expired on 31.12.2017 was renewed on 25.05.2018, thus operating illegally for 10 months last year. Turceni 3, 4, 5 and 7: Unit 7 at the Turceni Thermal Power Plant benefited from a derogation from the LCP Directive, provided it operated for 20,000 hours until December 31, 2015. This condition has not been observed and the unit has operated illegally for nearly 3 years, until November 23, 2018, when the integrated environmental permit of the thermal power plant was reviewed to include this unit as well. Having already benefited from a derogation, it now has to meet the strictest pollution limits under the new EU pollution standards. According to the latest permit, this is possible, given that units 5 and 7 have been upgraded and are now equipped with selective non-catalytic nitrogen oxide (NOx) emission reduction technology. The same investment is also provided for the other two functional units. Govora 4: The thermal power plant operates illegally because it does not have an integrated environmental permit, but according to its reauthorization request it could theoretically be legalized. The request shows that various investments have been made to ensure that the plant complies with existing environmental legislation - a desulphurization plant and a selective non-catalytic NOx reduction system.

to enhance the quality of the environmental impact assessment procedure and align this process to the principles of smart regulation. In addition, the Directive mentions that the issues to be taken into account implicitly in the environmental assessment are the impact of the project on climate and its vulnerability to climate change. It is important to note that the planned unit in Rovinari is already included in the National Energy Strategy, so it can receive additional support from the government. According to the National Energy Strategy, this project would create a significant number of jobs in the region, but the document does not mention how they will be created. The analysis focuses on the economic challenges and vulnerabilities of the 600 MW lignite-fired plant planned in Rovinari. The potential for generating the profit of a thermal power plant is determined by the revenue generating capacity and the costs associated with energy production. In the case of a coal-fired power plant, there are three important elements of the production cost: fuel cost, in this case lignite; the cost of carbon dioxide (CO2) associated with energy production; cost of limestone added to reduce sulphur dioxide (SOx) emissions. For the Rovinari 7 project, 82% of total revenue will be used to cover the three costs. According to the analysis, even in the first year of operation, the project will generate only a gross commercial margin (total revenues - costs) of RON 187 million. This is likely to be insufficient to cover fixed costs (salaries, operating and maintenance costs etc.), depreciation costs and interest expenses related to the project. The authors of the analysis point out that it was based on normal market conditions, in the sense that the planned unit would sell electricity on the liberalized market, where no other sales of electricity, such as that produced from renewable energy sources, biomass would be recorded and no additional compensation would be granted through capacity allocation mechanisms. Prices on the energy market in Romania are calculated based on prices for the Day-Ahead Market (DAM) and on futures prices on the energy exchange in Romania (Operator of the Electricity and Gas Market in Romania - OPCOM). Therefore, the assessment of the estimated financial performance of the planned unit will be based on available energy sales prices. The level of DAM for base load on OPCOM fluctuated for most of 2018 below EUR 50/MWh. Futures prices expected for 2019 and 2020 are below EUR 50/MWh. These market conditions are not a good environment for project implementation. No other additional selling opportunity - biomass co-firing, system services etc, was considered, which could increase sales revenue. Under these conditions, the thermal power plant will face a very difficult financial environment from the first year. By analysing the structure of operational costs from a prudent scenario perspective, the project would not be able to generate the cash needed to pay the loan instalments needed for the construction or to provide some return to shareholders. We mention that this project is already among the objectives of the National Energy Strategy, so it could benefit from additional support schemes - biomass co-firing, additional income sources etc, but these have not been mentioned so far in any document.

Rovinari 7 project In 2012, Romania announced its intention to build a new coal unit on the site of Rovinari Thermal Power Plant. Based on the available information, the report analyses economically the project of the 600 MW supercritical unit having available the data of the preliminary feasibility study, information from the energy market and strategic energy documents. Starting from the current shortterm perspective of the energy market, the study addresses two fundamental issues regarding the operation of the new Rovinari unit. Economic aspects: There may be difficulties in paying the instalments of the loan needed to build the unit, as cash flow generation would be limited and insufficient given the current prices in the energy market. Environmental aspects: Issuing environmental permits will also pose a challenge, under a stricter procedure to grant them under the current EU legal framework. Directive 2014/52/EU of the European Parliament and of the Council amended Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment. The amended Directive seeks 86

