This is the transcript of the message delivered by Valeriu Binig, partner EY România, during the 2016 Energy Strategy Summit, held on May 31 at Snagov Palace. For a sum-up of the main ideas, check our previous material: 27 essential ideas after Energy Strategy Summit 2016.

Good afternoon.

The challenge for me was to find a balance between the composition of this panel and the interests of the speakers, given that we have five specialists in gas, while Romania’s energy security is more than natural gas. In this context, I have chosen a particular order that I will present immediately. From my point of view, I see two very important topics that I would suggest for the distinguished speakers to comment upon them, to see if they are good or not.

Also referring to the natural gas, today Ambassador [Richard L.] Morningstar said gas is a transition fuel for the next 40-50 years. I know that the European Union aims to decarbonize the energy sector much faster. And I’ve also heard statements in regard to investments in the gas transmission infrastructure. There is, currently, a debate upon replacing the production of electricity from polluting sources, with production from renewable sources, which are considered clean sources. And the gas is seen as a transitional solution to replace storage, which is not sufficiently powerful at the moment. Also, gas is seen as a fuel to provide the balance for the generation sector facing the challenges related to the intermitent consumption, and to the intermittent renewable energy generation also. Gas is seen as a transition fuel. On the other hand, there is the discussion of decarbonization and the association of the gas industry in Europe has raised a very valid question: what is the objective the European Union holds? To reduce emissions of greenhouse gases, or to promote renewables? Because, for example, the renewables share increased in 2015, but also the amount of the greenhouse gases emissions increased throughout the EU. What is the goal after all? Of course, the question actually was targeting to the idea to substitute the gas with coal. Under these circumstances, we question what is happening in Romania?

An Ambassador who comes from a strong oil producing country, says gas is a transition fuel for 40-50 years. And then we have to ask ourselves: for how long will gas play a role in Romania and for how long will gas help in this transition? On the one hand, we say that on onshore we have resources for a number of years, on the other hand, we found some gas in the Black Sea and we ask ourselves when it will enter the market. We prepare ourselves for a transformation of the heating sector in this country, one of the largest consumers of natural gas, and then we ask the question: how long will this transition in the field of natural gas last?

There is another idea, coming from the experience of working as coordinator of the energy transport section within the Coalition for Romania’s development. There is a position paper issued by the Council of Foreign Investors, who was eventually adopted by the Coalition for Romania’s development, entitled “A roadmap for the Romanian gas sector”. The good conclusion shown there is that we need an inter-institutional cooperation between the legislative, executive and regulator. Operators, investors, they are going to find justice at one institution at a time. Each institution will say to them: “Certainly, we support you, but there are things that we cannot resolve, go the next institution!”. And when all the circle is rounded, nothing happened. The message I wanted to convey was that an institutional collaboration, an even formalized one, is needed eventually.

(…)

Before I give the floor for questions, allow me to conclude: fully functional markets are not enough to ensure the security of energy supply. Biomass can be a significant contributor to the energy security of Romania, as it is virtually the cheapest replacement for natural gas. In fact, statistics show an extraordinary contribution from firewood to the primary energy consumption of the country, especially for heating.

Romania could become a regional provider for energy resilience. It is unclear for how long will Romania depend on natural gas, it is an equation with too many variables and we do not have reasonably enough information on the various developments, such as how much gas do we still have, or how will Russia sell it 15 years from now, or when will the storage technologies will enter the game, or how we will heat ourselves in the future etc. So it is still difficult to give such a response.

We have a big problem in terms of legislative and regulatory framework for offshore activities, and also a big problem is the fiscal framework for this area, given that very sudden developments in the international markets generate a conception of risk for those who must decide on a piece of legislation that could have an impact for maybe 30 years. Everyone fears that too high royalties that will deter investors, or too low a taxation level, for when the oil price will increase in the future. Here I quote one of the classics alive among the investors in Romania, who said: “50% of zero is zero”. For who knows how to interpret this, it is a very important message.

I also raised the issue of institutional collaboration. I was talking about legislative, executive, regulators. It has been also mentioned here the need to introduce into this equation two more very important players: local authorities and judicial system. Really, it reminds me of the fundamental question: who is granting the building permit for the Black Sea? And I researched it; we do not have a proper answer to such a question.

These would be some of the conclusions of this debate. You have a richer list of your own. We witnessed a series of very consistent and relevant messages, and I personally am grateful to have had such a panel from which I learned so much.