Momentum for change in the Romanian energy sector
With the start of Russia’s unprovoked military invasion of Ukraine, one of the main problems on the mind of every European became the insecurity and instability around energy supply. In a race to diversify their sources of supply, countries who are dependent on Russian energy began to explore options that had been previously avoided. As European countries struggle to cut ties with their unstable Eastern partner, Romania is increasingly seen as a future European energy hub.
Romania’s energy potential
Romania is the second largest producer of natural gas in the European Union, after the Netherlands. It currently produces 25 to 26 million cubic metres of gas every day – enough to cover its entire consumption during summer, yet insufficient to satisfy its needs during the cold season. Nonetheless, Romania has substantial potential to become the largest net exporter of natural gas in the European Union, largely due to its unexploited gas reserves in the Black Sea. Its onshore gas reserves are estimated at 100 billion cubic metres, while those offshore in the deep waters of the Black Sea are estimated at anywhere between 42 and 84 billion cubic metres. This would suffice for both domestic consumption and export. The potential for LNG development in Romania’s Black Sea territories could be a major game changer for the EU, which sees natural gas as an important resource in the clean energy transition process. With investments in infrastructure and the development of competitive market mechanisms, Romania can succeed in becoming an important European supplier of gas, as well as a significant transportation hub. However, the earliest year in which Romania could start exploiting gas in the waters of the Black Sea is 2027.
At the same time, Romania is successfully capitalising on renewable sources. Its 208 hydrological plants produce about 30 per cent of its energy. An additional 16 per cent of the country’s energy portfolio comes from exploiting wind, photovoltaic and biomass resources (by 2030, this number is expected to increase to 30 per cent). In summer months, their potential is especially high. For instance, in July 2021, just over half of the energy generated was from renewable resources. Hydropower accounted for over 34 per cent, wind over 15, photovoltaic over seven and biomass just over half a per cent.
The Romanian energy sector is also significantly reliant on its nuclear sources. The nuclear reactors at Cernovoda account for 20 per cent of its energy capacities, with more investment incoming. With the help of the US, two more reactors are expected to be built: Cernovoda 3 and 4. Romania is also to be the first European country to build small-size modular reactors, expected to be ready in 2027-28 at the earliest.
Romania as a regional energy player
Russia’s invasion of Ukraine, which shares a border with Romania, has strengthened Bucharest’s push for regional energy security. As Russia intensified its attacks on Ukraine and started targeting its energy infrastructure, the issue became increasingly pressing. Ukraine, which is an important electricity provider for its smaller neighbour Moldova, has been facing increasing challenges in keeping up with the demand. As Russia’s missiles paralysed Ukraine’s energy infrastructure, on October 14th Ukraine notified Moldova that it would not be able to provide it with electricity (which amounts to about one third of all electricity in Moldova). This will hinder Chisinau’s plans to reduce dependence on its uncontrolled territory of Transnistria (the Cuciurgan power plant, located in the Russian-occupied Transnistria region, provides 70 per cent of Moldova’s electricity, produced on the basis of gas bought from Russia). Although as Russia reduced in half the exports of gas to Moldova to put pressure on the government and feed the destabilisation movement, Transnistrian region of Moldova also can’t produce enough energy for Moldova. In an already tense energy crisis for Moldova (lingering for more then a year), Romania stepped up to help its historic ally. The government of Romania approved an emergency ordinance, which declared that “electricity producers have the obligation to conclude bilateral contracts, within the limits of available quantities, primarily with electricity suppliers designated by the Government of the Republic of Moldova.” In this moment of balance, Romania played a crucial role in preventing the deepening of the energy crisis in Moldova. Since November Romania supplies up to 90 per cent of Moldova’s energy needs and therefore becomes the sole exporter of energy to Moldova.
This was possible largely due to the fact that Moldova and Ukraine were connected to the European electricity distribution network in March this year, which allowed for the intake of energy from the EU (Romania) in the shortest time. The Iasi-Ungheni-Chisinau gas pipeline, completed in 2021, allows Moldova to import 40 per cent of its total gas requirement from EU countries, which is precisely the amount needed to support Moldovan government-controlled territory.
In theory, Romania can also provide energy support to Ukraine (especially if Russia continues to target the country’s energy infrastructure), although it is not able to meet all its neighbour’s energy needs.
The race to unleash Romania’s energy potential
Despite Romania’s rich energy potential, the country is still dependent on imported gas – to a greater or lesser extent, depending on the season. This setback can be attributed to the delay in exploitation of gas resources from the Black Sea and from land, as well as the fact that Romania’s energy sector is largely handled by state companies. For instance, the electricity market is dominated by Transelectrica SA, which manages the operation of the market, the development of the market network and infrastructure, and the security of the national energy transmission system. A similar situation is characteristic of the gas and nuclear energy sectors. The Romanian state operates with great caution in the energy sector, aiming to prevent price increases for its citizens and thus slowing down the development process.
Nonetheless, Romania has ambitious plans for its energy sector. They include completing two additional nuclear reactors at the Cernavoda power plant and paving the way for a new type of nuclear technology – small modular reactors. The country also wants to take full advantage of its substantial offshore gas fields in the deep waters of the Black Sea and plans to build an LNG terminal in the port of Constanta by 2026. All these grand projects though are constantly delayed by the Romanian authorities, who often change rules overnight, thus hindering the projects’ development (see the case of Exxon – Neptun Deep). At the same time, taxes for foreign energy companies are the highest in the region and the rules of doing business are very rigid, making the investment process in the Romanian energy sector difficult. This is mainly because the Romanian energy sector is the oldest in Europe and there is a deep fear among politicians of allowing foreign companies more freedom. This is based on the fear that the energy prices will grow, which could eventually cost them critical votes.
The war in Ukraine, however, has created an impetus to break years of stalemate and step-up drilling in the Black Sea to unlock potentially rich deposits of natural gas that Romania could export. Such an investment would be particularly important and welcomed by Romania’s neighbours. This includes Moldova, Ukraine, Hungary and the Balkan states, which are constantly seeking new sources of energy. Romania could satisfy their energy needs at least in the medium term, provided that reform of the energy sector is implemented by its authorities and significant investments are made by the EU (in 2021 the European Commission pledged 16 billion euros in areas such as renewable energy, coal replacement, nuclear energy, cogeneration, biofuel, and the modernisation of energy infrastructure) and the US (through private investments in nuclear energy and 3SI in logistics and transportation) in the Romanian energy infrastructure. Although the current government is talking a lot about the need to support the energy sector and bring more investments to the field, no major actions have been taken yet. If Romania succeeds in exploiting and fully capitalising on its energy potential, it is very likely to dethrone Russia as the dominant force in the region, depriving it of its main leverage – energy.
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Alexandru Demianenco is a graduate of the College of Europe in Natolin, currently working as a program officer in an international organisation accredited in Moldova. His research interests include internal politics of Moldova and Romania, geopolitics, security and defence.