ANALYSIS

Evolution of prices for CO2 emission allowances

claim that the fines, which in some cases are at the same level as those imposed on restaurants that allow customers to smoke indoors, are part of Romania’s systematic failure to set and apply appropriate sanctions. Under the Industrial Emissions Directive (IED), Member States are obliged to adopt ‘effective’, ‘proportionate’ and ‘dissuasive’ sanctions to punish non-compliant operators. In Romania, sanctions imposed on operators of coal-fired power plants are far too small to prevent their illegal operation, the press release said. For example, for operators of coal-fired power plants, whose annual revenues are typically between EUR 86 and 400 million, the sanction for non-authorized operation is a single fine from RON 30,000 to RON 60,000. Moreover, if the operator pays the fine within 15 days, the level drops to half the minimum, i.e. RON 15,000. By comparison, in Spain and Greece, the operators of thermal power plants are exposed to fines of up to EUR 2 million for operation without authorization. At present, 3 out of 8 coal-fired power plants operate since 2013 without integrated environmental permit, but have only been fined once. Sanctions could be more effective and could discourage illegal operation if the authorities apply them repeatedly. The Commission will examine the complaint filed by ClientEarth and Greenpeace and will decide whether to take legal action against Romania.

It will be essential for the viability of the project. Coal-fired power plants that do not have carbon dioxide (CO2) reduction technologies are typically the installations that generate the highest CO2 emissions in any country. This is the case here, and the still-functioning coal-fired units are even more polluting with regard to greenhouse gases, especially nitrogen oxide (NOx), sulphur dioxide (SO2), carbon dioxide (CO2), but also particulate matter (PM 10, PM 2.5). An essential issue under the new Emissions Trading Scheme is the price level on European exchanges. A sharp rise in prices has been observed over the past 15 months, which has significantly influenced the financial sustainability of coal-fired units, as they operate anyway at a high rate of carbon dioxide (CO2) emissions. The current ETS price level is over EUR 21/MWh, accounting for about 50% of the sales price the project can make.

Investment cost The construction cost of the thermal power plant corresponds to the European industrial standards. The planned unit would operate at higher pressures and temperatures compared to conventional thermal power plants or with circulating fluidized bed technology. It is important to note that, based on the preliminary feasibility study of the project, a staged flue gas cleaning system was designed to meet the limits imposed by the LCP Directive. Thus, there will be a flue gas desulphurization plant, and in the second stage a selective non-catalytic reduction system would reduce the emissions of nitrogen oxides (NOx) of the planned unit. However, a system for reducing carbon dioxide emissions (CO2) is not foreseen, and this will have significant implications on the financial sustainability. The total cost of the investment is slightly less than one billion euros and includes the cost of the plant, project development costs and unplanned costs, in line with relevant industry standards. One of the important features of the planned investment is the efficiency of the thermal power plant. The use of coal in conventional units and adding desulphurization equipment and equipment for the reduction of nitrogen oxides of flue gas would reduce efficiency. Considering only the additional flue gas cleaning system, without reference to additional efficiency improvement methods, meeting the required efficiency limits will become difficult. From the perspective of the capacity allocation mechanism, in many EU Member States, one of the eligibility criteria for participation in such markets is the minimum efficiency criterion.

Government plans to erase debts The Government wants to erase the budget debts of power producers facing financial problems such as CEH or Electrocentrale Bucharest and has developed a procedure whereby they will be able to transfer in lieu of payment to the Ministry of Energy functional production assets in exchange for extinguishing tax receivables that the National Agency for Fiscal Administration (ANAF) has over them. The measure, which would apply until December 31, 2021, is an attempt to keep alive these vital units for the safety of the functioning of the national energy system. The debt erasure measure is justified “in view of the difficult economic and financial situation of some economic operators, such as CEH and Electrocentrale Bucharest, which have electricity generation capacities of particular importance in maintaining the level of safety in operation of the National Power System,” reads a document of the Executive. The document also states that the measure is justified by the fact that the dispatchable energy production units have the obligation to offer all the electricity available on the balancing market and that the economic operators holding dispatchable units have debts managed by ANAF and the adoption of some measures for their recovery through enforcement measures or other means of extinguishing claims do not ensure the desideratum of maintenance within the National Power System.

