Natural Gas Prices Could Triple after EU Accession Bucharest Daily News – February 13, 2006
by Adrian Hamzescu
Romania agreed during EU negotiations to increase the price of natural gas from internal production to 270 dollars per 1,000 cubic meters, compared with the present price of 115 dollars.
“We must do something to protect customers who will not be able afford these prices,” said Achim Saul, the deputy general manager of the Romanian gas distributor Distrigaz Nord. He advised that the prices are expected to triple and the acquisition costs will increase significantly.
The price of natural gas, both from imports and domestic production, represents approximately 80 percent of the final price which is paid by consumers, according to Distrigaz Nord officials.
The minister of Economy and Trade, Codrut Seres, stated that the formula used to calculate import gas prices is used throughout Europe and agreed upon by all companies who are party in such contracts. Thus, the price is set by using the international quotes of diesel and fuel oil, corroborated with a discount, and granted in accordance with the contracts maturity and imported quantities.
According to the minister, the local production of natural gas covers 60% of Romania’s needs, while the rest must be imported. Seres stated that the price paid for natural gas by consumers was of approximately 252 – 254 dollars per 1,000 cubic meters in the last quarter of 2005, similar to that paid in other European countries. For this year, although the National Regulatory Agency for Natural Gas (ANRGN) had estimated last November a price of approximately 320 dollars per cubic meters, the minister announced yesterday that contracts stipulate an average of 280 dollars per 1,000 cubic meters.
Gas price could increase again The tariff for natural gas supplied to captive consumers (the population and public institutions) could increase by seven percent in April to 282 dollars per 1,000 cubic meters. The increase was proposed by the National Regulatory Authority for Natural Gas (ANRGN) and aims to align the local prices with those of the European Union, a clause of the EU accession negotiations. Taking into account the impact on the population, the authority could extend the deadline until the end of 2008 to ensure a smoother transition to European prices.
Thus, the price of gas extracted from local deposits would increase by the end of this year to 145 dollars per 1,000 cubic meters and should reach 200 dollars by the end of next year. Subsequently, the price for captive consumers should rise from 263 dollars to 294 dollars per 1,000 cubic meters by yearend. The tariff is expected to be of 336 dollars per 1,000 cubic meters at the end of 2007.
Gas prices have already boosted by 20 percent last month.
Government to keep control on gas market The authorities have decided against the privatization of the national gas producer and supplier Romgaz by selling at least 51% to a strategic investor.
The government announced that the re-organization and privatization processes of Romgaz will carry on in accordance with the proposals to be forwarded by the consultant within six months. The decision to renounce to the strategic investor was made after a report of the Ministry of Economy and Trade showed that the privatization would have been unfavorable for Romania.
Romgaz is the main gas producer in Romania and holds the largest quantities of gas stored in Romania.
President Traian Basescu discussed the sale of the gas producer with members of the government at the beginning of the year and established that the chosen method should carefully consider all the effects on the market. Prime Minister Calin Popescu Tariceanu stated at that time that Romania should benefit from its own natural gas deposits.