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3

01wHy A NEw ENERgy REVIEw?by RĂSVAN ROCEANU, Editor in Chief

Because year by year, we are increasingly concerned about the future of civilization, as we built it so far and, as we can’t continue to build it! After the era of cheap oil, which led to huge progresses in the first seven decades of the last century, the first rude awakening came, when we had to take into account the costs of our own style of designing economic and social development.When we had started to discover new resources of energy which we did not imagine it was possible before, the second rough awakening came, when we had to admit how much we are destroying the environment with our exuberance. Now we have to accept that the only chance we have is not to think on long term, but indefinitely! The third awakening is the idea of sustainability which may have consequences that we do not even suspect, or we prefer to consider them simple speculations.

The sign that we are living in fast-changing times: major energy companies are the first to seek diversification and they are investing in biofuels, nuclear or wind power.

No resource is neglected anymore, from small hydro power plants to marine algae, but, at the same time, no resource can be explored or exploited without scientists, “the skeptical guards”, having a (tough) word to say. Romania has the great advantage that it still has some aces in its sleeve, in the energy sector. The investors in the Black Sea region are the first able to confirm this. From wind farms to the almost ignored ligno-cellulosic biomass, our country is able to ensure at least a minimum consumption, if not total independence.

Obstacles are not at all few and can’t be ignored. Debates about shale gas are more than clear in this regard, but even more certain is the fact that any social or political long term action depend on energy security: the safety of producers and of the energy infrastructure.

We are prepared to finance alternative supply routes for conventional energy resources, even when AGRI and Nabucco projects may have problems to come. We got used to think that energy costs and

that we have to pay extra in order to subsidize renewable sources. This is true for wind power especially. But there aren’t yet any visible results with regards to hydro and geothermal. The political decision to encourage solar energy, not only by Green Certificates, is necessary now. WE should also consider expanding the “Green House” program in the direction of photovoltaic systems, a field where we didn’t do almost anything.

Last but not least, we must take care of what we already have, we have to modernize the power plants, to finish the constructions of the nuclear reactors and to accelerate the energy efficiency programs for buildings. There is money, as well as investors, the priorities are displayed, so we should respect our own commitments.

We want that all of these facts, questions and answers, debates, projects, failures and successes, draft laws and opinions of investors to be presented in our magazine.

Editorial

4

News

ENEL is optimistic

Renewable energy branch of Italy-based Enel will put into operation wind turbines with an installed power capacity of 180 MW in Romania, by the end of this year, according to Francesco Lazzeri, General Manager of Enel Green Power Romania. This statement has been made during an event dedicated to renewable energy, organized by Confindustria Romania, last April. Enel Green Power had started operations in Romania in 2007 and last year it reached an installed power capacity in wind of 296 MW in Dobrogea and Banat. Enel wants to expand also its green energy resources. “We are taking into account several possibilities, including hydro power”, said Lazzeri. Appointed CEO last January, Lazzeri added that Romania is an interesting country where Enel plans to make long term investments. In March 2012, Luigi Ferrari, the financial chief officer of Enel, said that 500 MW in wind turbines will be built in Romania by 2016.

A new term for extendingthe power grid

Government promises to electrify all households and villages in the country by 2016 and raises the value of investment at 990 million RON (226.5 million Euro), according to “Ziarul Financiar”. “Funds required to complete the electrification process throughout the country are estimated at about 990 million RON. The cost for the connection of an isolated home to the electrical distribution network is about 11,000 RON”, it is said in a government decision draft. According to the Government, there are still 97,805 households with no electricity access in Romania, located in 2,284 municipalities. About 2,822 households of the total are located in 97 villages completely without electricity. This program will be conducted by the Ministry of Economy and will be 90% funded from the state budget and 10% from the local budgets. According to the draft legislation, a solution for electricity supply of isolated settlements is given by electrogenic groups, but in this case the energy will cost between 5 and 7 times more than if delivered by the national system.

The offensive of solar panels

“Romania needs a stable and predictable legislative environment, so investors could develop important projects in the renewables in general and in the solar segment in particular,” stated Robert Cruceru, Executive Director of the Romanian Photovoltaic Industry Association, during the conference “Solar panels in Romania: rooftop installations”, which took place last April, in Bucharest. With regards to the much discussed number of green certificates given for solar energy, the association’s arguments for maintaining the current support scheme have been heard even by Romanian authorities, that understand, more and more, the necessity of legislative stability: „I am in favour of maintaining the current number of Green Certificates and I highly appreciate the manner in which Law 220/2008 was elaborated,” explained MP Mugurel Surupaceanu. The association has been recently founded by a group of consulting experts in the development of electricity production from renewable resources.

5gazprom changed its mind

Gazprom has dropped the plan to increase the quantitz of natural gas sold to European countries in 2012, justifying its decision on the basis that there is an increasing competition, caused by the liquefied gas suppliers, who have to be confronted, and that there are low prices for natural gas on international markets. “Between exporting an estimated 154 billion cubic meters of natural gas at a lower price and the exporting 150 billion cubic meters of natural gas for a higher price, we chose the second option,” said Alexander Medvedev, Gazprom Vice-President, quoted by Russian media. Gazprom announced, earlier this year, that its exports to Europe will increase by 2.6%. Medvedev said that 150 billion cubic meters is the minimum to meet long-term contracts. The European Commission has repeatedly expressed regret that EU states are negotiating separately with Gazprom, hoping to get a better price, rather than adopting a common European approach, which maz be more profitable in the discussions with Russia.