ClientEarth and Greenpeace notify EC ClientEarth and Greenpeace Romania have reported to the European Commission about the very low level of sanctions imposed by authorities on coal-fired power plant operators in breach of European law, urging the Commission to act, a Greenpeace Romania release said. The two organizations 87

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Cities of Tomorrow #7: Communities in Focus It takes a whole village to raise a child! African saying, Ambassador of the German Republic in Bucharest There is no cooperation without trust, trust is the currency of participation, Dr. Arnold Voss

he German-Romanian Chamber of Commerce and Industry (AHK Romania) organized on March 26, 2019, the seventh edition of the conference Cities of Tomorrow at JW Marriott Grand Hotel in Bucharest. The event brought together more than 300 participants from across the country, but also from abroad, including architects, urbanists, business representatives and numerous

representatives of the public sector, confirming once again that the event has an international approach, dedicated to the importance of urban and regional development. The central theme this year was the trialogue between the administration, the business environment and civil society, the motto of the event being â&#x20AC;&#x2DC;Think global. Act local.â&#x20AC;&#x2122; The opening of the event was held by the General Manager and the President of AHK Romania, Mr. Sebastian Metz 90

and Mr. Dragos Anastasiu, and by HE Ambassador Cord Meier-Klodt, Ambassador of the German Republic in Bucharest. The central theme of the first part of the event was the importance of public consultation and community participation in urban development projects. Therefore, the first speakers presented the project Raumwerk D of DĂźsseldorf (one of the most complex projects in terms of public consultation

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and urban reconfiguration of an entire city). Afterwards, we welcomed Arch. Eugen Panescu and Dr. Arnold Voss, renowned international planner, in a dialogue regarding the correct approach on big urban projects and the involvement of all relevant stakeholders. Mr. Marius Cristea, The World Bank Group, had the opportunity to present for the first time the results of the consultation process of the World Bank, ‘Prioritățile orașului tău’. This unique consultation process for cities in Romania and their development priorities, involved 41 municipalities, 372 strategic projects and 72 billion euro for the development of Romanian cities. 100.000 Romanians participated in the survey, with the purpose of contouring an urban and metropolitan development strategy of the country. The process ended on March 22 and on March 26 the premiere of the results was hosted at Cities of Tomorrow #7. The findings show a direct connection between the education level, a certain professional profile and the interest for the community. Among the priority projects voted by the citizens of Bucharest, the expert of the World Bank mentioned: the extension and modernization of the subway network, the modernization of the ring road, developing the highway to pass through Ilfov County. General priorities for Romanians from all over the country are the health care system and the infrastructure. Before this edition, it was organized a project competition for public administration, business environment and civil society. The projects in focus were the ones dealing with sustainable development, initiatives for regional marketing, the quality of life or the dialogue between stakeholders. With the help of a specialized jury with a vast experience, 10 finalists were chosen out of all 83 submitted projects. Therefore, the 10 participants received special attention during the pitching session, where they had the chance to present their projects: category public

administration: City of Resita (‘Incredere in Resita’ – local program for financing projects of the citizens), City of Reghin (Reghin City App), City of Oradea (transformation of the historical center of the city) and Invest in Jiu Valley; category business environment: Ceetrus (Drumul Taberelor), Life is Hard (City Apps), Speedwell (Record Park Cluj-Napoca); category civil society: Association Over4 (rehabilitation of apartment buildings by means of a solar house extension prototype), Fundatia Comunitara Bucuresti (‘Bucurestiul Pregatit’ – fund for major natural disasters) and the Order of Architects in Romania (platform 30zile.ro). The winners of the category public administration: City of Resita; business environment: Ceetrus; civil society: Association Over4. The awards of AHK Romania for the three winners were: public administration – 1 visitor package at Expo Real 2019, the most important trade fair in Europe for real estate and investment; business environment – 1 year of full econet partnership, the green tech platform of AHK Romania www.econet-romania.com; civil society – 1 participation package at the AHK Romania delegation to the Smart City World Congress in Barcelona 2019. “The idea for the project competition came from the desire of highlighting the best practice examples in Romania and giving them a platform for promotion. The fact that we received over 80 proposals during the first competition is a success for our community and this conference. This country is full of creative, innovative ideas and people. The energy in this country is amazing. We should and we will use this advantage,” Sebastian Metz, General Manager AHK Romania stated. The second part of the event was dedicated to finding concrete solutions regarding 8 topics of high importance for the regional development: energy efficiency & energy management, financing & EU funds, mobility, city governance/digitalization/city 91

