Vol. 2 No.6  

Power Broker

Five years away from the operational date for the massive Turkey-Romania-Austria gas pipeline, Corina Mica talks to Minister Ioan Codrut Seres about energy costs, nuclear power and going green in an a high demand economy

     Although local energy production may not be liberalising at the pace many free market fans hope for, in distribution and for consumers, the local energy market is reaching complete private ownership and open competition.
     Partly, this was because Romania began restructuring its energy field and made it competitive in 1998, shortly after the same procedures matured in existing EU member states.
Romania was never that far behind.
     “Everything we are now doing is not necessarily connected to EU accession, but to a better integration of Romania’s energy market in the EU internal market,” says Minister of Economy and Trade, Ioan Codrut Seres.
     This means infrastructure projects aimed at inter-connecting Romania with the systems of Hungary, Serbia and the Republic of Moldova in transmission of electricity and Hungary - in terms of gas.
Romania’s market in e-nergy is fully liberalised for industrial use, but not for home-owners and individuals.

Ioan Codrut Seres

Romania’s Minister of Economy and Trade
Age: 37
Conservative Party (PC) member of parliament
Born in Zalau, Salaj county
1998-1999: Romanian-Canadian MBA degree: marketing
1988-1993: Military Technical Academy: mechanical engineering
How he got here:
2005: Minister of Economy and Trade
2004: Commercial director, CRC Electric
2001-2003: Business development and strategy director, Grivco Group
1999-2000: Deputy territorial director, CCA Intact – Antena 1
Political career:
2004: Vice president of the Conservative Party. Elected PC Senator for Maramures
2003: Secretary general of the Romanian Humanistic Party (PUR - the current PC)
2002: Chief of the Project Development Professional Department, in charge with financing infrastructure projects
2001: Member of the Bucharest branch of the Humanistic Party (PUR).

     In total, 83 per cent of electricity consumers can choose their supplier, compared to 65 per cent of gas customers.
     “By the middle of next year both markets will be 100 per cent liberalised, and each electricity and gas consumer in Romania can chose their own supplier,” the Minister says.
     Before this can happen, the Ministry has to decide on a ‘last resort supplier’ for the market and has to establish rules on consumption per hour for small consumers. Direct measures to protect the vulnerable consumer also need to be in place. Currently some consumers have cheaper bills because they are socially disadvantaged. The Ministry is looking at ways of replacing this system.

Nabucco plan stays awake

     Two multi-billion Euro oil and gas pipeline projects plan to cross Romania: the Nabucco gas pipeline and the Pan European Oil Pipeline (PEOP).
     Romania is one of the five countries that will be involved in the construction of Nabucco, alongside Turkey, Bulgaria, Hungary and Austria, through its gas transport company, Transgaz. The pipeline will be 3,282 km long, of which 450 will be on Romanian soil.
     “Nabucco will lead to increased security in supplying natural gas to Europe and diversify Europe’s choices of gas suppliers, accessing important reserves in the Middle East and the Caspian Sea,” says the Minister. “This project also means increased competition on the local gas market and a strengthening of Romania’s role as a country crossed by major energy transport corridors for western and central Europe.”
     The project will also see related investments and opportunities, which Romanian companies can benefit from, says the Minister.
     Although the European Commission (EC) has not come up with a common energy strategy for its member states that is acceptable to every country, it has acknowledged the importance of Nabucco and included the project in its Trans European Networks (TEN) programme. This means the EC will finance 50 per cent of the feasibility study.
     As we went to press, the national players in the project were due to sign an intergovernmental support project in Vienna to speed up the process.
     “If everything goes according to plan, the Nabucco pipeline should become operational by 2011,” says Seres. “As a first possible client, the French Government is most likely to ask to buy gas from this source. We, the Ministry of Economy and Trade, will support the signing of long-term gas import-export contracts.”

Qatar Connection

     Another first for this country is the planned construction of a LPG (liquefied petroleum gas) terminal in the port of Constanta, by a group of Qatarian companies.
     Discussions first started at the beginning of this year, and now Seres says an agreement has been reached for the two countries to set up a working group to identify the most favoured options.
     Some companies have registered an interest in the project and have “started corresponding” on the matter, says Seres.
     Presently, Romania’s only nuclear power plant in Cernavoda has one reactor running and a second due to be operational in 2007.
     The remaining two reactors, III and IV, will be constructed simultaneously, following a tender due in the coming months to select the constructor.
     “The feasibility study on the matter revealed that this is the best option, both in terms of investment and profitability,” says Seres.
     Estimated costs for constructing the two reactors are 2.2 billion Euro - including expenditure for de-commissioning nuclear waste.
     The cost of energy produced by the two new units could be between 30 and 35 Euro/MWh. This could also mean an eventual profit of between nine and 11 per cent. Annual operating costs are estimated at 100 million Euro, the Minister says.
     “Based on the feasibility study, a new privately-held mixed shareholder company will be set up to manage the building of the two new reactors,” says Seres.
     Romania’s nuclear power company, Nuclear-electrica, will put in the assets it already has at the Cernavoda plant, and will also operate Units III and IV.
     “We will shortly launch procedures to attract investors,” says Seres.
The two new reactors are scheduled for completion six-and-a-half years after construction begins.

Going green

     Globally, the EU is leading the way in encouraging a greater use of natural and renewable sources of energy.
     Therefore, Romania needs to align its energy efficiency to the standards of the EU green paper. Seres says he is revising Romania’s energy sector to these standards.
     “The strategy in energy efficiency is for it to have a solid increase by 2015,” he says.
     The Ministry is also looking to diminish losses in the district heating sector, where 32 individual municipalities take charge of heating infrastructure for their citizens.
     Energy costs for consumers, though low by European standards, have risen sharply in the last year.
     “In 2006 we have a national programme for the reduction of costs of energy for the population,” he says.
     ARCE (Romania’s Agency for Energy Conservation) is in charge of this programme, and the Ministry is in talks with the European Bank for Reconstruction and Development to prepare a second programme.
     “The main target is to have up to 25 per cent lower bill on energy for the population,” says Seres.
     Wind energy is another buzzword for Romania, with two companies currently operating projects, the Ministry is now running a feasibility study to best assess the opportunities – although Romania’s lack of strong and consistent currents may not favour the country as a source of large-scale wind-power.
     The Ministry last year adopted a European Parliament directive to promote biofuel consumption: using plants such as sunflower to create fuel.
     “We at the Ministry fully support the development of this particular market in Romania,” says Seres.
     Seres adds that starting next year Romania needs to report a two per cent biofuel consumption rate from the total percentage of fuels consumed in Romania, which should gradually increase to 5.75 per cent by 2010.
     So far, eight private companies have expressed interest in building refineries to produce biofuels, with an annual production of about 700,000 tonnes of biodiesel and bioethanol.
     The new Fiscal Code is now giving tax breaks to biofuels: they will not suffer excise duties imposed on oil and gas.
     “It is extremely important for Romania to support investments in biofuels, of any kind,” says Seres.