Makers and Breakers on Romania Energy Market
HotNews, August 30, 2007

Known as a country with a rich tradition in crude and natural gas production as well as in oil exports, Romania now faces a fast decline in production and energy reserves. Additionally, much of its energy sector is privately controlled or is about to be privatized. HotNews.ro presents the energy map of Romania, with the most important makers and breakers on the market.

Dependency on Russian imports

Romania can now cover only 35-40 percent of its energy needs from its own resources. The rest is mainly conditioned by imports from Russia.

Romania’s crude reserves were evaluated at about 80 million tons last year but are expected to drop some 6.6 times down to 12 million tons by 2025m according to the Romania’s draft Energy Strategy for the period of 2007-2020.

When it comes to natural gas, the reserves are evaluated at about 162 billion cubic meters this year but expected to drop to 141 billion cubic meters by 2010 and 77 billion cubic meters by 2020, according to the same Strategy.

Romania’s crude and gas production
• Crude production dropped from 14.7 million tons in 1976, the year of highest production, to 5 million tons in 2006. As deposits have been depleting, the crude production was reporting annual drops of 2-4 percent while the degree of replacement of used reserves is not expected to exceed 15-20 percent.
• Natural gas production stood at 12.3 billion cubic meters in 2006 and covered 69 percent of the total annual national consumption. Gas production can report annual drops of 2-5 percent as deposits get poorer. The replacement degree is expected to stand at about 15-30 percent.

OIL MARKET

Petrom

The largest energy company in Romania is Petrom, owned 51 percent by Austrian group OMV. The Romanian state still holds a participation of 30.862 percent in the company. Petrom controls oil and gas reserves evaluated at about 1 billion barrels in oil equivalent.

In 2005, the company produced in Romania 5.21 million tons of crude and gasoline and 5.19 billion cubic meters of natural gas, the equivalent of 77.95 million barrels in oil equivalent. In Romania, petrom holds concession rights over 19 exploitation, development and production areas and some 400 commercial deposits of oil and gas respectively.

The company operates some 15,000 oil and gas drilling pits on Romanian territory (onshore) and 7 offshore platforms in the Black Sea. It controls two refineries, Arpechim and Petrobrazi, with an annual capacity of 8 million tons.

Rompetrol

It is the second most important oil company in Romania. Monday August 27, 2007 Rompetrol Group president Dinu Patriciu announced the sale of 75 percent in the group to Kazakh company KazMunayGaz for a price evaluated unofficially at over 2 billion US dollars.

Rompetrol owns two refineries, Vega Ploiesti and Petromidia. The latter has a refining capacity of over 4 million tons of crude and can distribute more than 7 million tons of oil products annually through its own distribution network.

Rompetrol hopes that by the end of 2007 its market share would rise from 15 percent in 2006 to 20 percent. Rompetrol has a network of over 630 gas stations in Romania, France, Bulgaria, Albania, Georgia and the Republic of Moldova. By 2009, Rompetrol plans to reach a business figure of 12 billion US dollars.

Once it entered the Western market by taking over French company Dyneff, Rompetrol aims at expanding in the Balkans as well, where it eyes taking over Serbian state-controlled oil company Naftna Industrija Srbije (NIS).

RAFO Onesti

The second biggest refinery in Romania in terms of processing capacity, Rafo Onesti boasts a rather complicated recent history. Privatized in 2001, successively changing owners and managers, Rafo found itself at the center of huge scandals that affected activities there seriously.

Relaunched in August 2007, Rafo now works at maximum capacity (3.6 million tons annually). The company will be managed by Petrochemical Holding Company, controlled by Calder-A, where Iakov Goldovskiy is a majority shareholder. He bought Balkan Petroleum Limited, which on its turn bought the majority stake in RAFO from the Romanian state.

Lukoil

The Russian company controls the Petrotel-LUKoil refinery, the majority stake of which it bought in 1998.

NATURAL GAS MARKET

In the field of natural gas, Romania still is a state monopoly when it comes to the exploitation of its deposits. The state company operating in this sector, Romgaz, is a conglomerate that controls 3600 production drills, 5 subterranean supply deposits with an actual capacity of 2,550 million cubic meters/cycle and over 1,900 kilometers of pipelines.

The Government has been repeatedly announcing its plans to privatize Romgaz. The price evaluated for about half of the company stands at some 350 million euro. The investor interest in this company is high after the Russian gas crisis hit regions across Europe recently.

The company’s financial results also make it one of the most valuable companies the Romanian state is privatizing.

ENERGIE ELECTRICA

The biggest electricity producer in Romania is Hidroelectrica. The company controls 326 hydropower plants, 365 dams and 20 hydro-aggregates.

With an average annual production of 19772 GWh generated in 12 subsidiaries, Hidroelectrica provides some 22-33% of Romania’s total energy production.

Many of its hydropower plants need investments in improving their technologies. Hidroelectrica plans to invest some 1.3 billion RON in this regard to improve its power deliveries by 61 MW.

Another energy producer is Termoelectrica. With a power of about 5,500 MW, its worn-out installations and the lack of investments in updating them has led to less viability of its working groups.

Some 70-85% of the installed capacity is outdated and available power capacity dropped by 60-90% from its initial potential. The lack of financial resources did not allow the management to provide investments in mending and upgrading operations.

The state plans to privatize a series of thermal energy plants, which are to be assimilated to the energy complexes in Turceni, Craiova and Rovinari.

When it comes to guaranteeing its energy independence, Romania’s bet goes on nuclear energy. For the time being, a single reactor operates at the Cernavoda nuclear power plant on river Danube, with an installed power of 770 MW covering some 10% of Romania’s energy needs.

A second reactor with the same capacity and the same Canadian model (CANDU) is to start production before the end of 2007.

Petrobrazi Refinery (Petrom)
Photo: Rompress