Vestas taken overby the Chinese?

Share price of Danish wind turbine producer Vestas rose by 20% on the Copenhagen Stock Exchange in one day, on April 16, after it was rumored that two Chinese companies are considering a takeover bid for this firm, announced Danish newspaper Jyllands – Posten, quoted by Reuters. According to the newspaper, Sinovel Wind Group and Goldwind Science, first and second largest in the wind-power industry in China, are discussing the acquisition steps, as the Danish company announced worse results than its forecast for 2011. These results have led to a decrease in shares value by 50%, from October and until May. None of the three companies commented on the news, says Reuters.

Investment in Hidroelectrica

Hydro power producer Hidroelectrica included in this year’s budget, investments of 358 million Euro, up 1% from 2011. Around 60% of the investments (€ 205 million) come from Hidroelectrica’s budget, with 94 million Euro will be obtained through bank loans and 59 million Euro from other sources. The company’s estimated revenue for 2012 is down 1.2% to 711 million Euro against 2011. A 10% package of Hidroelectrica’s shares is expected to be sold on the Bucharest Stock Exchange later this year, as part of the privatization program agreed with the IMF. A consortium comprising of BRD, Citigroup Global Markets Limited and Société Générale and a brokerage company will intermediate Hidroelectrica’s initial public offering. The Ministry of Economy owns 80% of Hidroelectrica’s share capital, while the Property Fund has 20%.

6 High incomes, but lower profit

Nuclearelectrica, the second largest power producer in Romania after Hidroelectrica, with a market share of 19%, posted a net profit five times higher for 2011 compared to 2010. However, the company’s profit margin remained at only 5%, even if shouldn’t be below 20%, according to the main private shareholder, Property Fund, quoted by Zf.ro. “Preliminary turnover for 2011 stood at 1.588 million Ron (374.7 million Euro), while preliminary net profit was about 80 million Ron (18.8 million Euro). At the end of 2011, the company had 2,167 employees. We estimate to have 2,150 employees at the end of 2012”, Nuclearelectrica officials stated. The company’s low profit in 2011 is due to the fact that the energy production of Cernavoda is sold at prices set by ANRE (Romanian Energy Regulatory Authority).

Record dividends

The shareholders of the natural gas transportation company Transgaz Medias approved, in a general meeting, the proposal of the management to pay out total gross dividends of 350.4 million Ron (80.2 million Euro), the highest amount paid for dividents in the company’s history, announces “Ziarul Financiar”, quoting the press release sent to Bucharest Stock Exchange (BSE)by company representatives. The company reported a 379,6 million Ron (87,7 million Euro ) record profit last year, slightly higher than the 376.3 million Ron profit for 2010. Dividend payments will be made within six months of approval of financial statements for last year. Ministry of Economy, which controls 73.5% of the total stake, will collect total dividends worth 257.5 million Ron (58.9 million Euro). Property Fund (PF), which owns almost 15% of the company, will receive dividends worth 52.5 million Ron (12 million Euro). Transgaz had been listed on BSE in 2007 and the offer had been very successful considering that the current price of the shares is now 23% higher than the price obtained during the offering, states “Ziarul Financiar”.

Bio-embargo

Spain could stop imports of bio-fuel from Argentina, states Euronews. According to the source, this decision may be made by the Government in Madrid in response to Argentina’s nationalization of the YPF oil company, whose major shareholder (51% of shares) was the Spanish group Repsol. Spain did not provide details, but, the deputy prime-minister, Soraya Saenz de Santamaria, said the main goal is to encourage the use of biofuels produced in EU countries. Estimates show that Spain imported 720,000 tonnes of biofuel from Argentina in 2011, worth a total of 750 million Euro. About 75% of the biodiesel used in Spain is imported, and 90% of that comes from either Argentina or Indonesia. According to Euronews, the President of Argentina Cristina Fernandez de Kirchner stated that her country is able to overcome the financial shock of such an embargo, but many experts doubt this.

7Electro-ecology

Power distribution company CEZ Distribution has planted over 7,700 trees in six counties in its area of operation with the help of the Regional Environmental Protection Agencies and Departments of Forestry, the company announced. CEZ employees planted arboreal seedlings, provided by ARPM (Regional Environmental Protection Agencies) and Departments of Forestry from Dolj, Olt, Mehedinti, Valcea, Gorj, Teleorman, on an area of more than 22,000 square meters. The initiative led to the plantation of 5,000 arboreal seedlings in Tunari region (Department of Forestry “Poiana Mare”), in the Dolj county. CEZ volunteers contributed to a half – hectare afforestation, near the cement factory in Bârseşti, in the Gorj county. The afforestation area in the Mehedinti county was focused on Orsova region. In the Valcea county, CEZ teams operated in “Valea Voicului” region and in the Olt county, CEZ volunteers helped in a half – hectare afforestation, in Jitaru region. “This action is neither first nor last of its kind (...) We will always try to give a good example in the fight for a cleaner environment and a more responsible attitude towards it,” stated Doina Vornicu, CEO of CEZ Distribution.