information platform, construction law, reconversion & revitalization, circular economy, tourism & lifestyle. Each of these topics was discussed separately during the round table debates, where participants had the opportunity to actively engage and contribute with input on the chosen subject. The best solutions were voted by the conference participants and the members of the winning round table were awarded prizes during the award ceremony of the event. The roundtable Tourism & Lifestyle, moderated by Mr. Dragos Anastasiu, won the title for the best identified solutions on the case study Baile Herculane. 31 participants, tourism experts, specialists in hospitality, the medical and heritage sectors, as well as representatives of the central and local authorities concluded that there is a need for a destination management organization in Herculane. The project manager of this initiative will be Mr. Marius Bazavan (Bacolux). “Tourism has no time to wait and this is why we need to act now. Baile Herculane are a national treasure of the Romanian tourism and we didn’t take proper care of it until now. An organization for the destination management and the support of all stakeholders present at the event will help develop Herculane into what it needs to become,” declared Mr. Dragos Anastasiu, President of the GermanRomanian Chamber of Commerce and Industry. Similar to previous years, the conclusions and solutions of the round tables will be summarized in the follow-up brochure of the event, while the German-Romanian Chamber of Commerce and Industry together with its partners from the private and public sectors will focus on implementing them. This year’s edition of Cities of Tomorrow, organized by the GermanRomanian Chamber of Commerce and Industry, confirmed once again that the event became an important platform for interaction between the public and private environments, offering the possibility to exchange information, ideas, experiences and valuable contacts.

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Romania at CERAWeek 2019 4,000 representatives of the energy industry, government officials from more than 75 countries and representatives of the civil society attended, during March 1315, 2019, in Houston, Texas, the most important energy event - CERAWeek.

Text by Daniel Lazar

omania was represented by Energy Minister Anton Anton, who attended the event hosted by the Department of Energy, Partnership for Transatlantic Energy Cooperation (P-TEC) Ministerial and Investment Forum, under the auspices of CERAWeek. The U.S. launched in September 2018, within the 3 Seas Initiative Summit in Bucharest, the concept of a transatlantic energy cooperation format (P-TEC). According to the initial vision, the objectives of this initiative aimed at energy markets liberalization, development of power grids interconnection, increased confidence and resilience of power grids and gas pipelines, boosting energy efficiency. Minister Anton Anton highlighted, in Houston, the importance of development, on Romania’s territory, of the National Gas Transmission System on Bulgaria Romania - Hungary - Austria corridor (BRUA), after, in early March this year, he had attended, in Brussels, a meeting with representatives of Austria, Bulgaria and Hungary on the evolution of works at the gas pipeline. Within the first ministerial forum

dedicated to transatlantic energy cooperation, meetings have taken place with representatives of US companies in the industry and with Romanian employees of various companies in the energy and oil industry from Houston, Texas. An event dedicated to energy also took place in Europe, the fifth edition of EU Energy Summit, event held in Brussels and organized by Business Bridge Europe and European Business Summit. “International energy markets are going through an extensive transition process, which takes place at technological, geopolitical, economic level and at the level of climate change. At European level, we are on the verge of a deep transformation of both how we will produce and consume energy and also how the society we live in will cope with these challenges. It’s a reality to which we will have to adapt to maintain our competitiveness and energy security. All these changes, whose purpose is a less polluting energy, will have to materialize in benefits for the citizens of the European Union and in affordable prices,” the Energy Minister said during the event held in Belgium’s Capital. In 1983, Cambridge Energy Research 92

Associates (CERA) was founded in Cambridge, Massachusetts by Daniel Yergin and James Rosenfield. The energy research and consulting firm quickly became known for its critical knowledge and independent analysis on energy markets, geopolitics, industry trends, technology and strategy. Each year, CERA clients gathered for a few days in Houston, Texas to attend the executive conference where they gained insight into the energy future while connecting with their peers. Over time, the program was expanded to five days of informative sessions and networking opportunities— and named CERAWeek. More than three decades later, CERAWeek by IHS Markit has become the world’s premier energy event. The conference is distinctive in the extraordinary depth and breadth of its content and the quality of the dialogue among participants. CERAWeek is the premier annual international gathering of energy industry leaders, experts, government officials and policymakers and leaders from the technology and financial communities. 2019 marks the 38th anniversary of this influential event, ranked among the top five ‘corporate leader’ conferences in the world.

