Romania's energy, under assault

The battle for the energy resources has been constantly in play over the course of history, it has generated coup d'etats and led to regimes being overturned, has generated colonialism, conquests of land, armed and economic conflicts, but, at this moment of the crisis, the battle for energy resources is becoming paroxistical.

Investment in energy resources is one of the few left that are still secure, at the present time, meaning that investors which have a tradition in this field have to deal with competition and with those involved in other sectors, which, worried about the decline of other markets, have shifted their focus, as well as from speculators involved in other sectors, such as George Soros.

• FINANCIERS

It would seem a harsh competition over commodities and the energy resources in Eastern Europe has begun between the finance overlords of the world, George Soros and Marc Rich.

The press wrote about the fact that Soros is involved in the acquisition of resources on the territory of former Yugoslavia, in Romania and Ukraine. Such a reorientation, means however, that Soros is stepping on to the turf of Marc Rich, who is considered the "father" of the Russian oligarchs, and who is their advisor.

Marc Rich is a well known businessman who is involved in a global-scale commodity trading. He is the founder of Glencore. He was convicted in the US for illegal trading with Iran at the end of the "70s and for tax evasion. He was sentenced to 325 years in prison, but was pardoned by Bill Clinton.

• HUGE RESOURCE DEPOSITS IN ROMANIA?

Are the resources of natural gas and oil in the Black Sea "gigantic and of planetary importance", like Gerhard Roiss, the CEO of OMV Austria, recently said?

Does Gerhard Roiss have newer information over what he had in February this year, when those finds were announced?

Recently, Europe has begun a true-to-form conflict with Russia over the price of gas, in which it is using every weapon at its disposal: official investigations, statements talking down the importance of Russian natural gas, pipelines which exist only on paper, which would bring forth new sources of natural gas, shale gas, etc.

This could be one of the explanations why the topic of the big resources of oil and natural gas in the Black Sea was suddenly propelled forward again, just as "Gazprom" has inaugurated Nord Stream, a pipeline which would provide fuel to Europe, bypassing Ukraine.

Moreover, the Nabucco officials keep saying that they will build the pipeline, which will reduce Europe's dependence on Russia.

• WHAT DID WE HAVE?

Our sources in the energy market claim that the findings of "OMV" and Exxon in the Black Sea are indeed very big, but their exploitation would be extremely expensive, and "OMV" doesn't have the money needed to get involved in the project company which would tap those deposits.

Government sources told us that American giant Exxon has the money needed to exploit the perimeters in the Black Sea, and "OMV" would provide its European distribution network.

Moreover, the officials of Nabucco recently said that they may use natural gas from the transit countries, to supply Nabucco, more specifically from the Black Sea.

It would appear such news is causing anxiety in Moscow, and it is not out of the question that Russia would become more aggressive in Europe, our sources also say. As a matter of fact, an article recently published in the "Voice of Russia" states: "If, at a specific time, the Russian Federation became interested in < solving the problem > of the deposits of energy resources at the Black Sea, then the simplest and most effective solution would be for < Gazprom > or < Rosneft > to acquire < OMV >, which could happen some day. At any rate, the battles around these energy resources no longer involve Romanian president Traian Băsescu, because Romania no longer has control of its own natural resources. Under the current circumstances, the fate of the deposits in the Black Sea will be decided in Vienna, not in Bucharest".

• THE BLACK SEA - A BUGABOO FOR "GAZPROM"

Energy expert Aureliu Leca, said he doesn't believe in coincidences:

"It is no coincidence that on the day of the inauguration of Nordstream and with the battle for the resources in Azerbaijan in full swing, Nabucco officials say that they are extremely confident when it comes to the natural gas resources in the Black Sea, recently found by "Petrom". "Petrom" has actually said that the studies are promising, but that it would take a few years for the exploitation of the resources to begin and for their exact potential to be known. In fact, the estimates over the resources in the Black Sea are a bit outdated. What is important is to get to the phase of exploiting those resources".