Hard blow to Nabucco

Hungarian energy group MOL did not approve the Nabucco budget, because the company believes the financing of this project is unsustainable, said a representative of the MOL for MTI agency, quoted by Mediafax. Also, financing sources and gas supply of the pipeline are uncertain, said MOL. According to industry experts, if the current shareholders do not exercise their preemtion right, MOL could sell its stake in the project to German company Bayerngas, which is in talks on becoming the seventh member of the Nabucco consortium. At the moment, Nabucco consortium comprises the following shareholders: OMV Austria, Transgaz, MOL Hungary, Bulgargaz Bulgaria, Botas Turkey and RWE Germany. Deputy Director of Transgaz, Ioan Rusu, told Reuters that the project is still viable and the company remains part of it. OMV said, in turn, that the Nabucco project is still viable, but a shorter pipeline could be an alternative.

Biomass is called!

The total energy potential of biomass in Romania is estimated at about 518,400 Terajoules per year (TJ/year), meaning 3 million tonnes of equivalent oil (toe) per year, it is said in a research on the renewable resources potential, developed by The Energy Research and Modernization Institute (ICEMENERG). Taking 2030 year as reference year for the economic potential harnessed, the study gathers together the potential of forestry biomass, of wood waste, of agricultural biomass, of urban waste in 7 regions. So, Dobrogea has an estimated potential of 29,900 TJ / year. Moldova has a potential of 81.300 TJ / year, the Carpathian Mountain area has a potential of 65,400 TJ / year, the Transylvanian Plateau - 43,000 TJ / year and the Western Plain - 60,900 TJ / year. The regions with the greatest energy potential of biomass are Sub-Carpathians, with 110,100 TJ / year, and the Southern Plain, with 126,600 TJ / year. The economic energy potential is, however, lower: only 318,000 TJ / year.

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03THE BLACk SEA HOLdS HUgE PROMISE fOR ROMANIA

by A.M.N.

With the discovery of Sterling Resources Ana and Doina fields, Exxon’s deep water Domino well and the recent developments that have increased the possibility for new offshore concession holders to become active, Romania’s Black Sea is poised for a new era, believes Mark Beacom, Vice President of Sterling Resources Ltd and Director General of its Romanian subsidiary Midia Resources.

Sterling Resources has invested over 50 million USD in Romania in drilling operations and information gathering in the Black Sea since 1998. It had a deep understanding of Romania’s oil and gas potential from the beginning of its activity and even though it has encountered several difficulties along the years, the company waited patiently to reach its goals. Now, Sterling Resources, along with its new co venture partners Petroventures and Gas Plus, are finally poised to move proactively forward after 15 years of investment.So far, the company has discovered gas reserves in two fields called Ana and Doina in the XV Midia block in the Black Sea, which, along with its other exploration prospects, could have high commercial potential for gas exploitation. The company, along with its partners, has decided to further invest in Romania to an amount that could reach 50 million USD each

year in exploration activities and additionally over 500 million USD for its initial gas development. Further exploration success would then lead to further development investments. Romania’s President is also an official supporter of Romania becoming energy independent, “If the other explored or soon to be explored fields will show similar volumes of natural gas, Romania could become a supplier of natural gas for other countries in Europe,” said Traian Basescu. This is exactly what Sterling Resources’ Mark Beacom believes. “Romania is at a stage where it couldbecome self-sufficient in energy and even become an exporter of gas. In order for this to be realised oil and gas companies will need to pour in vast amounts of money in this country due to large expenditures needed to drill and develop offshore. At large depths, drilling alone is estimated at around 1 million

9USD per day. Such intense activity should result in fields coming into production which in turn will require significant daily expenditures into the Romanian economy and will also bring in large inflows of royalty and tax income to the Romanian state. The Black Sea area generally could see exponential growth, resulting in the likelihood of transforming one of the Black Sea cities into an “Aberdeen of the Black Sea” (meaning a centre of excellence and supplier and provider of equipment, personnel, services for the Black Sea as well as offshore regions around the world). The UK North Sea supports 440,000 jobs, many of them high cailiber and high paying,” says Beacom. The first development that is ready to kick off this activity is Sterling Resources’s Ana and Doina fields. “This will not happen unless the gas market

is deregulated in Romania. At the moment, the very costly development of offshore gas is discouraged, thus, prolonging the import of expensive Russian gas,” believes Mark Beacom.In 1992, a contract was agreed between oil and gas company Rompetrol, then state-owned and two other companies, Enterprise Oil and Canadian Occidental, which could lead to the exploitation of two zones that cover a total area of 4,119 kilometres in the Black Sea, called XII Pelican and XV Midia blocks. During these years, Sterling Resources first acquired a ten per cent stake in the concession and became full-owner in 2007 of the right to explore and exploit offshore for oil and gas in the two zones. It was in 2008 that Sterling successfully drilled and discovered the Ana and Doina fields. . In February 2009,

a dispute with Ukraine was resolved in Romania’s favour at the International Court of Justice which confirmed that the eastern portions of Sterling’s two blocks in the Black Sea were part of Romanian waters. Just after this judgement certain Romanian state officials questioned the legality of Sterling’s concession rights which then resulted in a number of investigations by various state institutions. From early 2009 until late 2011 Sterling was unable to conduct offshore operations or assign interests to its joint venture partners. Later on, in November 2011 Sterling reached amicable resolution on all outstanding matters with the state of Romania. In addition, the Government has confirmed that the company’s exploration rights are available until May 2014, with the possibility of extending them twice, each on a three-year periodThe recent change in the Romanian legislation of construction permits has also contributed to the company re-starting its exploration and development activities in the Black Sea. Previously the Government decided that drilling companies in the Romanian plateau of the Black Sea were required to obtain construction permits. Sterling Resources was not the only firm to benefit from this change in legislation but OMV Petrom, Exxon and Lukoil as well.