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ROEC Bucharest Talks Black Sea Energy Security O

n March 12, the think tank Romania Energy Center (ROEC) organized a new event part of the ROEC Bucharest Talks series. The project itself was launched by the think tank in 2018 to engage the biggest names (in 4 core areas of interest) in meaningful conversation on current affairs topics in order to stimulate highquality intellectual debate and create opportunities for dialogue between the Romanian public and high-profile international experts. This 3rd talk was a

lecture by British energy security expert John Roberts – a household name for anyone working in energy geopolitics. The event was organized in partnership with the Bucharest University of Economic Studies and with the support of Energy Industry Review, Civitas Politics, Revista 22 and Impromedia.

The guest speaker John Roberts has five decades worth of experience as a correspondent, bureau chief and energy analyst having 94

worked for Reuters, Platts, Financial Times Energy, Energy Intelligence, Middle East Economic Digest, Business Monitor International (BMI) and Al Hayat. Currently a member of the United Nations Economic Commission for Europe Group of Experts on Gas, Roberts is a Senior Fellow with the Atlantic Council’s Eurasia Center and Global Energy Center. His latest think tank publications for the Atlantic Council include such reports as ‘Three Pipelines and Three Seas: BRUA, TAP, the IAP and Gasification in Southeast

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Europe’ (2018), ‘Completing Europe. Gas interconnections in Central and Southeastern Europe — An Update’ (2016); and ‘The Impact of Turkish Stream on European Energy Security and the Southern Gas Corridor’ (2015).

The highlights The expert started by emphasizing that “energy security these days is more about gas, not oil”. Oil is fungible, gas is not. Gas requires expensive and complicated infrastructure (pipelines, LNG, or CNG) and it “costs twice as much to shift a unit of energy in the form of gas than it costs to move around a unit of energy in the form of oil”. There is no single definition on what constitutes energy security. The terms do not mean the same for everyone, especially if adjectives (which are subjective) are involved such as: sufficiency, surety, survivability or sustainability. For instance, what is sustainable in a rural climate is not sustainable in densely populated cities. The speaker explained the fundamental difference between pipeline versus LNG and why it matters. The pipeline gas is a ‘bilateral affair’ (a direct relationship between buyer and seller) while LNG means the possibility to send it anywhere in the world – essentially, more flexibility. Talking about Russia and its price discrimination in different markets, he asked: why did Russia charge Macedonia 564 USD/1,000 m3, the UK – about 300 USD when others spent far less? Because Macedonia was not connected to anybody else and had no other choice. According to Roberts, this is ‘classic monopolistic practice’ – a perfectly standard practice which does happen with other industries and other countries as well. The solution to this is to work out ways to avoid dependence on a single supplier. However, this is not easy to do, particularly in regions that have been historically dependent on Russia for natural gas. And this dependence on Russian gas in Europe will grow, he warns.

He predicts that faced with climate change concerns and energy transition, Europe will offer a growing market for Russian gas (which, already big, will get even bigger), especially in the context of declining indigenous European gas production. Any hope for gas diversification in Europe comes from LNG, and in particular US LNG which he dubs as ‘a really good long term bet for gas supply’. In his view, energy interdependence works only if you have a diversity of potential supply sources. However, “you don’t need to be energy independent” to be energy secure. One of the dangers of trying to be energy independent is to end up with a closed market which creates a whole network of subsidies domestically. And “generic broad-based subsidies tend to cause generic broad-based problems”. The solution is not a closed market, but trade, because trade creates market prices. Regarding the Black Sea area, he outlines that the invasion of Crimea and its seizure by Russia created a quantitative change which resulted in the resource development around Crimea being in effect taken off the table, depriving Ukraine of ¾ of its maritime offshore resources. So, it’s not about “a plus going into Russia’s column, but about a minus going into Ukraine’s column”. Finally, probably the most important point about the Romanian Black Sea resources was that they are “useful, but not earth-shattering discoveries”. They are commercially viable in a local context, so their purpose will be mainly local leaving a “small amount for seasonal export or even a small amount for year-round exports”. The takeaway: Romania will be once again (as it was) self-sufficient in gas, but not a major gas exporter.

