Mysteries of the Moldovan Gas Market

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Christian RUSSU
How the authorities profit from manipulations with gas supplies and why Russian fuel will change the situation on the country’s gas market from 1 May, bringing price cuts
Since the beginning of the month, the topic of gas supplies to Moldova has once again become the subject of both lively discussions and scandals. Once again we have seen that the financial interests of the local authorities clearly prevail over concern for the welfare of citizens. First came the news of Energocom’s first-ever purchase of liquefied natural gas (LNG) from the United States. Our officials actively relayed the message that we will consume American gas for two days in April, presenting it as another evidence of lifting Russia’s “energy yoke”. The US ambassador, who was obviously tasked with finding a buyer for the tanker arriving from America amid an oversupply on the EU gas market, praised our authorities. Although Energy Minister Victor Parlicov urged to ignore the delivery price due to “commercial secrecy”, the issue nevertheless spiked further bickering in the media. The price, he admitted, was “slightly higher than that of Gazprom”, which in April was $327. Why was this reference made? Simply to justify the purchase of $270-280 in a Greek port. Given the cost of transportation, for which Romanian partners, among others, take their share, the final price was about $340. Two days after this “positive” news, Energocom gave ordinary consumers hope for reducing the tariffs by announcing a decrease in the previously government-approved price of gas sales to Moldovagaz in April from 550 to 450 euros per thousand cubic meters. This generosity was explained by the supply of 2.6 million cubic meters of gas from US partners at a price “slightly above the Gazprom price”, as well as by the purchase of another 30 million cubic meters of gas from other suppliers at a price “slightly below the Gazprom one”. When asked why, in this case, the cost of gas sales to the distributor Moldovagaz is still significantly higher than the exchange price and the Gazprom price (this month by more than 100 euros), the authorities again refer to the need to take into account the price of gas from the reserves formed in previous years. It may seem that there is no way out of this stalemate, we will have to overpay out of our own pockets until the expensive gas from storages runs out. But once again, dubious schemes have surfaced, causing ordinary citizens the familiar feeling of being “deceived”. The confusion was caused by Renato Usatii, who said that Energocom will sell gas to the “Chisinau Glass Factory” (which is put up for privatization) at a price slightly higher than 6 lei without VAT. How come such low tariffs when the price for the population is 14.4 lei per cubic meter? Alexandru Slusari spoke in defense of Energocom’s interests stating that this is the tariff for May and that from now on his company has the right to sell gas to anyone, not only to Moldovagaz. Slusari did not answer the question where such cheap gas comes from and why it should not be sent to the population. It became even more interesting when it turned out that Moldovagaz had also participated in the tender for supplying fuel to the capital’s glass factory, but lost because of the higher price offered. So, there is cheaper gas in the country, but not for the population? This is exactly how the head of Gazprom’s subsidiary Vadim Ceban expressed his discontent, demanding the sale of “cheap” gas from Energocom for distribution through its networks. Such arguments are understandable, because Moldovagaz has its hands tied until 1 May and cannot buy gas from anyone else. According to Minister Parlicov, the authorities do not buy gas from Gazprom yet, as it is used to generate cheaper electricity for the right-bank MoldGRES. However, why is the gas at a price “close to Gazprom”, available on the market, not flowing through our pipes now waiting for May? The answer is simple, being again connected with the factor of Russian gas. The point is that from 1 May the Moldovan market will in any case be supplied with fuel of Russian origin, simply because the entire volume of 5.7 million cubic meters supplied by Gazprom will not be demanded by the left bank. Moldovagaz planned to sell the resulting surplus, including to industrial enterprises, at a price that, as of May, had not yet been announced by the Russian company, but which apparently all interested parties, including Parlicov, already knew. Hence his verbose statements that it is not certain that Moldova will again buy Russian gas since 1 May, that from that day it will be possible to buy gas from any supplier through the Moldovan branch of the Romanian commodity exchange. The authorities are well aware of the availability of free volumes of Russian gas at an attractive price since May, and exactly this factor is the main one when Energocom itself makes offers for gas sales. Even if the tariff is reduced, this governmental agency will not refuse to sell gas, as it is a profitable business for the politicians close to PAS. That is, if we assume that the left bank would still consume the entire volume of Russian fuel, there would be no question of any significant reduction in the gas tariff for industrial consumers on the right bank. They would keep telling us that the situation is purely market-driven and there is no politics involved. However, Russian gas, which our authorities refuse in every possible way insisting on the need to shift to western routes, is decisive. A simple truth follows: if the volumes of gas supplies from Russia via Ukraine return to the previous uncut volumes, the price and, as a consequence, tariffs in Moldova will inevitably decrease. This is evidenced at least by the fact that only a week after a two-day delivery of American LNG, gas supplies to Moldova via Romania continue, and even in a larger volume, about 1.5 million cubic meters per day. However, this gas is clearly not of Western origin and comes not from Greece, but through the Trans-Balkan pipeline. Moreover, two and a half to three times more gas from the same resource goes to Greece than to Moldova: from 3.7 to 4.2 million cubic meters per day, and some of it is also deposited in Romania. Needless to say, the authorities will never publicly admit that they are using the restrictions on gas supplies from Russia as a source of personal enrichment, and will keep claiming that they are right and offering us to pay tariffs at prices “close to that of Gazprom” with their own margin.