REPORT The Outlook for natural gas in Romania and proposals for its value-added capitalization Vasile Iuga and Radu Dudău June 2018 Table of contents Abbreviations ............................................................................................................................................................................ 3 Executive summary ............................................................................................................................................................. 4 1. A Brief history of the natural gas industry in Romania ..........................................................9 2. The current state of the Romanian natural gas sector ............................................................11 2.1 Natural gas resources and reserves ........................................................................................................11 2.2 Production, imports and underground storage .........................................................................12 2.3 The National Gas Transmission System (NTS) ............................................................................ 13 2.4 Natural gas transmission corridors and Romania‘s interconnection to regional networks ......................................................................15 2.5 Interconnection and security of gas supply ..................................................................................18 2.6 Natural gas underground storage ........................................................................................................ 20 2.7 Natural gas consumption ................................................................................................................................21 2.8 Natural gas trading ..............................................................................................................................................21 The wholesale market ........................................................................................................................................22 Other relevant regulation ................................................................................................................................22 Key elements for natural gas trading hubs....................................................................................23 The retail market ......................................................................................................................................................24 3. Trends on the international gas markets ...........................................................................................25 3.1 Natural gas consumption .................................................................................................................................25 3.2 Natural gas prices. Comparison with coal prices .....................................................................26 3.3 Reserves and production of natural gas ..........................................................................................28 3.4 The global Liquefed Natural Gas (LNG) trade ...........................................................................29 Small Scale LNG, SSLNG .......................................................................................................................................30 3.6 Natural gas in the European Union ........................................................................................................ 31 4. Natural gas as transition fuel to a decarbonized economy .............................................32 4.1 The control of methane emissions .........................................................................................................33 4.2 The complementarity of natural gas with renewable energy sources ..............35 5. Expected trends on the Romanian natural gas market ........................................................36 5.1 Natural gas in the electricity mix ..............................................................................................................37 Natural gas prices .......................................................................................................................................................38 The price of EU ETS certifcates ..................................................................................................................39 Support schemes ........................................................................................................................................................40 The cost of capital ......................................................................................................................................................40 5.2 Heating of households, the tertiary sector and public institutions ........................ 41 Heating and cooling of buildings according to energy source: 2015 and 2030 ........................................................................................................................................ 41 5.3 Natural gas in the petrochemicals industry .................................................................................43 5.4 Natural gas in transport ................................................................................................................................... 47 6. Long term options: conversion of methane into hydrogen ..............................................49 7. Conclusions ...........................................................................................................................................................................51 8. Roadmap ...............................................................................................................................................................................54 Bibliography ..............................................................................................................................................................................57 2 Table of contents Abbreviations ............................................................................................................................................................................ 3 Executive summary ............................................................................................................................................................. 4 1. A Brief history of the natural gas industry in Romania ..........................................................9 2. The current state of the Romanian natural gas sector ............................................................11 2.1 Natural gas resources and reserves ........................................................................................................11 Abbreviations 2.2 Production, imports and underground storage .........................................................................12 2.3 The National Gas Transmission System (NTS) ............................................................................ 13 2.4 Natural gas transmission corridors and Romania‘s interconnection to regional networks ......................................................................15 RBSTA The Romanian Black Sea Titleholders’ Association 2.5 Interconnection and security of gas supply ..................................................................................18 BRUA Interconnector Bulgaria – Romania – Hungary - Austria 2.6 Natural gas underground storage ........................................................................................................ 20 CCS Carbon Capture and Storage 2.7 Natural gas consumption ................................................................................................................................21 CNR–CME The Romanian Committee of the World Energy Council 2.8 Natural gas trading ..............................................................................................................................................21 CEGH Central European Gas Hub (Baumgarten, Austria) The wholesale market ........................................................................................................................................22 EIA Energy Information Agency (US) Other relevant regulation ................................................................................................................................22 ENTSO-G The European Networl of Gas Transmission System Operators Key elements for natural gas trading hubs....................................................................................23 EU ETS EU Emissions Trading System The retail market ......................................................................................................................................................24 FLNG Floating Liquefed Natural Gas 3. Trends on the international gas markets ...........................................................................................25 CNG Compressed Natural Gas 3.1 Natural gas consumption .................................................................................................................................25 LNG Liquefed Natural Gas 3.2 Natural gas prices. Comparison with coal prices .....................................................................26 IEA The International Energy Agency 3.3 Reserves and production of natural gas ..........................................................................................28 MBtu Million British Thermal Units