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04ROMgAz ANd TRANSgAzON THE STOCk ExCHANgE

Minority stakes of 15% of Transgaz and, respectively, Romgaz, two of the most profitable Romanian state companies, will be sold on the Stock Exchange by mid this year. This decision, postponed several times, was taken as a result of International Monetary Fund (IMF) pressure in the last three years. The reason is: the Romanian state needs cash. The Government hopes to obtain about €100 million for selling 15% of Transgaz’s total shares and three times the amount on Romgaz’ minority stake. However, Transgaz and Romgaz are two of the most profitable state-owned companies in Romania. Romgaz made last year a €179 million Euro net profit, a 17% rise y-o-y, after the company’s turnover increased by 13.3% during the same period, to €955 million Euro. Transgaz reported a €92 million Euro preliminary net profit in 2011, a 4% rise compared to the previous year. The company’s

turnover increased by 6.5%, to €346 million Euro, even if the transport tariff for natural gas did not change last year. In addition, Romgaz and Transgaz have another advantage on their side, namely the companies that are part of the two consortia selected to manage the listing.The consortium consisting of Goldman Sachs, Erste, BCR (Romanian Commercial Bank) and Raiffeisen Capital & Investment (RCI) will mediate the Romgaz offer that will be listed on Bucharest Stock Exchange. The consortium consisting of the same Raiffeisen Capital & Investment together with Wood & Company Financial Services and BT Securities will carry out the selling of 15% of Transgaz shares. Transgaz is controlled by the Romanian state through the Ministry of Economy that owns 73.51% shares, while the Property Fund holds a participation of about 14.99% while other shareholders control

the remaining 11.50%. The Ministry of Economy also holds a majority of 85.01% of Romgaz’s total shares, while the Property Fund holds the remaining 14.99%.After the sale of minority stakes in Transgaz and Romgaz, the Romanian Government will no longer be in the position to ask the two companies to give away their entire profit as “voluntary” donations to the state budget, as it happened at the end of 2010 with Romgaz, despite the fervent critics from Franklin Templeton, the manager of the Property Fund. At that time, the Ministry of Economy forced Romgaz to “donate” €100 million from the company’s profit to the budget.The main activity of Romgaz is the extraction and the storage of natural gas. The company has more than 3,000 production wells and nearly 6,000 employees. Romgaz has an available storage capacity of about 2.7 billion cubic meters of gas annually and produces

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by A.M.N.

Romania and its involvement in the Nabucco pipeline project is a proof. Even more, the company has recently notified the Bucharest Stock Exchange that it will have a €10.21 million Euro participation in the consolidated budget of the Nabucco Gas Pipeline International GmbH, in the first half of 2012, as part of its financial responsibility to the consortium.

each year about 35-40% of the domestic gas demand (meaning around 6 billion cubic meters of gas). The company operates its own six underground storage facilities of natural gas, located in: Sarmasel, Cetatea de Balta, Bilciuresti, Balaceanca, Urziceni and Ghercesti. The company also owns storage facilities in joint-ventures with Depomures, located in Targu Mures, and with Amgaz, located in Nades. Romgaz’s large gas storage capacity has made this company to be valuable. As a proof, Gazprom, the biggest natural gas producer in the world, took the first step toward a partnership with Romgaz, in order to develop together ten storage facilities on Romanian territory with a capacity of up to 6 billion cubic meters.As for Transgaz, the company was listed on the Bucharest Stock Exchange on January 24, 2008, after the completion of an Initial Public Offering of shares, a moment that had registered a record level of participation from investors. Romanian state raised over 6 billion RON from investors, as a result of its public offering to sell 11% of its share capital. Transgaz’s gas transportation capacity is about 30 billion cubic meters per year and it is provided through almost 12,000 kilometers of pipelines. The company has approximately 4,500 employees and a strong union. Transgaz is also an important strategic company in

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05SHALE gAS –AN UNCERTAIN fUTUREThe probability of existence of important shale gas resources in Romania, ready to be exploited and the statements of several foreign companies interested in exploring and, eventually, exploiting these reserves, put in the spotlight an energy resource almost unknown until recently, few being those who knew something. The topic has become, suddenly, hot news, when energy giant Chevron stated its intentions to start exploration on a 2,500 square kilometers area, located in southern Dobrogea.

According to some estimates, if Europe would exploit shale gas formations, its dependence on Russian gas would fall from a current level of 27% to 13%.