He said that the European officials are fighting "Gazprom" with their own weapons: when "Gazprom" shows off its might by building pipelines or keeping the price of natural gas high, positive news start being published, concerning Nabucco, the shale gas resources in Poland, Romania, Bulgaria and Ukraine, or the natural gas resources in the Black Sea.

Similarly, "Gazprom" downplayed the recent successes of Nabucco or the findings in the Black Sea, as well as Europe's ability to mine shale gas.

Aureliu Leca says that, it has been impossible so far to reach an objective conclusion on the value and the volume of the resources available in the Black Sea. Furthermore, the explorations and the exploitation of the high-depth resources are very costly operations, which need to be recouped using the price.

Until we can know for sure whether or not we will win our energy independence thanks to the natural gas deposits in the Black Sea, we will have to go through a few more winters using Russian gas. According to Mr. Leca, Europe is trying to improve its position in relation to Gazprom, just as winter is getting closer, for fear of seeing its natural gas supply cut off, a threat which has already been used as the bargaining chip in the negotiations over the price of Russian natural gas.

• WAVES AT THE SEA SHORE

The deposit of natural gas which "OMV Petrom" and ExxonMobil found in the Black Sea once again grabbed the attention of the press in the beginning of this month. "OMV" CEO Gerhard Roiss, said, in the October issue of German magazine Manager, that the resources are "gigantic" and "of planetary importance".

A few days later, the CEO of "OMV Petrom", Mariana Gheorghe, was a bit more subdued in her statements, stating that, if the deposit were to prove commercially viable, production could begin towards the end of the decade, probably in 2018.

These two pieces of news were later reproduced in the Romanian media, and sparked speculation over the possibility of Romania becoming energy independent.

• THE NEGOTIATION OF THE ROYALTIES IS UNDER WAY

An interest in bringing up for discussion once again the "gigantic" deposits in the Black Sea comes from the interest of "OMV" to pay as little in royalties as possible to the Romanian state, starting with 2014, sources from the energy sector told us.

The Romanian government repeatedly warned that the royalties which are currently under negotiation could climb considerably.

In its strategy for the year 2021, "Petrom" announces that it would invest between 800 million and 1.2 billion Euros a year on average in Romania, provided the latter provides a favorable environment to investors. Also, according to sources, the company wishes for the royalties to be calculated based on the location of its investments. According to our sources, this would involve the value of the royalties paid for the exploitations in the Black Sea being lower than the royalties paid for exploitations of deposits found inland.

• AUSTRIA'S STRATEGIC INTERESTS TAKE PRECEDENCE OVER THOSE OF ROMANIA

Energy market sources said that Gerhard Roiss will pursue Austria's strategic interests, even if they may not always align with those of Romania.

"OMV" seems to be mostly concerned with exploiting the potential of "Petrom" according to its own interests, as producer and distributor of fuel, in Romania as well as in the neighboring region.

In that regard, "OMV" appears to have some "exaggerated" demands from the Romanian state.

Our sources told us that "OMV" would want to be consulted, rather than just notified, if the Romanian government decided to sell, in part or in full, its stake in "Petrom", which would allow it to take in due time the necessary steps to protect its own business interests.

A possible course of action would be to perform a share capital increase at "Petrom", prior to the authorities putting up their stock for sale.

Our sources also said that "OMV" would like the shares to be sold at price at least 20% lower than the price the shares of "Petrom" are currently traded at on the Bucharest Stock Exchange (BSE).

Furthermore, the company would like to be informed in advance about Romania's Energy Strategy.

"OMV" supports the liberalization of the Romanian market for natural gas.

In August last year, Romanian president, Traian Băsescu, received a delegation of "OMV Petrom", led by Mr. Gerhard Roiss, president of the Supervisory Board of "Petrom" and CEO of "OMV". At the time, the Romanian president said that "OMV Petrom" was a very important company for Romania, which plays a strategic part in the energy sector.

