- The Ministry of Energy, as a shareholder, wants companies to present, during their shareholders meetings, sustainable and feasible investment plans
- We encourage and support any investment project that it is necessary, useful and feasible for the companies in which the Ministry of Energy is a shareholder
- The Ministry of Energy encourages investments in discovering and developing new reserves of crude oil and natural gas in Romania
- The Ministry of Energy’s position is that the elimination of the purchase price for the natural gas from domestic production for the domestic customers must not coincide with the elimination of the regulated final prices of natural gas of supply to the domestic consumers
- The gas price should be established where the demand meets the supply, but under conditions of transparency and competition
- Aristotel Jude: I think that round XI of granting oil concessions will be launched as soon as the new legislative framework is set out, regarding the taxation of the oil sector
- Romania is concerned with the development of the AGRI LNG project at the Black Sea
Esteemed Mr. Aristotel Jude, you are a Secretary of State in the Ministry of Energy for six months, in charge of hydrocarbons, oil and gas sector. What are the directions in which you believe Romania should allocate resources in this sector and with what objectives?
Ensuring the security of the energy supply in Romania and the region is one of the most important strategic objectives which surely will be part of the primary objectives of the National Energy Strategy. To ensure this objective, Romania, through the companies in the natural gas or through the public authorities entitled, where appropriate, should allocate resources to ensure the following secondary objectives:
a) The national transport system modernization and construction of new transport infrastructure elements for natural gas;
I refer to the modernization and construction of a transport infrastructure of natural gas so that there is a real and efficient use of transmission capacity between Romania and the countries of the region, and to upgrade and build infrastructure to enable the transport of Black Sea natural gas and unloading it with priority on the gas market in Romania. Investments are also required in the national transport system infrastructure to achieve bidirectional capacities, investments made in a timely manner, so that any supply disruptions are covered.
b) Development of the underground gas storage capacity;
It is necessary to increase the working capacity and the active capacity of the underground storage units of natural gas, the increasing of the maximum extraction output from the underground storage of natural gas and the establishment/construction of underground storage for natural gas of technological – noncommercial type.
c) Building a strategic infrastructure;
In this regard, we consider building new strategic infrastructure, particularly storage, in order to balance supply requirements, to help a better functioning of the market and to ensure an optimum level of security of supply. Another important direction is the building of a strategic infrastructure of underground storage for natural gas by regulating the proper emergency situations for the access of third parties. Finally, we talk about building an LNG capacity, to ensure the alternative of gas import, capacity necessary given the need to diversify the import sources of natural gas.
d) Ensuring the adoption of measures to safeguard the security of natural gas supply for the proper functioning of the internal market of natural gas, that does not unduly distort competition or the functioning of the internal market of natural gas;
e) Improving the quality and incisiveness of various departments, ministries or authorities in the drafting and transposition process into the national law, of the obligations of the EU law in the field/matter of natural gas/energy;
f) The harmonization of the national legislation in order for Romania to achieve, as a Member State, the objectives set by the EU directives and regulations from the natural gas / energy sector.
Given that the Romanian government increases the tariffs the subordinated companies receive from the customers and requests them (Transgaz, Conpet, Romgaz) to distribute dividends increasingly larger, on what resources can these companies make investments in modernization and expansion, possibly on external markets?
I would begin by clarifying an important aspect that appears in your question. It is wrong to say that the Romanian government increases tariffs that its subordinated companies charge the customers. If the Ministry of Energy was the one who approves the tariffs that the subordinated companies apply, we would find ourselves in a conflict of interests.
If we refer to Romgaz and Transgaz, companies mentioned by you, they apply tariffs arising from the application of calculation methodologies approved by ANRE authority under parliamentary control. The natural gas transportation tariffs charged by Transgaz are approved by ANRE, the natural gas transmission activity is a regulated one. The storage tariffs charged by Romgaz and Depomureş are approved by ANRE, the storage activity being a regulated one. The tariffs charged by Conpet for the transportation of petroleum products are approved by the NAMR, based on a methodology of calculation adopted by NAMR.
