The restructuring of the natural gases exploitation activities in Romania, in the prospect of its integration in the European Union

Prof.dr. DUE Dan-Maniu, eur.ing, Lucian Blaga University of Sibiu, Romania, Member of European Society for Engineering Education (SEFI), European Federation of National Engineering Associations (FEANI), Verein Deutscher Ingenieure (VDI), Germany Abstract
The end of the 20th century has brought Romania the long-awaited balance of natural gases deliveries in the national transport system, through the inauguration of the Commercial measuring and regulating station for natural gases in the North-West of the country (Medieu Aurit). Considered as one of thelargest and most modern such stations in Europem, it made the connection between the national gas transportation system and the Ukrainian one, thus linking Romania to Europes natural gases network. In the same period, in the Romanian natural gases industry major events took place: - the adoption by the EU of the guideline EC/98 which defines the common rules for the unfolding of natural gases transport, storage and distribution activities, in the light of market liberalisation and of the introductionction of competition; - the restructuring of the former Autonomous Society for Natural Gases of Romania, by moving from a vertical organisation to a structure in which fundamental activities are carried out by companies with separate juridical personality. Which was Romanias way for this? Which were the changes taking place in natural gases exploitation activities? Which were the influence factors in defining the strategy for reorganising the exploitation of natural gases? These are questions to which this paper tries to answer. It seeks to present the natural gases exploitation in Romania in view of the major national objective: the integration in the European Union.

Introduction
The social-political changes which took place in 1989 in Central and Eastern Europe have led to a new strategic, essentially economic and social development perspective of the countries in this area, through their integration in the European Union. The adoption of the EU (EC) Guidelines regarding the gas transit, the gas prices for industrial consumers, common regulations for the natural gases market, the complete liberalisation until 2009, impose Romania a restructuring of the natural gas exploitation activities. The defining of the subsystems: the national transport system (NTS), the local transport system (LTS) and of those for local distribution, allows the settling of a Network code with the specific commands needed for Romanias access in the EU system. It is necessary that Romania adopts development tactics and strategies for each activity, correlated with national interests and the obligations towards the Romanian state and those deriving from international agreements and regulations.

1. The exploitation of natural gases in Romania historical overview 1.1 Evolution of the primary energy waves.
The exploitation of mineral fuels and the production of energy were industrial activities which appeared early on in South-Eastern Europe. In Romania, the foundation for oil exploitation were laid down in 1857, in 1886 electric energy started to be produced in hydro-electric power stations (in southern Transylvania was built the worlds third hydro-electric power station) and in 1909 began the exploitation of natural gases.

Romania is the worlds first country to be recorded with an oil production, in 1857 with 275 t. In the same year, at Ploieti (southern Romania) the first refinery started to function, distillating oil for lighting purposes. The discovery of natural gases was followed shortly by the building of the first transport pipeline between 1911-1913, Romania becoming Europes first country to use natural gases in the industry and for the lighting of cities. If until 1950, the usage of coal, oil and natural gases was relatively small although far larger than in many other countries of the world, Romania being among the first 5 countries world-wide in terms of primary energy production and consumption after this date a significant in production and consumption of primary energy could be remarked, generated by the policy of the countrys industrialisation. Today, Romania continues to be an important producer of primary energy in Europe and in the world. The existing relationship between primary energy, technological development and economy has led to the appearance of successive waves of primary energy, presented for Romania in figure 1.

Weight of the energy sources [%]

80

100

20

40

Coal (linear) Oil (poly) Natural gases (poly) Nuclear energy (linear)