However, the figures on potential reserves of shale gas of the various European countries, as they were published, differ significantly from one source to another. Poland seems to be the most advanced country in exploitation of these reserves.It appears the idea of using shale gas faces no significant resistance, neither from the Government nor from the general public.The situation is very different in France and Bulgaria, where governments have decided to stop, at least for now, the method of hydraulic fracturing because of the danger of pollution.Paris blocked the granting of exploration permits, under pressure from green NGOs and the left political parties, and despite energy companies ELF and Total, that want to be involved in shale gas industry. Closer to us, Bulgaria banned the

exploitation of shale gas, also under pressure from environmentally friendly movements, even if Sofia had initially made an agreement with Chevron, similar to the one signed by Romania. Opponents of shale gas exploitation point out that, first of all, a single drilling requires large amounts of water (between 9,000 and 23,000 cubic meters for a single well, according to Greenpeace) and, secondly, from the beginning, this water is mixed with dangerous chemicals, the additives. In addition, Greenpeace accused the USA authorities who allow companies not to publish the list of substances used as additives for reasons of competition. The NGO claims that 260 substances have been identified until now, some of which are known as toxic, or having carcinogenic or mutagenic effect on the human body. In turn, the United States Environmental Protection Agency (EPA) believes the carbon footprint of shale gas is much higher than the one of conventional fuels.

by Răsvan Roceanu

2314 This situation is due to the fact that, on one hand, the drilling and exploitation of wells require a high consumption of oil, and on the other hand, a shale gas well is releasing into the atmosphere between 3.6% to 7.9% of gas, meaning between 30% to 200% more than for conventional gas exploitation.

As for the situation in the European Union, there is no project designed to establish the framework of shale gas exploitation on Brussels’ agenda. Considering the deeply divergent positions took by different EU countries on this subject, most probably no common legislation will be approved any time soon. Romania is still at the prospecting stage. « If we find shale gas, we will inform the Romanian Government and then negotiate a license for production, » said Daniel Jerningan, business consultant at Chevron, quoted by Green-report.ro. Chevron is looking for gas not only in Dobrogea, but also in Barlad region.Professor Mihai Valentin Batistatu from the Oil and Gas University of Ploiesti said, last year, at RFI radio, that the first researches conducted in Barlad « had not been conclusive at all ». In the same interview, he warned that shale gas deposits in Romania could be just a mirage. In his turn, the president of the National Agency for Mineral Resources, Alexandru Patruti, told Hotnews that Chevron could start the exploration at any moment, because

of the obtained 2010 in only valid until 2015 and the time is running out.Analysing how the wave of criticism and claims against shale gas have grown in recent years, the most virulent opposition is manifested in European countries where Russian gas giant Gazprom in a very strong position. This is visible due to the fact that, either the Russian giant is the most important supplier of conventional natural gas, as in the case of France, or it is the only source of gas supply, as it happens in Bulgaria.«The ecological argument » is strong

enough nowadays in Europe, in order to have an intensive influence on the economic policy of any government, as we can see also in Romania, in the case of Rosia Montana.Meanwhile, France has very close political and economic ties with Algeria and it has recently built a very solid political “bridge” with Libya. Therefore, France is not vitally pressed by the need to find gas resources on its own territory, because, if it needs it, it will be able to find alternatives to Russian supply.

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06NO SOLUTION fOR gAS !?

The exceptional consumption of natural gas during last January and February has recalled the problem of gas supply on wintertime, which appears to be insoluble in the case of Romania. If the failure of increasing domestic production is perfectly understandable due to technical, objective reasons, it is much harder to explain why we can’t store more natural gas, in order to mitigate financial crashes and other kind of shocks, during wintertime.Currently, the 6 underground gas storage of Romgaz, together, do not exceed 2.76 billion cubic meters of usable capacity, while the company’s plans to build new facilities have failed to overcome the stage of beautiful (official) statements. In 2008, Romgaz pledged to invest over $500 million USD in the next years, in order to increase storage capacity by 40% until 2012. If this commitment would have been followed, we would have this year storage facilities with a 3.9 billion cubic meters capacity.

Many hopes seemed perfectly justified in June 2009, when Romgaz and Gazprom signed a Memorandum of Understanding on forming a joint venture. The main objective was to build a deposit at Roman-Margineni, with a capacity of 2 billion cubic meters, but other warehouses have also been planned. The AGRI project, which would have supplied Romania and other countries with gas from Azerbaijan, hasn’t gone forward either and the proof is that, in December last year, AGRI LNG Project Company SRL had just published a request for offer, in order to select a company for developing the feasibility study of the project. Making the situation even more complicated, late last year, the Romanian Government realized that, actually, it has no money to finance AGRI, so the project was included on the Public-Private Partnership (PPP) list of projects.As another alternative to Russian supply, in the previous years,Algeria has made several attempts to persuade Romania to take advantage

of the surplus gas available in this Northern African country. Algerian officials have presented Bucharest two possible options. The first option would be the extension of the existing gas pipeline between Algeria and the northern Italian city of Trieste. The second option proposed was the delivery of liquefied gas, by sea, to Constanta port.In addition, the much delayed Nabucco project seems less and less feasible, considering the start of the construction phase has been postponed repeatedly. Moreover, most countries involved in this project, including Turkey, have been cautious enough to get involved in other projects too (example: South Stream). Another fact against Nabucco is that the EU refuses to use Iran as a source of supply, for political reasons, even if Iran would be the only country which would not have any problems to ensure full transportation capacity for the pipeline.

by Răsvan Roceanu

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07TARNIţA-L{PUşTEşTI HydROPOwER PLANT

- ONLy wITH CHINESE HELP

Last december, former Prime Minister Emil Boc stated that one of the engines of Romanian economy in 2012 will be projects developed through public-private partnership (PPP). former Prime Minister referred to the list of 18 priority projects, approved by the government in April 2011, which have a €20 billion Euro estimated cumulative value. Among these projects, Tarnita-Lapustesti Hidropower Plant (estimated at €1.164 billion excluding VAT and designed for an installed power capacity of 1,000 Mw) has real chance of success.

