Expert: Moldova’s Gas Transport System Operates in the Interests of Romania

Christian RUSSU

By taking away the gas infrastructure from Gazprom, the authorities seem to be planning to use it to the benefit of Romanian companies, regardless of the risks for Moldovan consumers

Dismantling long-standing ties with Russia in the gas sector has been going on for two years, following a tested scheme. The example is Ukraine, whose representatives are advising our officials on ways of pressurizing the Russian gas monopoly to disband or unbundling the Moldovagaz joint venture as soon as possible. The political goals are clear - to gain full control over the supply of blue fuel with associated financial benefits due to the possibility to use the transit pipeline for a variety of schemes. The long-term negative consequences of such actions observed in Ukraine (large-scale reduction of the gas market capacity and hydrocarbon transit) do not bother our authorities. However, if in the neighboring country ordinary citizens, unlike the industrial sector, have been relatively protected by domestic resources, we are only promised the prospect of high prices and savings. As time has proven, even the facts of numerous violations and blatant frauds in gas purchase and transmission during the last heating season widely reported by media did not affect the PAS general line of creating schemes hidden from the public under the pretext of energy security. Thus, in June, Energocom’s management reported plans to purchase gas from European traders, when in fact this was already happening. Two companies were mentioned among the exporters: DEPA Commercial SA and someone of Romanian origin who wished to remain incognito. Early in August, Energocom was announced to have purchased about 300 million cubic meters of gas for current consumption and storage from its own funds in June-July. The suppliers were 7 companies: OMV Petrom SA, Trafigura Trading Europe srl, Axpo Bulgaria EAD, DEPA Commercial SA, MET International AG, PGNiG Supply & Trading GmbH, DXT Commodities SA. The average price was $425 per thousand cubic meters including transmission, and the total cost was more than 116 million euros. The company said that different price formulas were used: linked to the TTF benchmark index and fixed, as exchange prices varied between 25 and 41 euros per MWh. If we take a look at the gas supply channels to Moldova, they can run either through the Trans-Balkan gas pipeline or through the Iasi-Ungheni gas pipeline. Based on publicly available data, there were no gas deliveries in June through the first pipeline, partly due to maintenance at the beginning of the month. Around the same period, the gas price peaked at 41 EUR/MW. It is doubtful that the authorities would have dared to buy gas at a time when the transit lines were non-functional and the price had risen. In reality, as in May, in the first summer month supplies from Romania were mainly via the Iasi-Ungheni gas pipeline in the range of 1.5-2 million cubic meters per day, which is roughly comparable to the daily consumption of the right-bank districts. The situation changed in July, when Romania officially started exporting gas to Moldova in a significantly larger volume via the transit branch of the Trans-Balkan gas pipeline, prices on the market adjusted, and Ukraine agreed to give a discount for pumping gas through the northern entry point “Alekseevka”. At the same time, there is no reason to say that this was a Romanian export, as the gas passed through the neighboring country exclusively in transit and was sent not even to Moldova, but to Ukraine. At the beginning of July, the volume of deliveries was within 1.5 million cubic meters via the Ungheni route and 3.8 million cubic meters via the Isaccea-Orlivka checkpoint. The Ukrainian gas network operator said in August press release that Moldova had processed 143 cubic meters in July under the “customs warehouse” regime. Some of this gas went to Ukrainian storage via northern Moldova, but a substantial part of it was probably processed using a virtual reverse (i.e. Russian gas went straight to Ukrainian storage and current consumption was compensated from the Trans-Balkan pipeline). In August, the volume of transit gas supplies through Romania in the direction of Moldova/Ukraine increased to 6 million cubic meters per day, which made it possible to cover consumption in the country and actively increase the volume of gas stored in Ukraine. In a month, due to these deliveries we could have achieved the 450 million cubic meters of reserves at a reasonable price, which our authorities spoke about as a strategic goal by 1 October. However, it is not clear what volume of gas in storage actually belongs to Energocom, and what volume should be delivered and in what timeframe. As already mentioned, the Ukrainian operator confirmed the gas injection in the interests of Moldova in July of 143 million cubic meters out of 300 purchased by the Moldovan company in June-July. We can assume that the increased volumes of supplies from Romania are carried out in the interests of Romanian companies, for instance, OMV Petrom SA, which send gas to Ukraine amidst fulfilment of obligations to fill Romanian gas storage facilities. Bucharest promised to reach the 90% reserve level required by the European Commission by September, but the cost of gas storage in Ukraine is now 3 times cheaper than in Romania. Therefore, it is possible that the sharp increase in pumping since July means that we have been pumping gas not for ourselves, but for Romanian companies (with kickbacks for our participants in the deal). Formally, Romania does not export gas to Ukraine, with Moldova bearing all the obligations. There is no doubt that these gas volumes will be used taking into account the interests of Romanian partners and market conditions in winter, and Moldovan consumers will be used as a “safety cushion”. This is why Energocom assumes that the gas tariff for citizens may remain at the current level or “slightly decrease” during the heating season, although today’s prices would have allowed to reduce them yesterday. At the same time, Energocom will continue purchasing gas on the market not from its own sources, but with money from the European Bank for Reconstruction and Development. Although only in August the company repaid the second tranche of the 300-million-dollar loan used to pay for gas purchases last year. The EBRD will probably have its own interests in terms of the structure of gas suppliers and potential consumers when negotiating further financing, and the country’s gas infrastructure will be used to satisfy the commercial interests of third parties. The strategic gas reserves, which should be purchased by our country and allegedly should not be used for commercial purposes (resale, pledge and other transactions), include only 45.6 million cubic meters, which will be equally allocated for storage to Romania and Moldova. The twofold reduction of gas consumption in Moldova allows to administer commercial supplies without significant risk. This explains the demonstrative confidence of our officials. The overall situation with the country’s gas transmission system once again brings to mind the promises of Maia Sandu and PAS to ensure full transparency and get rid of all dubious schemes. As a result, it seems that the schemes are thriving, while the gas industry breeds strange businesses smelling big profits for some beneficiaries and big risks for the rest of the country’s residents. Maybe the authorities will answer at least the questions of what the real price is, where the gas supplies come from, and why transit from Romania and to Ukraine has increased so sharply?