Power, Gas E & P in Romania

The prospects for power and gas exploration and production sectors in 2010 look good.

Several major power projects are underway, CEZ started works on windfarm projects with a final capacity of 600 MW. The esti­mated costs are about €1.1bn. The European Investment Bank recently approved credit fa­cilities of €200m to finance the first stage of the project. Iberdrola also plans to develop a windfarm project with a first stage capacity of 600 MW, and a final capacity of 900 MW.

Both projects are developed in Dobrogea, a region of Romania ranked second in Europe, after northern Germany, as a source of wind energy.

Iberdrola and CEZ are also participating in the construction of two nuclear reactors at the existing nuclear power plant in Cernavoda.

This project is developed by Nuclearelectrica SA., a joint venture in which the Romanian State holds 51 percent, and CEZ, Iberdrola, Enel, GDF Suez, RWE Power and ArcelorMittal hold 49 percent. Discussions are underway to reduce the State’s participation to 20 percent. The estimated costs of this project are of €8bn. In January 2010, Craiova Energy will launch a tender for the construction of a thermal power plant with a capacity of 500-600 MW, at estimated costs of €650m The development vehicle will be a joint venture in which the foreign investors will hold 51 percent. Hidroelectrica SA, the state-owned hydro power producer launched a tender in November 2009, for consulting serv­ices regarding the selection of investors, and the setting up of a legal vehicle for the con­struction of a hydro power pumped-storage project.

Other long term projects include a hydro-power plant on the Danube, which will be developed jointly by Romania, and Bulgaria, with the probable participation of Serbia, and a nuclear plant which will be located in central Transylvania.

With assistance from IFC, a consortium led by Nordpool designed and assisted the im­plementation of an electricity trading plat­form located in Bucharest. Trading licences were issued to EON Romania, ENEL Energie, CEZ,  Merrill Lynch Commodities, Statkraft, and Gazprom Marketing & Trading, among others. Romania has the largest electricity pro­duction capacity in South Eastern Europe. The strong interest shown by major electricity pro­ducers and traders shows that the Bucharest trading platform has the potential to become the most important power exchange in South Eastern Europe.

According to official estimates, Romania has reserves of 185 billion cubic metres of gas, and 75 million tons of crude oil. The most signifi­cant gas discovery of 12 billion cubic metres is on a block in the Black Sea continental shelf concessioned to Sterling Resources Ltd.

There are indications that further significant gas reserves are on the Black Sea continental shelf. Exxon is currently drilling on an OMV concession on the Black Sea continental shelf. Commercial discoveries were also made in a block concessioned to Aurelian in north-east Romania. In the last couple of years other com­mercial discoveries were made by Wintershal and Toreador. On 18 November 2009, the National Agency for Mineral Resources, pub­lished the Tender Notice for the tenth bidding round for concessions of oil and gas explora­tion and production. Many oil and gas inves­tors are expected to attend the tender

All of these energy and gas sector projects will generate major project finance deals to raise the necessary funds for their completion.

Peter Buzescu is a partner at Buzescu Ca. He can be contacted on + 40 21 222  4422 or by email: pbuzescu@buzescu.com

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