Romania may challenge Russian grip on Europe’s energy
BUCHAREST: Romania, one of the EU’s poorest members, could emerge as an unlikely challenger to Russia’s iron grip on eastern Europe’s energy supply thanks to vast oil and gas reserves waiting to be tapped, experts say.
Its hydrocarbon riches already give Romania a high degree of energy self-sufficiency, but there are many more untapped reserves under the Black Sea, attracting the attention of the world’s oil and gas majors. Some, including US giant ExxonMobil and Austria’s OMV Petrom, have started drilling in the Black Sea.
“Romania’s position as a potentially significant gas producer in this region is unique and the resources here may pose a threat to what has been mostly a Russian monopoly,” said Mark Beacom, CEO of Black Sea Oil & Gas, a company owned jointly by the Carlyle Group and the European Bank for Reconstruction and Development.
But the energy majors have put their ambitions on hold after Bucharest passed legislation that will tax revenues from offshore drilling and stipulate that half of output must be reserved for the domestic market – even though the country still lacks much of the infrastructure needed to distribute and consume it.
Romania currently produces about 10.5 billion cubic metres of gas each year, largely onshore, and consumes 11-12 billion cubic metres, making it almost completely independent from Russian gas unlike its eastern European neighbours.
According to varying estimates, further untapped reserves of between 170 and 200 billion cubic metres lie deep in the Black Sea that could be extracted by 2040.
Romania could “become a regional hub and contribute to Europe’s energy security”, the Energy Ministry said.
Russia is one of the biggest suppliers of oil and gas to Europe, a stranglehold that the West has long tried to break in view of recurring geopolitical tensions between the former Cold War foes.
In the 2000s, a dispute between Russia and Ukraine left Europeans shivering in the middle of winter when Russian giant Gazprom cut supplies to the West.
“The volume of (offshore) reserves can turn Romania into the main EU gas producer, after the UK leaves the bloc,” said Razvan Nicolescu, a consultant with Deloitte.
To capitalise on this, authorities have started work on the Romanian stretch of the BRUA pipeline, a 479km artery, partly financed by the European Commission, that will also cross Bulgaria, Hungary and Austria, and transport gas from the Caspian and Black Seas to Central Europe.
But the plan can only proceed “if the gas companies decide to go ahead with their investments”, Nicolescu said.
And therein lies the catch. In October, the Romanian parliament passed a law introducing progressive taxation on revenues from offshore drilling and stipulating that half of the gas produced must be sold on the local market.
The government hopes the new legislation will bring in up to US$20bil (RM83bil) over the next 20 years.
But companies are getting cold feet and putting their plans on hold.
“There are no assurances that the industry will move forward particularly with these proposed fiscal terms,” BSOG CEO Beacom said.
Christina Verchere, CEO of Austria’s OMW Petrom, said that “we are currently assessing the impact of the offshore law but we do not see a final investment decision (possible) in the fourth quarter of 2018” as initially planned. — AFP