On BRUA As far as gas pipelines are concerned, he talked about BRUA in the context on Turkish Stream (second line). Sales of Russian gas to Europe have increased and the prices have recovered which now gives Russia the surplus income to build the second line of Turkish 95

Stream (which will go to Baumgarten). Commenting on the scope of BRUA and its likely success, Roberts reminded that BRUA is a limited capacity line if compared to Russian pipelines (which are gas systems commonly carrying around 30-33 Bcm). BRUA is designed to carry 4.4 Bcm – “a modest and useful contribution” in his opinion, but which will not solve the major energy security problem which is: where do you get your gas from, if for some reason (any reason) your chief supplier cannot supply you? The Southern Gas Corridor is Europe’s response to this exact issue. BRUA has received financial support from the European Commission because of that. However, at a 4.4 Bcm capacity, BRUA is “too small for an insurance policy” he thinks. It would make sense to double the existing capacity of commercial priority projects (in BRUA’s case – a larger diameter pipe, or a tougher pipe and spare capacity in the form of extra compression). In addition, he questioned whether BRUA will be able to fulfil even its original purpose of connecting Bulgaria with Romania, Hungary and Austria. “The Hungarians are supposed to be cooperating”, he went on. “But, are they in practice?” he asked rhetorically. The Hungarians have suggested not using the congested link between Hungary and Austria, but use an existing link between Hungary and Slovakia instead. But, if Romania cannot link with Baumgarten at the far end, what is the point of connecting BRUA with the offshore fields? What is the purpose of Romania’s offshore gas fields? Only for domestic use? It can still make sense, the expert thinks, but “it basically, returns Romania to being what it sought to be in the Soviet days: an independent energy island.” As, for Turkish Stream, it “will proceed apace, aided by Hungary.” This message should worry Romania greatly. To watch the full video recording of the event, go here: www.roec.biz/event/johnroberts-black-sea-energy-security/ More about ROEC Bucharest Talks project here: www.roec.biz/roec-bucharest-talks/

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Top challenges in the gas sector on the agenda of RIGC Considering that Romania holds a considerable growth potential relative to the regional gas market, a stable and predictable regulatory framework is a prerequisite for encouraging investments. In the context of the disputed GEO 114, the representatives of companies say that Romania risks missing on the opportunity of becoming a gas hub at the level of South-Eastern Europe. 96

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oreover, predicta bility is the one that can substantially contribute to our country’s energy independence. Franck Neel, Executive Board member responsible for Downstream Gas at OMV Petrom and FPPG President, believes that gas plays a key role in solving the current challenges - increased energy demand and climate change. Therefore, it is worth continuing the flow of new discoveries, as this represents an opportunity not only for companies, but also for the economy as a whole. For opportunities to materialize, it is important to have an adequate regulatory framework, fiscal stability, conditions of competition, key infrastructures and liberalized markets. The second edition of RIGC - Romanian International Gas

Conference - brought together on 13 March, in Bucharest, officials and experts both Romanian and from the Member States of the European Union, in order to debate the main challenges and development opportunities specific to the gas sector in Romania and in the region. The role of natural gas in energy and climate strategies was addressed by European Commission representatives through the voice of Catharina SikowMagny (DG Energy), Gerd Bommer (Austrian Embassy Commercial Counsellor), Zakonyi Botond (Hungary’s Ambassador to Romania), Julian Popov (Goodwill Ambassador for Energy and Climate, Bulgaria), as well as Aliki Skliri (Director of the Hydrocarbon Directorate in Greece). The topic focused on the capitalization of natural gas at present and in the near future was communicated from the point of view of representatives of some of the most important companies in the sector, OMV Petrom, Engie and E.ON. Viorel Toma, President of ANPM (National Agency for Environmental Protection), congratulated at the beginning of RIGC - Romanian International Gas Conference the initiative of organizing debates at international level. He claims that the development of the gas sector on the energy market is in a mutual support dynamic, also pointing out the involvement of the Ministry of Environment especially in carrying out programs for the reduction of greenhouse gases. The delegate official of the Ministry of Environment recalls that at present methane concentration is twice as high as in the pre-industrial era. In this regard, modern gas-fired power plants are part of the adequate longterm solutions, taking into account the considerably lower construction time the average being two years compared to five years for coal and eight years in the case of nuclear units. The representative of the Ministry of Energy, State Secretary Iulian-Robert 97