In the Tarnita-Lapustesti case, there are two major Chinese companies that have shown, intentions to invest in the project. China Gezhouba Group International has expressed its firm decision to get involved in the implementation of the hydropower plant. This company was the main contractor of Three Gorges Hydropower Plant, the largest facility of its kind in the world. China Sinohydro is the second Chinese company that has shown interest in the hydropower plant. Except for Chinese companies, no other local or international investors have shown any interest in this project. The reason is the large amount of money required to be poured into building a hydropower plant of such magnitude.This hydropower plant is one of the most important energy projects in Romania, the achievement of this unit becoming mandatory due to the growth of wind farm projects. The

main problem with wind energy comes from the uncontrollable source of this energy – the nature’s wind. Transelectrica representatives repeatedly said that measures need to be taken to protect the national power system against imbalances. Therefore, in order to maintain the security of the national power grid, electricity based on wind must be balanced with electricity based on other safer and also clean energy resources, such as hydro. This is where Tarnita-Lapustesti Hidropower Plant comes in. This unit is planned to be built in Cluj county, 30 kilometers upstream of Cluj-Napoca city, on the valley of Somesul Cald river and on the left side of Tarnita reservoir. The project is designed for the construction of four units (pump-turbine) with an installed power capacity of 250 MW each. Its construction is estimated to take either 8 years and be done in 2 stages or in 7 years and completing the four

by A.M.N.

17groups in one single stage. The accomplishment of this project will bring a significant economic development to the area, located near Cluj-Napoca city. Preliminary analyses show the project’s impact on the environment will be very limited, Romanian officials say. In any case, this issue deserves more attention especially from environmental NGOs and local residents. In terms of the construction’s impact on Lapustesti community, the official statements are also positive, as local residents will not be displaced. Building a hydro power plant with accumulation through pumping is an old interest of the

Romanian specialists in energy systems. The first analyses in this respect were carried out during 1975-1985, when the Institute of Hydro Energy Studies and Design (ISHP) was involved in drawing up feasibility studies for such a project. Subsequent to those researches, 17 locations, appropriate for construction, were found.During 1985-1988, based on technical and economical considerations, the plans were focused on the basin of Somesul Cald, the location being considered efficient and secure, from geological and hydrological point of view.In 1999-2000, Electric Power Development Co. (Japan), a

specialized institute, carried out a new study, based on a grant offered by the Japanese government. Later on, in 2007, the consulting consortium IPA/Verbund/Poyry carried out a feasibility study within the SEEREM program of the World Bank. The analysis was based on previous solutions and on the layout scheme proposed by the ISPH and EPDC, with small modifications, useful to the objective. In 2008, ISPH updated the feasibility study.

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08wHAT wILL THE fUTUREOf wINd POwER BRINg IN ROMANIA?

Wind power is one of the few sectors of Romanian economy that is very popular among the foreign investors who are ready to spend hundreds of millions of Euro in this country. Around €1.5 billion Euro has been invested in operational wind turbines in Romania until February 2012. However, this amount does not include others hundreds of millions of Euro that are currently invested in wind farms under construction.

The capacity of all wind farms in our country reached the level of 1009.5 MW (according to the latest data provided by the national power grid operator Transelectrica), considering that a nuclear reactor of Cernavoda Nuclear Power Plant has an installed power capacity of 750 MW. Nowadays, more than ever, Romania gets the attention of wind farm developers, as a result of solving the problems related to the renewable energy legislation, by adopting the Emergency Ordinance no. 88/2011 on amending and supplementing Law no. 220/2008. The new and clear system of subsidies in this field generates a huge number of investment plans in wind farms in the East and South-Eastern Romania. There will be a notable increase in the presence of foreign portfolio investment into the local green power market, in the next two to three years, due to the new framework of subsidies that make Romania one of most wanted five European locations of choice for foreign investments in the renewables, according to US giant General Electric. Romania has an important wind

power potential, a cheap workforce in constructions field, a lot of IT specialists and energy engineers. Romania is thus expected to reach a high level of diversification of sources of electricity that will cause the envy of other countries in the region and, perhaps, around the world. Romania currently supplies around 30-35% of its national electricity needs from renewable sources (mainly hydro).But a great problem will arise: the management of renewable electricity by the same companies that are also electricity distributors. This fact will lead to a monopoly of the price of electricity which will be set up by a very limited group of companies. In this case, as usual, the consumer, already burdened by taxes, will be the only one affected by being unable to react to any increases of the price per kW/h imposed by those who control and will control the market.Transelectrica data show that 11 wind farms are operational at the moment, all of them located in Dobrogea County. We present below the most significant players in the Romanian wind power sector. CEZ

by A.M.N.