The officials of OMV also talked about a possible partnership with the Romanian government for a ten-year development strategy of "OMV Petrom".

Other topics discussed during the meeting were the company's plans for its investments in Romania, the expansion of the deep sea explorations on the continental shelf of the Black Sea, the outlook on for the price of oil and gas and the protection of the environment.

In the month of June this year, prime minister Victor Ponta met with "OMV" and Erste officials, in Vienna, to discuss "very concrete things, which concern the investments of the two companies" in Romania.

• COULD OMV TRY TO RAISE FUNDING THROUGH THE STOCK MARKET?

Another possible reason behind the statements made by Gerhard Roiss in the press, could be that the CEO of "OMV" wants to convince potential investors to finance the investments the company would conduct in the exploration and development of the deposits it found, which would cost as much as several billion dollars, according to the company's estimates.

Whereas for ExxonMobil (the partner of "OMV" in the exploitation of that block) the amount would be rather easy to contract, things aren't that simple for the Austrian company, meaning it would probably have to resort to raising money from the stock exchange, according to market sources.

Besides, the fact that in the days following the announcement of the discovery of the deposit in the Black Sea, the price of "OMV" shares dropped slightly, could be explained by the investors' fears that this could put pressure on the company's financial resources, they said.

One third aspect that the Austrian group is considering, concerns the difficulties in exploiting the natural gas deposits, which are officially estimated at 42-84 billion cubic meters (about 20 billion Euros).

The positioning of the deposit makes it the most accessible option for connecting to Romania's gas transport network, people close to the situation say.

This would be beneficial for Romania's economy, because it would generate significant investments.

Another possibility would be "Petrom" choosing to produce electricity using the extracted gas, thus generating higher added value, according to the same sources.

• THE GHOST OF NABUCCO, CARRYING THE ETHEREAL GHOST OF THE NATURAL GAS FROM THE SEA

Gerhard Roiss said, for "Manager" magazine, that Nabucco may be used not only for delivering the natural gas of the Shah-Deniz deposit in Azerbaijan, but for the natural gas extracted from the Black Sea as well.

"As part of our new concept, Nabucco must subordinate itself to our strategic needs. Our main interest is to obtain a transport route for the natural gas from the Black Sea. With adequate quantities, we will be able to supply Nabucco", he said.

George Maior, the head of the Romanian Intelligence Service (SRI), said, in turn, that the natural gas findings mean that the Black Sea is no longer just an area of transit for the resources in the Caspian Sea.

Reinhard Mitschek, the CEO of "Nabucco Gas Pipeline International GmbH", which is developing the project of the pipeline, said that Nabucco would also be supplied with natural gas by the countries of transit, if they were to provide such sources.

"Nabucco isn't just a transit corridor, but also a huge market which provides huge business opportunities to those involved, and if any local resources of natural gas will be available in the countries of transit, those countries will have the ability to become suppliers for the pipeline", he explained.

• PREFERENTIAL RELATIONS WITH "GAZPROM"?

With or without the natural gas from the Black Sea, Nabucco would have as its terminus point the natural gas station Baumgarten from Austria, run by "OMV".

This has a strategic importance for Europe's energy security, as about one third of Russia's gas exports to Western Europe go through this node. The pipeline network which goes through Baumgarten, carries gas to countries such as Germany, France, Italy, Croatia, Slovenia and Hungary, according to a document by "OMV". "The expansion of the current pipeline system and the connection of new ones, such as Nabucco, to the Baumgarten station would ensure the long term supply of natural gas to Europe, through this ecological and safe system for transporting energy", according to the document in question.

The transport node is run by "Central European Gas Hub (CEGH)", which was previously called "Gas Hub Baumgarten", whose shareholders are "OMV" (65%), "Wiener Borse" (the Vienna Stock Exchange) (20%) and Slovakian company "Eustream" (15%). The latter is owned by the National Property Fund in Slovakia, with 51% of the shares, and "Slovak Gas Holding", a consortium made up of "E.ON Ruhrgas" and "GDF Suez", with 49% of the shares.