60

Fig. 1 Evolution of the successive waves of primary energy sources in Romania It is to be remarked the speed with which some primary energy sources had been replaced by others, in a rhythm of change much superior to the global one, which shows Romanias contribution to the development of the world energetics. The succession of the waves of used primary energy is also faster than the one in Europe. If the coal was predominant between 1790 and 1860, it has lost ground to a new resource oil, which in the new technological (appearance of engines with internal combustion) and economic context, has replaced it to a great extent. The peak value was reached at the end of the 19th century, whereas the peak value at world level was reached in 1975. The advantages presented by natural gases, both from an economic and an ecological point of view, have led to the replacement of other fuel types and the imposing of this fuel on the Romanian market, the peak point being reached in 1982. Thus can be seen the pioneering role played by Romania and its contribution to the development of world energetics. If, from the point of view of hydrocarbon resources usage, Romania has preceded the worlwide situation, in the usage of nuclear power stations Romania has been left much behind, only in 1996 having been finished the building of the first reactor of a nuclear power station (45 years after the worlds first such power station). The old age of the energetic activity domains: coal exploitation 311 years, oil exploitation 144 years, production of thermo-electrical energy 118 years, production of hydro-electric energy 103 years and natural gases extraction 92 years entitles the Romanian energy industry to candidate for a senior position in Europe and even in the world.

1.2 Exploitation of natural gases

The history of the development of natural gases production and exploitation in Romania has known significant moments, but the current and future situation is marked by a lack of correlation of the extraction dynamics with the existing resources. There can be distinguished three stages, which duffer by a series of technical, economic and political particularities: - the first stage, between 1909 and 1950, was characterised by the discovery of important amounts of natural gases, with small productions (up to 2 billion cubic metres per year) and with a relatively poor development of the transport and distribution system; - the second stage, between 1951 and 1976, during which the discovery of new, important deposits and the production have known significant increases (reserves of up to 50 billion cubic metres per year and production of up to 29.8 billion cubic metres per year). The increase in exploitation was determined by the development of the transport and distribution system, both in Transylvania and outside the Carpathian arch. There are to be mentioned the policies for a judicious and higher exploitation of the natural gases reserves. - priority to the chemical processing (fertilisers, synthetic fibres, acetylene, ammonia etc.) with a very high usage degree; - thoroughly controlled extraction technologies, with modern equipment and an adequate treatment of the gases, which led to the decrease of losses in extraction , transport and distribution; - judicious usage of the natural gases for the production of electrical and thermic energy. - the third stage, between 1978 and 1996, during which the discovered reserves and the production were in continuous decrease, with yearly consumption levels much higher than the new discovered reserves. During this period there were extracted about 153 billion cubic metres of gases and there have been discovered only 60 billion cubic metres of gases, thus a coverage level of only 39.2%. This alarming situation came about due to an unrealistic policy to boost the oil and oil products export in order to help the payment of Romanias external debts (1978-1990) and their replacement in the iron producing and energetic domains by natural gases. Since, after 1990, an energy-intensive industry, producing mostly on staple, with aberrant but unpaid energy consumption, has been kept in place and since the natural gases consumption by the population has risen from 7% to over 15% (1996), the reserves/extraction ratio continued to decrease (figure 2).

Fig. 2. The production of natural gases in Romania between 1976-2000 From the analysis of the extraction dynamics, following can be concluded: - the amount of extracted natural gases is in a continuous decrease, with yearly means between 145%, the most accented decline being registered in 1989/1990 with 3.1 billion cubic metres per year. - the decrease of extraction has determined a decrease in the exploitation of natural gases, which in turn resulted in a worsening of the economic situation. - the decline of production parametres has imposed a re-equipping of compression stations,the opening of new derricks, collaborations and performing technologies in exploring and exploiting, all these determining a huge financial effort by the national natural gases exploitation company.

2. Tendencies regarding the future of natural gases exploitation in Romania

For 2000-2010 there have been revealed different studies and scenarios for the extraction dynamics by Romanian specialists ( ) and by foreign consulting companies ( ), shown in figure 3. Flow [bill. m3/year]