Group holds the largest wind farm with an installed power capacity of 387.5 MW, located in Fantanele, were 155 wind turbines with a capacity of 2 MW each are operational. So even if only half of the total 600 MW wind farm is operational, CEZ Group is already making a lot of money. The company has received already over 720,000 green certificates, totalling over €39.8 million Euro. The wind farm established by « Energias de Portugal » in Pestera village, in Constanta county, has a capacity of 90 MW and 30 wind turbines. The same company holds another two wind farms, each with a capacity of 69 MW, both located in Cernavoda. Spanish-based berdrola has recently opened a wind farm with a capacity of 80 MW in the town named Mihai Viteazu, in Constanta county. Italy-based Enel holds three wind farms, each of them with a capacity of 70 MW, and another smaller one, with a capacity of 34 MW, all of them located in Tulcea county. The largest oil and gas company in south-eastern Europe Petrom has started slowly with a 45 MW wind farm in Dorobantu village, but the company has bigger plans in the future, in this sector. The smallest operational wind farm (an installed capacity of 25 MW), located in Silistea, Dobrogea county, is owned by Butan Gas. Enel Group plans to finish its fifth wind farm in Romania, a business that cost the company over €400 million Euro so far. Several projects rolled out by Energias de Portugal and Iberdrola (Spain) are on the new wind farms list and their value is estimated at more than €200 million Euros. After EDP had finished the construction of three wind farms in Dobrogea county last year, the Portuguese group promised

to finish two other investments in the first quarter of 2012, a 24 MW wind farm in Vutucani, Vaslui county, and a 33 MW wind park in Sarichioi village, in Tulcea county. In its turn, wind farm developer Monsson Group has started to build a new wind park last January, located in Pantelimon village, in Constanta county, an investment estimated at €200 million Euro. This company became known on the market after its projects had been bought by big players from energy industry like CEZ, Petrom or ButanGas. This group has developed wind farms with a total capacity of 2,400 MW in Romania, but it is managing now its own units of a 25 MW capacity.

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09BIOfUELS – THE ENd Of A dREAM?

The production and the use of biofuels have increased worldwide, but the doubts and accusations against these oil substitutes have skyrocketed even more.

The charges related to the serious negative effects of bioethanol and biodiesel on food prices and on biodiversity led the EU to request the transition to the « second-generation » of biofuels, as a cleaner alternative. These are fuels made of ligno-cellulosic biomass, meaning the wooden part of a plant, like bark, straw, corn or cane. But on July 2009, Raffaello Garofalo, executive director of the European Algae Biomass Association (EABA), said that the algae are the real raw material for ligno-cellulosic biomass. EABA argued that, theoretically, the algae can be used for the fuel industry, in the pharmaceuticals and also for animal feeding, but the organization admitted that more research needs to be done in this field. On March last year, the EU proclaimed again the objective that the fuels made of renewable resources should represent 10% of the total transport fuels, but it stipulated that the term “renewable resources” designates not only

biomass, but also the so-called “green” hydrogen and “green” electricity, obtained by wind power or hydro power plants.Brussels decided that it would allow to trade only biofuels that meet the criteria of sustainable development, in order to defend itself against claims that biofuels lead to massive deforestation and food price increases. These remarks were presented as a way to prevent situations when energy-focused crops would replace food crops, meaning the so-called criterion of „Indirect Land Use Change” (ILUC). The polemics intensified on September last year, when some ideas revealed in an opinion of The Scientific Committee of the European Environment Agency (EEA) were disclosed to the general public. The document rejected the belief that biofuels are 100% beneficial to the environment and it said that errors in calculation have been made with potentially dramatic consequences. The EEA report also rejected the data presented by the International Energy Agency (IEA), which believed that biofuels could provide 800 EJ (exajoules) of energy per year (one exajoule is equal to 1018 joules). Scientists point out that the total

agricultural land, used to produce food for humans and animals, fibers and wooden raw materials actually have an energy potential of only 230 EJ (exajoules) per year, just over one quarter of what the IEA estimated. The European Commission (EC) reacted immediately to these disclosures saying that the study which had led to the opinion of the 19 scientists had been “distorted”. However, another study, made at the request of the EU, showed that biofuels could be included in the sustainable development policy only if the energetic plants were grown on degraded, unusable lands or on those infertile for other types of plants. In reply, Isabelle Maurizi, the spokeswoman for the European Biodiesel Board, said the data about biofuels published in the European media were in conflict with the results of studies conducted in the United States. She said: “We do not recognize the validity of scientific studies because of the contradictions between the results”.

by Răsvan Roceanu

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10CRITICAL ENERgy INfRASTRUCTUREOPPORTUNITIES, RISkS ANd NEw PARAdIgMS

How critical an infrastructure is is a function of damages caused by a potential disruption and the complexity of modern energy systems requires a growing number of such points of tension. No matter how well secured an objective is, a threat will result, sooner or later, especially if the human factor is involved, both inside and outside of an objective. Each link of a set of critical infrastructure has its own, often unique, vulnerabilities, requiring a specific approach to the idea of security.