Four years ago, "CEGH" was the subject of a controversy: "OMV", which at the time owned 80% of the shares, wanted to pare down its stake to just 30%, due to selling 30% of the shares to "Gazprom", and the rest to "Centrex Europe Energy and Gas", a Swiss company registered in the town of Zug, which had the Russian giant behind it.

The name "Centrex" was mentioned in a hearing before the US Senate, in 2008, concerning the secrecy of the Russian energy system, led by Joe Biden, the current vice-president of the United States.

"Gazprom", with Kremlin's tacit support, created approximately fifty intermediation companies, spread out across Europe, such as the < Centrex > group of companies or the "Gazprom" Germany network, which add no value to the Russian gas which is sold in Europe, but earn huge amounts of money which then disappear through dummy companies located in Cyprus and Liechtenstein", the enquiry read before the US Senate states.

Had the deal gone through, "Gazprom" would have come to own, directly and indirectly, 50% of "CEGH", thus playing a crucial part in the control of the node of Baumgarten and gaining the ability to influence the Nabucco project.

As a matter of fact, in the actions for promoting the business plans of "OMV", Gerhard Roiss intends to avoid endangering in any way the partnerships set up by the Austrian group with the subsidiaries of "Gazprom", market sources told us.

• "GAZPROM" IN ROMANIA

Europe and the countries in the Community of Independent States (CIS) will remain the main markets for the fuel of the Russian Federation, Russia's 20-year Energy Strategy for the 2010-2030 period says.

According to it, Russia would implement measures to reduce the transit risks, including the continued development and improvement of the large scale transport infrastructure to ensure the reliable supplying of these markets with energy.

"Gazprom" president, Aleksei Miller, last year announced the willingness of the Russian company to respond positively to the requests of the Romanian party to buy natural gas directly. He said that ensuring the supply of natural gas needed for the production of electricity had priority.

Aleksei Miller also voiced the interest of "Gazprom" in investments in electric plants in Romania.

The management of "Gazprom" also expressed its interest in building underground natural stores in Romania, one of them in Roman-Mărgineni, with an estimated capacity of 2 billion cubic meters.

Furthermore, "Gazprom" was also reviewing nine more locations for the storage of natural gas, proposed by Romgaz.

"Gazprom" also expressed interest in the offers of the Romanian government to sell stakes in "Petrom" (9.84%), in the sale of the 15% stakes of CN Transelectrica SA Bucureşti and SNTGN Transgaz SA Mediaş, the assets of CET II Oradea of Termoelectrica SA.

As for the offer of "Petrom", sources from the energy market said that "Gazprom" officials sent a letter of intent to the Ministry of the Economy, Trade and Business Environment (MECMA), and they had talks with the top officials of the MECMA on making this acquisition.

• "GAZPROM", VIA "GAZPROMNEFT", VIA NIS, VIA GEAMĂNU

Russian company "Gazprom", through "Gazpromneft", has repeatedly expressed its interest in expanding its business in Romania, as part of Kremlin's regional strategy to expand into Central and Eastern Europe. "Gazpromneft" wants to enter Romania through Serbian company Naftna Industrija Srbjie (NIS), in which it holds a majority stake.

Since the Russian officials weren't too successful in their direct relations with the Romanian authorities, our sources in the energy market told us that "Gazpromneft" is trying to sneak in via businesspeople Jenică Ioniţă and Grigore Andrei Cristian Geamănu, in order to mediate the meeting between Alexander Diukov, the CEO of "Gazpromneft", and Romanian president Traian Băsescu, and prime minister Victor Ponta, respectively, during which they would present its investment projects.

Jenică Ioniţă and Grigore Andrei Cristian Geamănu are the shareholders of "Petrolsun" and "Central Sun", of Bucharest.

Grigore Andrei Cristian Geamănu was involved in the Desintco scandal, together with Mircea Băsescu, brother to the Romanian president.

