Pipeline Projects in Eastern Europe Beset With New Concerns

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Pipeline Projects in Eastern Europe Beset With New Concerns

Wed, 09/27/2017 - 07:10
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A natural gas station in Bucharest, Romania (Gabriel Petrescu / Shutterstock)
A natural gas station in Bucharest, Romania (Gabriel Petrescu / Shutterstock)

Amid heightened concern about the financial viability of natural gas pipeline projects in Romania, it appears likely now that the country will scale back ambitions to export gas to western Europe and thus compete with Russia.

Romania has been developing reserves in the Neptun bloc of the Black Sea, estimated at 80 - 100 billion cubic meters, or up to nine times Romania's annual consumption. And for the past couple of years the Black Sea reserves spawned the hope that Romania could become a source of gas to other European countries.

Indeed, the discovery and renewed efforts by European governments to invest in gas transmission infrastructure offered Romania a tantalising economic and geopolitical prospect. The country’s own gas needs could be met internally for many more years but more discoveries would create export opportunities. “We can already cover our domestic gas consumption — it’s only in winter that we need some imports, amounting to 10 per cent of total consumption," said Toma Petcu, Romania's energy minister.

Yet a number of factors have militated against the expansion of Romania's gas infrastructure -- primarily the drop in aggregate demand in Europe as well as the rise in LNG deliveries to Europe.

Thus Brussels is throwing its weight behind BRUA — a €560m pipeline project to carry gas along a route from Bulgaria, across Romania and Hungary to the Baumgarten hub in Austria. But the plan is now being scaled back after FGSZ, Hungary’s transmission operator, cut back on its most ambitious elements.

FGSZ shocked observers in July when it announced that the only economically viable part of the pipeline would be an expansion of capacity on the existing Romania-Hungary interconnector, from 4.4 bcm to 5.26 bcm annually.

All three countries expressed confidence that BRUA would be completed soon.

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