Different types of infrastructure is often interdependent, so that one vulnerability increases the others’, and producing a disruptive event in a certain point of the system could risk to widen the vulnerabilities of other points. Therefore, the concepts of resilience, business continuity and quality of life may be found under the “umbrella” of the protection of critical energy infrastructure. In countries where power outages are frequent and long, those institutions and companies that can afford are using their own secondary power supply systems based on generators for home or public use. Such investment could be considered too high for a society accustomed to energy availability (ironically, these companies are most exposed to a cascading failure), but increasing the resilience of a society must be an ongoing and cumulative process. Without such kind of effort, and given the importance of trust as a good and intangible value in the global economy, the moment when a disruptive event occurs, chaos and damages associated to this moment,

could determine the decrease of confidence in local authorities. Foreign investors would seek other countries for business, residents and local entrepreneurs would have to confront with the uncertainty of fulfiling their future plans and the cooling off effect of economic growth could take several years. Critical energy infrastructure is not limited to technological objectives. Interdependencies occur beyond the immediate presence of basic components of the energy infrastructure, adding new dimensions that need comprehensive approach, in order to get an effective protection. The financial health of infrastructure companies, their ownership structure or the infrastructure structure, the availability of capital for repairs, maintenance and expansion and also the state interests in the development of new infrastructure (having the potential to impose changes in location and technical specifications) means issues that have been already taken into account when a company’s energy risks are analyzed. By default,

by Prof. Liviu Muresan, PhD

22 the financial crisis triggered in 2008 has spread into the power sector as well. The slowdown in industrial production led to the reduction of energy consumption and the decrease of oil price, a fact that meant a disaster for the producing countries, mainly in the Middle East, Central Asia and Northern Africa, largely depending on income from the energy market.The complexity level of the energy infrastructure exposes it to other risks – that of cyber attacks, made possible by the need for digital integration of the critical infrastructure, in order to enable their proper control. For example, it is well known the case of one country where the computer system for nuclear research facilities was damaged by a virus, being one of the most publicized cases of use of cyber weapons.Environmental protection is another priority for maintaining the resilience of companies with extensive energy infrastructures (producing or transit countries, whose energy profile exceed local needs). The anxiety caused by fossil fuel reserves, and also high international prices have stimulated the interest in sources once considered non-economic, like shale gas. Finally, geopolitical risk is a major source of energy system disruptions. Nothing destroys faster and more completely a critical infrastructure system then an active or smoldering conflict. The “Arab Spring” revolts are full of examples of disruptive energy system due to intra-states conflict. Libya is a good example, due to the

fights for control between rebels and government forces in areas where the most important infrastructure was located. An interstate war zone is even worse for the power system, at least one party being motivated to prevent capture of important objectives by the enemy. A well known example is the burning of Kuwaiti oil wells by Saddam Hussein, during his withdrawal from Kuwait, in the first Gulf War.The importance of Critical Infrastructure Protection is obvious. I present a final idea about how to undertake such a laborious process. Many countries are seeing their efforts hampered due to the misunderstanding of the interconnection level of different infrastructures – financial-banking, education, health system, water, food, energy supply, etc. An effective protection should start at the strategic level and it is based on a series of basic documents, such as plans and strategies, developed by experts who have an overview of various efforts. The education of these security experts is another important step forward towards infrastructure protection and ensuring resilience of society, in times of ordeal, like the ones we are living.

11HARSH ANTI-POLLUTION

MEASURES IN USAThe US president Barack Obama announced last December the beginning of new harsh regulations to limit the emissions of the coal-fired and oil-fired power plants in USA, regulations called Mercury and Air Toxics Standards (MATS). EPA experts estimate these new safeguards will prevent up to 11,000 premature births, 4,700 heart attacks, and 130,000 asthma attacks per year. This is expected to lead to total annual savings of $90 billion USD from the national health budget. According to EPA, these new standards are designated for approximately 1,400 thermo power plants, of which 1,100 coal-fired units and 300 oil-fired units. Immediately after the announcement of the White House, Obama’s Deputy Assistant for Energy and Climate Change, Heather Zichal, predicted that some people in the Congress will try to prevent these standards from being implemented.

It was exactly what had happened. Some Republican Senators, members of the U.S. Senate Committee on Environment and Public Works (EPW), announced that they would do everything is possible to overturn the MATS rules in Congress. Senator Jim Inhofe called the MATS « another costly rules, that will have a devastating effect on jobs ». In response, Democratic Senator Barbara Mikulski, who chairs the EPW Committee, said the EPA rules will « generate jobs and protect the health of families ». However, EPA estimates that manufacturing, engineering, installing and maintaining the pollution control equipments will provide 46,000 short-term construction jobs and 8,000 long-term utility jobs. Edison Electric Institute (EEI), an association of shareholder-owned power companies, based in Washington DC, said that the new regulations are « the most expensive in the EPA’s history ». « It will require a significant number of electric generating units to design, obtain approval for and install complex controls or replacements in a very short timeframe », said EEI’s president, Tom Kuhn. John Walke, Clean Air Director of

NRDC (Natural Resources Defense Council), said, in an interview for The U.S. Public Broadcasting Service (PBS), that the MATS are « the most significant clean air and public health achievements in a generation ».The www.energydigital.com site estimates that the MATS will become one of the most expensive legislations in EPA’s history, because its application will cost about $9.6 billion USD. The same source said this high amount determined the White House to allow electricity producers to implement these standards in 4 years. In a first reaction, FirstEnergy Corp., the producer that owns energy units with a total power capacity of approximately 23,000 MW and has 6 million customers in eastern U.S., announced that the new anti-pollution rules would turn off its six older, coal-fired power plants, located in Ohio, Pennsylvania and Maryland. After their closure, the entire electricity production will come from cleaner sources, said FirstEnergy Corp.

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by Răsvan Roceanu