Indeed we want competitive tariffs related to transport and storage, given that we talk of a European single market, integrated, with tariffs that do not jeopardize the domestic production and does not lead to a decline of investments for the upgrading or expanding of the companies.
Regarding the dividend policy, I would just like to say that the Ministry of Energy, as a shareholder of a number of companies in the energy sector, wants the companies to present at the General Meetings of Shareholders investment plans sustainable and feasible, to provide added value, which afterwards turn into dividends. Given that the companies where the Ministry of Energy is shareholder requests and substantiates the need for the distribution of a portion of the profit to cover the need for investments, the policy of dividend distribution will be adjusted accordingly, within the limits prescribed by law, to ensure financing also from the profit registered.
However, it should be noted that the investments of a company are not covered only by the achieved profit, there are other sources of funding within their reach, especially if we are talking about listed companies.
We encourage and support any investment project that is necessary, useful and feasible for companies in which the Ministry of Energy is a shareholder, including the expansion of their activities on foreign markets. Importantly is that these companies, their management, identifies those required investment projects, which then are accompanied by a correct substantiation in terms of technical and economic feasibility of the project, because in this field, as in any other economical field, investment decisions should be taken only as a consequence of the technical and economic feasibility of the investment. Precisely for this reason, the Ministry of Energy analyzes the management performance of the companies, including from this perspective.
The first phase of development of the National Energy Strategy has triggered the alarm regarding the depletion of the domestic resources of oil and gas in the next decade. What tools will the Ministry of Energy use to reverse this trend? We still rely on domestic production as much as possible or Romania can take advantage of the international prices to increase imports and to conserve the domestic reserves?
The National Energy Strategy is an objective assumed by the current leadership of the Ministry of Energy. In the context of the technological and geopolitical dynamics of the energy field, the National Energy Strategy aims to provide to the policy makers and investors the necessary milestones for a long-term planning.
Among the objectives of the Strategy we include energy security, competitiveness of energy markets and environmental sustainability that must find their counterpart in essential political, economic principles and energy governance through the integration into the European energy market, harnessing of national resources through advanced technologies, streamlining of the national energy system, professionalization and transparency of the energy governance, guaranteeing the predictability and stability of the energy regulations.
The Ministry of Energy encourages investments in discovering and developing new reserves of crude oil and natural gas in Romania, investments that will increase the rate of reserve replacement. In this respect, we indicate the exploration activity in the Black Sea that will lead to the addition of reserves to the portfolio of reserves of Romania. Last year the natural gas consumption in Romania was covered 97% from the domestic production.
I saw that NARE President launched publicly the idea that gas prices in Romania – I refer to the purchase price of natural gas from the domestic production covered by GD 488/2015 – reached the convergence level. The Ministry of Energy is more reserved in making such statements, given that NARE presented a study showing and demonstrating the convergence of prices. According to the legal provisions, the convergence is determined after an assessment, which takes into account some elements of influence, such as market conditions, the degree of convergence with gas prices registered domestically and in Europe, exchange rate fluctuations, etc.
The position of the Ministry of Energy is that the elimination of the purchase price of natural gas, from local production, for domestic customers and for producers of heat to produce heat in cogeneration power plants for household use must not coincide with the elimination of the final regulated prices for natural gas supply to the household consumers.
Regarding the sale of domestic natural gas on the free market, the Ministry of Energy’s opinion is that the gas price should be established where the demand meets the supply. But not in any circumstances, I am talking with subject and predicate, not in nontransparent and noncompetitive conditions. We encourage and support the need for marketing the natural gas produced domestically on the free market, with competitive and transparent mechanisms to ensure accessibility for the firms/companies in the market, to establish an effective competition in the purchase of these quantities from the supplier producer. Marketing these amounts in transparent, competitive and non-discriminatory conditions will ensure the prerequisites to establish a fair price for natural gas on the free market. One of the solutions is to sell the natural gas through centralized markets, stimulating these transactions is one of the aspects regarding the following period. We intend to launch soon a public debate upon the boosting of transactions on the centralized gas markets. We believe that through a proper regulation of the PVT, along with other regulations, we will succeed to accelerate trading on the centralized markets in Romania.
