The report covers the period since May 26 to July 30 –including time series up to full-Q1. At the end of the report, you can check the content of the previous similar report – issued on May 26.

LONG-TERM INDUSTRY SCENARIO. Romania’s energy sector is built on relatively abundant primary resources – moderate crude oil reserves, significant natural reserves [nearly self-sufficiency and offshore potential], abundant coal deposits and significant wind power potential. Resources are depleting, but the energy-intensive industries are also shrinking as the energy becomes more expensive. There exist a functioning power market and the potential for export of power is robust – yet not supported by sufficient transfer capacities. There exist on the other hand robust potential for the development of such connections [for power and gas] – supported and actually required by the EU directives. The government as well as other policy-makers lack any firm strategy for the sector. In the absence of such internal drive, country’s policies fully rely on the EU directives – meaning adequate but slow response to challenges and acceptance of rather global [than local] optimisation. Excessive green energy support created investment euphoria – but part if the support was already reversed prompting protests from investors.

ONGOING STORIES. The government and market regulator ANRE strives to make functional the natural gas market, including by compelling producers/suppliers to sell part of output on open market. Energy minister Nicolescu contacted EC officials to negotiate Romania’s access to TAP gas pipeline after Nabucco project collapsed last year. OMV Petrom and ExxonMobil evaluate size of the gas deposit found in Black Sea. The deposit is going to consolidate Romania’s self-sufficiency around 2020 and potentially generate exports. In the power market, the price coupling with Czech-Slovak-Hungarian DAM market is going to happen by the end of the year. The move is a step toward broader market integration that could help Romania unleash its potential in power generation. More investments in enlarging physical transfer capacities [by Transelectrica] are needed. Investments in renewable energy have stagnated after the recent amendments to the support schema. Romania already increasing substantially its green energy output also encouraged the government in cutting incentives to green energy investors – and rather help industrial consumers facing rising energy prices.

Key Points:
• Romania exceeds renewable energy target for 2013 on low consumption, strong hydropower generation.
• Market regulator cuts by 46% incentives for combined heat and power generation…
• … and approves state aid for electricity-intensive industrial consumers.
• Italy’s Enel starts sale of Romanian holdings [power distribution networks].
• KazMunaiGas to pay no more than USD 200mn to state for 26.7% residual stake in local refinery
• Romania’s Q1 gross primary energy use 3.9% up y/y in Q1 [3.9% up in Jan-May also], on more crude oil processed, while net [internal] use of energy drops by 5% y/y to 6.6mn toe.
• Car fuels sales increased robustly in Q1 on low base – by 14% y/y for petrol and by 31% y/y for diesel
• Gas imports down 9% y/y to 0.35bn m3 in Q1 – imports’ share in consumption up slightly to 11% from 8% in previous two quarters.
• Romania at no risk from Russian gas disruptions
• ExxonMobil, OMV Petrom start drilling well in Romania to assess offshore Black Sea gas deposit size.
• Romania’s net electricity exports up 11.3 times y/y to 2.8TWh in H1 2014.
• CZ-HU-SK-RO market coupling go-live in Q4/2014, with DAM coupling
• Investments in green energy capacities stagnate -- reach 20% of full-year projections in Jan-May 2014.
• Investments in conventional energy pick-up: Marubeni builds 250MW gas fired plant.