Our sources also told us that Geamănu has also worked for Russian company Lukoil.

The strategy of "Gazpromneft" also includes the acquisition of the majority stake of the "Rompetrol" group, currently owned by "KazMunayGaz", of Kazakhstan, and our sources claim that NIS has sent an offer on that subject.

"Gazpromneft" is also considering investments on the segment of unconventional energy, as well as acquiring stakes in companies which generate and distribute energy in Romania.

Another objective of "Gazpromneft" would be to create the auspicious conditions for promoting the South Stream pipeline, which is a direct competitor to Romania, a project which Romania is involved in.

Last year, a delegation of NIS, a company which is a subsidiary of "Gazpromneft", led by Kirill Kravchenko, CEO for Serbia and deputy CEO for the foreign assets of "Gazpromneft", presented to the Romanian authorities the intentions to expand in the country.

The plans also included investments of several hundred million Euros in the oil sector by 2015 and the creation of approximately 500 jobs.

• FAILED NEGOTIATIONS AT "ROMPETROL"

NIS was considering the acquisition of fuel distribution stations in Romania, which it would use to sell the oil products processed by the refineries located in Serbia. Last year, "Gazprom", through NIS, made a bid for the network of gas stations owned by "Rompetrol" in Romania, according to Saduokhas Meraliyev, former CEO of "Rompetrol" Group.

Since the negotiations with the "Rompetrol" group for the acquisition of the gas stations fell through, NIS began negotiations with "OMV Petrom", DG Petrol SRL Bucureşti, as well as with smaller operators, in order to acquire the first 40 gas stations in Cluj-Napoca, Arad, Sibiu, Vaslui and around Bucharest, according to rumors.

The same sources also said that "OMV" will provide the gas stations, and in exchange it would receive the support of "Gazprom", to promote the Austrian businesses in the area of the Caspian Sea, the Middle East and Africa.

Furthermore, it would seem that "OMV Petrom" could ask NIS to also sell it its exploitation rights in the Romanian perimeters (from the partnership with East West Petroleum Corp), if significant deposits were to be found in the locations in question.

The plans of NIS in Romania involve owning 140 fuel stations by 2020 and the increase of the sale of oil products from 26,000 tons in 2011 to 360,000 tons in 2020.

Also, the company is considering creating, in the area of the Danube, a network of intermediate deposits of oil products and derived oil products, in order to achieve superior integration of the emerging markets in Southern and Western Romania, and Serbia, Bulgaria and Hungary, respectively.

• HYDROCARBON PARTNERSHIPS

In May 2011, "Gazpromneft" signed a contract for developing, together with East West Petroleum Corp Canada, four blocks for the exploration of oil and gas.

The Canadian company received from the Romanian National Agency for Mineral Resources (ANRM) the concession of the perimeters located near Tria and Băile Felix (both in the county of Bihor), as well as those of Periam and Biled (both in the county of Timiş).

"Gazpromneft" wants to get the concession rights for deposits which are currently in production in the southern and western areas of Romania, and is conducting negotiations for that purpose with "OMV Petrom" and "SNGN Romgaz" Mediaş.

The rumors are saying that NIS already has partnerships with "OMV Petrom" in place for certain areas in the southern region of Romania (Bucharest, Craiova and Giurgiu).

"Gazpromneft" is betting that, in 3-5 years, it would output 1 million tons of crude oil, from the Romanian perimeters, which would then be exported to Serbia for processing in the two refineries owned by NIS (Pancevo and Novi Sad).

• CONSTANTA - PANCEVO, FOR THE CASPIAN OIL

For "Gazpromneft", it has become important to build the Constanţa-Pancevo segment of the PEOP oil pipeline, since it would be the most convenient route for supplying Caspian oil to the refineries in Serbia.

PEOP has stagnated over the last few years because Italy no longer got involved in the project.

Italy should have been the biggest market for the oil brought from the Black Sea.