What we have done, with GEO 114, was to subsidize the Russian gas, putting a cap for local producers, Franck Neel, President Oil and Gas Employers Federation – FPPG, told at the 2019 Energy Strategy Summit, an event organized by energynomics.ro.
Romania has the huge potential to become the first gas producer of the European Union and the third in continental Europe, which is a unique position, as we have a gas decline production in Europe. Romania has a huge opportunity with the Black Sea gas reserves exploitation.
„We have performed a study with Emerton, a consultancy specializing in gas market. In France we had several years until we have a liquid, functioning market. When we saw the increase of regulation of last year we decided to perform this study. The ‘chemotherapy’ with GEO 114 was introduced, after two years of liberalization.”
First of all, we have to understand why 114 was issued. We need to understand what happened to gas price last year, as gas producers sold below 81 lei per MWh. […] When the household suppliers complained that the price reached 110-120 lei per MWh, during the winter, we are talking about the Russian gas price. What we have done, with GEO 114, was to subsidize the Russian gas, putting a cap for local producers. Romanian government lost in taxes, but also created a discrimination between local and external gas producers.
„Dialogue is important before issuing such legislation”.
The Emerton study reveals how to identify vulnerable customers. „When you do that, you may cancel the cap.”
Then, we need to make sure that market is liquid enough.
„The market obligations (CMOs) as of today don’t work. We do not have enough liquidity in the market, there is not enough visibility for the suppliers. We recommend a change – a similar system was introduced in Italy, and in other markets in Europe, that creates liquidity for suppliers, have gas on the market each day. It is a package of measures to create a transparent, liquid, non-discriminatory market, as the regulator is wishing for, and that’s what we are pushing for.”
Another issue is the creation of new opportunities for new investors in Upstream. „The level of fine for non-compliance is huge, around 10% of the turnover. How can you attract new players and attract investment from existing players, with such a level of fines? If you miss delivering 1 KWh to a customer, you can get a fine of 10% of revenue – there is a disproportion between the fine cause and level which distorts the market and keeps away new investments”.
Also, interconnection is crucial to ensure liquidity. In Hungary there is a liquid market, even if there is no producer of gas. But Hungary has an interconnection with Austria, Neel added.