Dumitru Chisăliță

Romania has indirectly made a rule, through a regulatory decision, from what an ANRM official have said a few days ago: “the Romanian gas exchange is completely immature”, thus officially putting Romania under a referential subordination to the Vienna gas exchange. The decision also gives a signal of distrust in the Romanian gas exchange, because if the state does not trust it, why would anyone else?

At the same time, we take this as a signal of withdrawal from developing the gas market in Romania because the regulatory act, recently published in the Official Gazette, does not mention the reference price on the Vienna gas exchange as a temporary solution, for a period of time during which the evolution of the Romanian gas exchanges will be monitored in order to analyze a possible renunciation of this decision.

ROPEPCA: ANRM’s reference for natural gas royalties shows total indifference regarding the natural gas market in Romania

Thus, Romania, the third largest gas production country in the European Union, accepts indefinitely that the most important reference price on the Romanian gas market is established in another country, one that does not exploit any cubic meter of gas, in which all natural gas comes from a sole source, and whose exchange is 50% owned by the main supplier of the natural gas traded there.

For a unitary approach of the principles applied in a market, we appreciate that, given the fact that the Romanian gas market is “completely immature” to determine the price at which about 10% of the country’s production is sold (ie the gas owned by the state as royalty), then, for the other 90% of the gas domestic production traded, the use of the gas exchange in Romania is also not appropriate! In such a context, gas producers would be entitled to demand for a change in the gas law that currently forces them to trade gas on an exchange which is “completely immature”. Just so, the situation is similar for the gas suppliers who are legally obliged to acquire / sell gas on an exchange which is “completely immature”.

On the other hand, the natural gas price set on the Vienna hub based in contracts in the first quarter of 2018 is about 1.4% higher than the weighted average gas price on the Romanian Commodities Exchange. Apparently, this situation allows one saying that the most expensive market was chosen in order to bring more money to the state budget.

But here we have some potential consequences of this decision:

• the benchmark thus established will be a strong reference for selling gas in Romania, which may lead to higher prices than those established exclusively on the basis of demand and supply, apart from the existence of an official reference
• the reference price, which does not have a correspondence at home, will lead to some suspicions from the control organisms whenever a producer, even in a transparent manner, sells gas at a price below the official price set as a reference
• choosing the Vienna hub for setting the reference price for natural gas extracted in Romania, which is the basis for the calculation of the natural gas gross production value and the equivalent of the oil royalty, will generate money for this particular exchange: Romanian institutions and companies will be placed in the position to purchase from the gas hub in Vienna price reports, analyzes, forecasts, etc. with money that could have remained in the country to contribute to the development of Romanian exchanges

The financial gain that Romania can derive from a price reference linked to the hub in Vienna is clearly lower than the large losses caused by the signal of lack of interest in the creation of a free functional gas market and of an efficient gas exchange in Romania.

This text was first published on the author’s blog – Intelligent Energy.