The European Union is benefitting from a natural gas market that is highly competitive and increasingly interconnected, although with domestic production falling and consumption growing, the continent is increasingly more dependent on imports.
Romania and Greece play a crucial role within the EU gas industry: the first one has been defined as an important country, rich with culture, talented people and natural resources being among the few European countries that produce natural gas. On the other hand, Greece is increasing its key role as an entry door of different sources of supply to the entire Balkan region.
The crucial role of gas in Romania and Greece
Among the most important projects going on in Central and Eastern Europe, there is the Neptun Deep exploration. Since 2008, the largest energy company in Southern and Eastern Europe, OMV Petrom is part of a joint venture with ExxonMobil for the exploration of the block. Neptun Deep is estimated to contain natural gas resources of approximately 42 to 84 billion cubic metres (bcm), which is equivalent to three to six times the annual Romanian consumption.
However, ExxonMobil announced its decision to exit the project in 2019 and might be replaced by state-owned natural gas company Romgaz. OMV Petrom has also delayed a final investment decision due to the offshore law adopted in late 2018 by the previous government, introducing a series of price caps, taxes and export restrictions.
Following last year’s election, Christina Verchere, CEO and President of the Executive Board of OMV Petrom believes that 2021 will be a critical year.
“There are assurances that the offshore law will be amended this year, which is one of the prerequisites for the project to move forward,” she said speaking at CERAWeek by IHS Markit.
For Mrs Verchere, gas has an important role to play in Romania under three different aspects: the energy transition, energy security and economic prosperity.
“Romania has a 4-4.5 per cent GDP growth but it has also the lowest GDP per capita so economic prosperity is an important factor,” she said.
Furthermore, Romania plans to phase-out coal and it will replace it not only with renewables but also with gas. Same as it is happening in Greece.
“Greece is also phasing out lignite which makes replacing it with gas a necessity,” said Maria Rita Galli, the newly appointed CEO of the Greek Gas Transmission System Operator DESFA. “One of our priorities is to accelerate the completion of the natural gas network reaching parts of the countries that were not connected before.”
According to her, Greece will play a crucial role in the entire region.
“Last year we witnessed for the first time significant reverse flow and cheaper LNG coming from the US,” she said at CERAWeek. “We also have access to Azerbaijan gas. Therefore with the opening of the Bulgaria-Greece interconnector (IGB) this year and the construction of the Alexandroupolis terminal on the East coast, we would expect more flows of LNG from Greece to the north.”
After all, for Mrs Verchere the most important thing is that the gas can find the markets and, in this regard, Romania has a chance to become a net exporter.
“Connectivity has been a key debate for some time in Romania and we are beginning to see the change, for example with the BRUA phase 1 connection between Romania and Hungary which has been expanded to 1.75 billion cubic metres (bcm) just at the end of last year,” she pointed out. “We also see an increased flow to Ukraine and Bulgaria.”
Romania might have been relatively disconnected and isolated in the past but that is definitely changing.
“Multiple connection points is a key thing that we are looking for to make sure that the product can get to the market,” she emphasised.
Energy security: a topic of controversy and dispute
A competitive natural gas market is needed also to increase the levels of energy security. However, new projects like the Nord Stream 2 pipeline are turning the topic of energy security into controversy and dispute.
“It is a real regret that the project has been shaping the German and European/American relationship in a way that it shouldn’t have,” commented Niels Annen, Minister of State at the Federal Foreign Office, during the panel discussion at CERAWeek. “The context must be taken into consideration: we are in the middle of the energy transition and we are making progress concerning renewables, but gas is still the obvious choice as a bridge. We are investing in an infrastructure that might be the only fossil fuels infrastructure than can exist in the new energy world.”
Also, Maria Rita Galli agreed on the importance of infrastructures which in the European market can only increase the liquidity of the market and the security of supply.
“In the future it can be useful for the energy transition,” she said.
Indeed, as coal regions can play an active role in the energy transition, turning coal mines into wind and solar PV sites, also the gas infrastructure can serve a dual purpose, transporting new gases such as hydrogen.
Hydrogen will play a huge role in the energy transition and, as Mrs Galli said, with only some investments for the compressor stations, the existing gas infrastructure can save money when investing in hydrogen transportation, thus helping the gas industry to adapt to the new changes brought by the European Green Deal and its decarbonisation targets.