In the case in which the sale of natural gas produced domestically on the free market will take place under the previously expressed conditions, and the price of the domestic gas production will be established in a competitive and transparent manner, the Ministry of Energy will issue recommendations upon the conservation of the domestic reserves. And I say recommendations, because producers have, under the law, the right to dispose upon the quantities of natural gas and crude oil, conditions established by the petroleum agreements. The manager on behalf of the state of the crude oil and natural gas reserves is NAMR, an agency that approves the operating programs, under which the title holders of petroleum agreements achieve the extraction of natural gas.
NAMR announced for some time that round XI of granting petroleum concessions is in preparation. Can we expect this year it will finally be launched? What are the reasons for delaying a decision in this regard?
To this question we have one answer. We support the launch of round XI for granting petroleum concessions and hope it will be performed soon. To find out the reasons of delay of commencing this round, it would be fair to address to NAMR.
If you want a personal opinion, probably this round will be launched as soon as the new legislative framework regarding the taxation of the oil sector is set out.
We encourage the conclusion of new petroleum agreements which give investors the opportunity to conduct exploration activities, exploration which ensures the premises of increasing the reserve replacement rate.
We will have by the end of this year a clear taxation regime, on which companies can make their business plans? What is actual involvement of the Ministry of Energy regarding this aspect?
The colleagues from the Ministry of Public Finance can provide additional information regarding the date on which this project will be subject to public debate.
Regarding the date that will be applied for this regime, it would not be fair that I give an answer. Certainly, in this mandate, the government will submit the bill to the Parliament, as it is approved by the Government. The date from which the new taxation regime will be applied depends on its approval and adoption by the Parliament.
I can only add that the Ministry of Energy attended the preparatory meetings of this bill and supported the development of the necessary technical information. For example, I explained during the meetings the implications of a tax system upon mature and marginal deposits.
We want the tax system to ensure a predictable tax environment and to provide a favorable environment to attract investments and development in the oil sector, but also a correct state budget sufficiency.
In conclusion, the Ministry of Energy supports the subjecting to public debate of the bill regarding the taxation of the oil and mining sector.
Externally, in your area of responsibility, which are Romania’s strategic partnerships? With regard to the regional energy cooperation, what are the legal and political instruments that our country uses in relation to EU and non-EU countries?
The oil and natural gas sector is one characterized by dynamism at European and also at international level. Regarding the European perspective, the concept of the Energy Union was launched by the European Commission last year, a concept whose main pillar is the security of energy supply. The European Commission recently launched a package of legislative initiatives on energy security, package which includes a proposal for the revision of Regulation 994/2010 concerning the measures to safeguard the security of gas supply, a European strategy for LNG and storage, as well as the revisal of the decision regarding the concluding of inter-governmental agreements. At this time, negotiations are taking place in Brussels, within the energy working groups, regarding these documents. Of course Romania has in plan to strengthen its strategic partnerships in the context of the regional and international realities dynamics, linking the regional cooperation objective with the one regarding the development and implementing strategic projects for Romania.
Of the strategic projects, I want to highlight the initiative of CESEC – Central East South Europe Gas Connectivity, where Romania, being a signatory party of the Memorandum of Agreement in July 2015, along with states from the Central and South-Eastern Europe, aims to develop strategic projects, such as the BRUA project – natural gas transport corridor Bulgaria – Romania – Hungary – Austria, a major project aimed at creating a transport capacity of the interconnection points, between the Romanian system and the Hungarian system, and that of Bulgaria accordingly. This will require the rehabilitation of the pipeline routes and the construction of new pipelines in the southern area of Romania towards the western border.
A strategic partnership is the one with the Republic of Moldova, a non-EU state, member of the Energy Community. The interconnection between Romania and the Republic of Moldova, although it is not considered a priority CESEC project, it belongs to the list of those identified in the strengthening of the regional cooperation. Also, from the perspective of strengthening the regional cooperation and to increase the share of LNG at European level and in accordance with the objectives of the new European strategy for the liquefied natural gas, a document that highlights the importance of access of the Member States to the LNG capacities, Romania is concerned with the development of the AGRI LNG project at the Black Sea.