Evaluation

Year

Fig. 3 Forecasts regarding the natural gases production in Romania The analysis of the forecasts regarding the discovery of new natural gases reserves allows for following remarks: - there is an alarming difference between the forecasts of the two evaluation teams, which should be subjected to a responsible analysis by the Government of Romania; - the decline in production, in the Romania version is of 31%; - taking into account the slope of the decline and the current situation of the reserves, it is estimated that by 2020 the production level would be about 1.5 2 billion cubic metres per year, which would impose massive imports for Romania. Nevertheless, the natural gases production in Romania will continue to be physically and economically important for Romania, for the strategic aspect of energetic safety and as a raw material. As an example, the natural gas production in 1997 was of about 1.2 billion USD, while the one in 2010, even in a minimal forecast (3-4 billion cubic metres/year), will represent 400 million USD. Regarding the production amount of 3-4 billion cubic metres in 2010, it is to be remarked that this figure exceeds the current natural gases production from own ressources of France and of most of the European countries, except for the former Soviet republics and the countries bordering the North Sea, but the decline will remain for 2020. The current production of natural gases and its future perspectives should not be treated with pessimism and fatalism, but there have to be undertaken urgent analyses, technological measures and there have to be ensured the financial ressources needed for the development of investments for the discovery of reserves, for the slowing of the decline and for the maintaing of production at adequate quality parameters. At the same time, due to the appearance of the competition by other internal producers and to the increase of natural gases imports, at various pressures, each one having free and equal access rights to the national gas transportation and distribution system, the problem of the delivery pressure of the gas is complicating and needs to be analysed in various technical-economic scenarios, correlated with the re-analysing of the transport system and of the system used to receive the imports of natural gases. When determining the production flow, the productive structures for natural gases, from the point of view of flows, pressures and yearly dynamics, there has to be taken into account also the underground depositing. In the future period, 2005-2010-2020 the deliveries of natural gases from underground deposits will equall and even surpass the ones from the own production.

This is necessary, taking into account that: the natural gases import at high flow and pressure level must have a priority in handling; the production pressures in the own gas deposits are low and will continue to decrease; some productive deposits are or will become also underground gas deposits.

3. The harmonisation of the practices from the Romanian gas industry with those of the European Union
The political changes from 1989 have led to a new perspective for the Eastern European countries. The meeting of the Council of Europe in Essen has led to the adopting of a strategy of pre-access of the countries from Central and Eastern Europe, which indicates the direction envisioned by these countries in order fo them to enter as members of the European Union. In this context, the specific actions are: promotion of the principles of the single energy market, harmonisation of the energy legislation and standards, of the networks, of the energy efficiency, which will be promoted actively. Among the measures which have to be fulfilled by the countries which seek admission in the EU, there are also the ones regarding the harmonisation of each countrys legislation to that of the European Union. The European Union has adopted, beginning with 1990, a progressive method regarding the liberalisation of the energy market and the transparency of energy costs. The legal base for the liberalisation of the gas market is offered by the treaty which has created the European Community (the Rome treaty, modified by the Maastricht treaty). Through articles 7A, 30 and 100A of the treaty there are regulated the internal market, the harmonisation of the legislation needed for the founding and free movement of goods inside the EU. The adoption of the Guideline 91/296/CE, regarding the transit of gases, and of the Guideline 90/377/CE regarding procedures for the transparency of electricity and gas prices for industrial consumers, have represented the initial points for the regulations.. The Guideline 98/30/CE regarding common regulations for the internal natural gas market will affect the whole gases market, even if it is being applied in only a part of the European gas market (the internal market of the European Union). The Guidelines objective is the full liberalisation of the EU gases market until 2009, by the adoption of successive steps to be taken by the European countries and gas companies: - separation of the accounting activity by activity domains: production, transport, distribution etc. - free access of the third party to the transport and distribution systems, to be realised gradually from 20% of the national gases consumption in 2000 to 33% in 2020; - defines eligible clients, which are able to freely acquire the natural gases; Romanias engagement on the way to observe the Guideline will lead to a liberalisation of the gases market, without there existing an infrastructure able to support it. The functioning of a market economy imposes the existence of the contract as essential element between the participants in the market. The impossibility of respecting the contractual clauses supported by the current infrastructure leads to a partial observance of the contractual clauses, so that the markets liberalisation will not lead to the desired objectives: increase of the competitivity, diminishing of the prices etc. Romanias access requires the settling of a Network code, which is to contain specific instructions for the three subsystems which will exist in future: 1. The National Transport System (NTS), which will be comprised of about 5.500 km of main pipelines for the transportation of high-pressure gases and which will connect the ROMGAZ gas fields with those of PETROM and with the gas import points and the local trasnsportation systems and the consumers connected directly to the NTS.