Tudorache, brought to the attention of the participants that transition to a decarbonized economy is not easy to achieve. However, decarbonization strategies based on gas are less costly than those based on electrification. “Romania has a balanced energy mix, which can give its energy industry a sustainable future. Hydrogen is an essential element towards lowcarbon energy. Depending on carbon capture and storage (CCS) technology, hydrogen has the potential to become the green alternative to fossil fuels.” The State Secretary highlighted that solutions dedicated to decarbonization are focused around three pillars: energy security, energy poverty and the environmental problems specific to each state. The conclusions of the conference presented by Razvan Nicolescu, Senior Partner at Deloitte, highlighted the two major challenges of the natural gas sector, the first being related to the growing demand and the other caused by climate change. “Adopting the same behaviour as before, we will not reach the climate change targets assumed for 2030. Substantial changes are necessary. Further, we need to believe in markets and if there isn’t sufficient competition then we will have to create it. Otherwise, it will be very difficult to capitalize on this country’s potential,” Razvan Nicolescu said. The conference organized by EPG (Energy Policy Group) in partnership with IOGP (International Association of Oil & Gas Producers), FPPG (Oil and Gas Employers’ Federation) and ACUE (Federation of the Associations of Energy Utility Companies, Romania), through the presence of over 150 experts recognized in the industry aimed to provide an integrated approach of impact issues currently faced by the energy industry: the offshore law, GEO 114, sector decarbonization, the energy strategy of the country and the project of the national integrated plan - energy and climate change 2021-2030.

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Global Energy & CO2 Status Report The latest trends in energy and emissions in 2018

he recently published Global Energy & CO2 Status Report by IEA shows that the global energy consumption in 2018 increased at nearly twice the average rate of growth since 2010, driven by a robust global economy and higher heating and cooling needs in some parts of the world. Demand for all fuels increased, led by natural gas, even as solar and wind posted double-digit growth. Higher electricity demand was responsible for over half of the growth in energy needs. Energy efficiency saw lacklustre improvement. Energy-related CO2 emissions rose 1.7% to a historic high of 33.1 Gt CO2. While emissions from all fossil fuels increased, the power sector accounted for nearly two-thirds of emissions growth. Coal use in power alone surpassed 10 Gt CO2, mostly in Asia. China, India, and the United States accounted for 85% of the net increase in emissions, while emissions declined for Germany, Japan, Mexico, France and the United Kingdom. Oil demand rose by 1.3% in 2018, led by strong growth in the United States. The start-up of large petrochemical projects

drove product demand, which partially offset a slowdown in growth in gasoline demand. The United States and China showed the largest overall growth, while demand fell in Japan and Korea and was stagnant in Europe. Natural gas consumption grew by an estimated 4.6%, its largest increase since 2010 when gas demand bounced back from the global financial crisis. This second consecutive year of strong growth, following a 3% rise in 2017, was driven by growing energy demand and substitution from coal. The switch from coal to gas accounted for over one-fifth of the rise in gas demand. The United States led the growth followed by China. Coal demand grew for a second year, but its role in the global mix continued to decline. Last yearâ&#x20AC;&#x2122;s 0.7% increase was significantly slower than the 4.5% annual growth rate seen in the period 2000-10. But while the share of coal in primary energy demand and in electricity generation slowly continues to decrease, it still remains the largest source of electricity and the second-largest source of primary energy. Renewables increased by 4% in 2018, accounting for almost one-quarter of 98

global energy demand growth. The power sector led the gains, with renewablesbased electricity generation increasing at its fastest pace this decade. Solar PV, hydropower, and wind each accounted for about a third of the growth, with bioenergy accounting for most of the rest. Renewables covered almost 45% of the worldâ&#x20AC;&#x2122;s electricity generation growth, now accounting for over 25% of global power output. Electricity demand rose by 4%, nearly twice as fast as overall energy demand, and at its fastest pace since 2010. Renewables and nuclear power met the majority of the growth in demand. Still, generation from coal- and gas-fired power plants increased considerably, driving up CO2 emissions from the sector by 2.5%. Energy efficiency across the global economy continued to improve, with global primary energy intensity falling by 1.3%. But this was lower than improvement rates seen in recent years. Although efficiency was still the biggest source of carbon dioxide emissions abatement in the energy sector, 2018 marked the third consecutive year in which the improvement rate for energy efficiency slowed.