2. The Local Transport Systems (LTS), whose status will have to be clarified beneath the one for the NTS, they having to take over the natural gases from the NTS but also the lowpressure natural gases from the gas fields of ROMGAZ and/or PETROM and to deliver them to the distribution systems or to the consumers connected directly to the LTS. The functioning of the LTS will be ensured at pressures of 6-30 bar. 3. The distribution systems from the settlements and not only, which function at pressures of under 6 bar and which take over the gases from the LTS or directly from the collector pipelines of the gas extraction fields and delivers the gases to the consumers. This division of the pipeline systems will have to be carried out at the same time with the identifying of delimitation points between systems and their endowment with measurement equipment. This delimitation imposes a new information flow regaarding gas parameters, for the correlation of the gas requests with the gas sources. At the same time, on the market, beneath internal producers, gas importers, transporters and distributors, there will appear also a large number of gases intermediaries. Between these there has to exist, beneath the informational flow regarding the gas also a commercial informational flow (fig.4.)

4. The strategy of developing the natural gases exploitation and the compatibilisation with inter-continental systems
The re-organising, developing, efficientising and creation of conditions for the privatising of the gas industry are complex actions, which depend on the political will, on the ensurance of the legislative framework, on settling adequate tactics and stages. The detailed analyses for the proposed goal implies a large a responsibility determined by following aspects: - the gas industry ensures in first place the energy base of Romania, and in a significant proportion, the raw materials for the chemical processing, taking place on virtually the whole territorry of the country in a complex, vertically-integrated system (extraction-transportdistribution). - the international gas transit through Romania, beneath being a profitable activity (1.5-2.5 USD/1000m3/100km), constitutes also a beneficial mean in determining the political relationships between the linked countries and a factor of regional integration, on the condition of the correct unfolding of activities from a legal, technical and economic point of view. - the better ensurance of the energetic independence represents an essential political, strategic, social and economic goal of every country. The extraction, transport and distribution activities are vertically integrated, with patrimonial technical, economic, organisational interferences, as well as with responsibilities which need clarification.

4.1. Influence factors

From the facts presented above, there result directions and priorities in the analytical approach to the adapting of the gas industry to the rigors of the market economy and for the European integration. The motivation of actions results from certain factors, which can be grouped as follows: - the existence of infrastructure in the extraction, transport and distribution of natural gases, virtually on the whole territory of Romania. - the own gas production will remain significant, being estimated for 2010 at about 3-4 billion m3. 3 - the demand for natural gases will be of about 23-26 billion m /year. - the national gas transportation system is currently interconnected for the gas import with the Ukrainian system and on the North-Eastern direction with pipelines from Moldova and Ukraine. The international transit in Dobroudja is interconnected with the Ukrainian transport system amd to the Balkanic countries.

For the mentioned import and international transit, the current source is the Russian Federation, and through these activities there is made indirectly a connection with the intercontinental transport system Russian Federation-Europe and the pipelines planned in the Northern and North-Western areas will actually connect indirectly the national system. Through direct or indirect connections with the main gas sources in Europe (Russian Federation, Norway, Netherlands, Great Britain), through the geographical position and through the radial-annular configuration of the national gas transportation system, after its modernisation and efficientising, there can be ensured facilities for: unfolding of a carrier and distribution activity for all producers and operators in this domain (on-shore and off-shore); other interconnection with gas exporters/producers in the area of the Black Sea, Caspian Sea, Near East; the possibility of transporting vaporised natural gases as well as bottled or aired gases, from possible deposits in the Black Sea and Danube to the large industrial users from neighboring areas. the experience of about 23 years in international gas transit through Romania, from the Russian Federation to countries in the Balkans (Bulgaria, Turkey), activity which will extend in this direction (Turkey, Greece, Macedonia), constitutes and is recognised by partners as a guarantee for professionalism and seriousness in this activity; there exist technical possibilities to realise also other transit lines in Romania, in the Western and Southern areas (Serbia, Montenegro); there exist real possibilities for the development of underground natural gases depositings which could surpass 3-4 billion m3/year, an active cushion at the level of year 2010; tradition, specialists and training possibilities at all levels (in exploration, drilling, production, transport, import, international transit) with regards to education, research, design, realising and exploitation of specific activities; a good knowledge and cooperation with the major gas industries from Europe, USA, Canada, with companies, associations and speciality organisations; the grographical position of Romania, the access to the Black Sea and Danube, as well as the relationships with foreign countries facilitate and guarantee the activity of the internal gas industry and international cooperations; the existence of an inter-governmental convention between the Russian Federation and Romania, for 2000-2010 (with provisions for the extension of this period) regarding: - increase of gas import and settling of directions; - development of the natural gases transit from the Russian Federation through Romania towards the Balkanic countries; - founding of joint companies for gas commercialisation.

4.2. Development tactics and strategies

The market economy, obeying the law of demand-offer-profit presents some random, but not chaotic, characteristics, risk elements which have to be assumed and calculated as part of tactics and stategies for each particular activity, however correlated with national interests and the obligations towards the state and the ones which come from international arrangements and regulations. Analysing the re-organising and restructuring of the fundamental activities as distinctive companies with juridical representation, for the preparation for the privatisation and alignement to European standards, following results: (i) Exploration-production, having as final objective the commercialisation of extracted natural gases; (ii) Specialised transport of natural gases, of common carrier type, which is to ensure free and equal access for all producers, importers and gases customers, the efficiency of economic activity being determined by the difference in transport proces and expenses for exploring, investments and obligations towards the state. (iii) The underground storage of gases from internal production and import, which will increase from 1.1 billion m3/cycle in 2000 to over 3-4 mld billion m3/cycle in 2010 will require investments of over 500 million USD. (iv) The international gas transit through Romania from the Russian Federation to third countries can be analysed as part of the transport activity or as a distinctive profit

centre, an evolution being possible depending on interests and legal provisions, towards a company with distinct juridical personality. The main programs designed by Romania in cooperation with the neighboring countries, under the patronage of the EU, are represented by: I. In the domain of gas production: 1. Sustainment of the gas production through the rhythmical discovery of new resourcesreserves in advantageous economic conditions; 2. Rehabilitation of production from structures with special technological problems; 3. Intensifying of the development rhythm of the existing underground natural gas storage capacities and creation of new storage areas; 4. Improvement of the gas quality and of the control and measurement systems of delivered gas quantities; 5. Usage of valuable components (C2+, helium, nitrogen, CO2) from natural gases mixtures In the domain of gas transportation 1. Interconnection of the national natural gases transportation system in the North-Western area with the Ukrainian system 2. Finalising of the 700 (28) x 5 Mpa in Northern Romania 3. Interconnection of the national natural gases transportation system in the North-Eastern area with the Moldavian system. In the domain of gas transit a. Projects of international interest: - on the territory of the Russian Federation; - on the territory of the Ukraine; - on the territory of Bulgaria; - on the territories of Greece and Turkey; - on the territories of other countries b. Project of international interest, realised in Romania: transit pipeline in the South-East of Romania In the domain of gas distribution: 1. Replacement of the metallic pipelines with polyethylene pipelines; 2. Improvement of the configuration of gas distribution networks; 3. Improvement of the measuring of gas flows deliverd to consumers.

II.

III.

IV.

References
1. *** Activity reports of ROMGAZ 1991-1998. 2. Giura, L, Contributions to the history of methane gas in Romania, Publishing House of the University of Sibiu, 1998. 3. Simescu, N. Strategies and technical-economic reasons regarding the transport of natural. Publishing House of the University of Sibiu, 2000.

PHYSICAL GAS FLOW

Tehnological Consumption EXPROGAZ TG. MURES Extracted gas IMPORT PETROM
CUSTOMERS CUSTOMERS

Tehnol.Consumption DISTRIGAZ NORD Redevency

ct du ro y -p as nc G ve de Re
Gas-product Redevency Tehnological Consumption S.N.G.N. ROMGAZ S.A. SISTEMUL NATIONAL DE TRANSPORT

Tehnological Consumption EXPROGAZ MEDIAS Extracted gas

Redevency

Re de ve nc y

Tehnol.Consumption DISTRIGAZ SUD Redevency

Tehnological Consumption EXPROGAZ PLOIESTI Extracted gas

as -p ro du c G

t
DEPOSITS

CUSTOMERS

CUSTOMERS

Fig 4. The physical gas flow in Romania in the year 2000