Crisis, price and gas


by Dumitru Chisalita

The years of media “silence” on natural gas have been replaced with media “unrest” in the recent weeks. Analyzes were replaced by investigations. Expertise was replaced by gossips. The gas issue has become a daily subject, reason of quarrel between nationalists, journalists etc., who issue points of view on energy independence, gas crisis, failure to store gas, how many gas exchanges exist in Romania, the increase in gas prices etc. I propose an analysis of the circulated elements, to be able to identify the fake news, the persuasion and the real beneficiaries of this artificially created situation, as the consumers will definitely lose from it.

Will there be a gas crisis in the winter of 2017-2018?

According to forecasts of the National Meteorological Administration (NMA), we will face very low temperatures this winter, expecting a situation similar to that in the winter of 2012 (the coldest of the last winters). Given that the current transmission-storage-distribution infrastructure was designed before 1989, for an entirely different consumption structure, i.e. a level of demand variation at national level from 1:2 before 1989, to a demand variation of 1:8 today. Failure to adapt the infrastructure in the gas sector to the current requirements determines that any decrease in the average daily temperature in the country below -15C, for more than 3 consecutive days, to bring an alarming state, i.e. the apparition of deficit on the gas market. The gas deficit is covered from imported gas. As the number of days with low temperatures increases, the daily gas deficit grows, with the possibility to reach 35%. This gas is normally available to be imported from Russia, with the exception of: malfunctions in the transit systems in Ukraine and Moldova; the momentary unavailability of such amounts of imported gas, following the need to meet the demand from the existing contracts; the existence of a similar crisis as the one in 2009. I estimate that for the winter of 2017-2018 there are no premises for the above mentioned situations, so there is a great probability that in situations of consumption peak in the winter of 2017-2018 to be necessary only to purchase gas from import at a price that could be by 20-30% higher than the market price in Romania. In conclusion, in my opinion, a crisis in the winter of 2017-2018 is less likely, being an unjustified alarm. Why is it necessary to launch such news? A situation of deficit of domestic sources – demand is used, which takes place year after year, to invoke a false danger introduced by GEO 64, of gas market liberalization, and to reason the legislative intervention of imposing control in the market, control which for 17 years has allowed gamesmanship.

Are the heated debates on a possible gas crisis meant to attract Gazprom’s attention?

The largest gas company in the world has sufficient experts, not needing support from Romania to estimate the potential quantities to be sold by the company this winter in Romania and help it forecast the prices. Romania is and will be dependent on imported gas (at least in the next 5 years) during winter, following the impossibility to ensure the gas demand at the level of days with consumption peak (days with very low temperatures). If we deny this reality, the Russian experts know this reality very well. Failure to accept this reality of contracting gas in the moments of consumption peaks, which are statistically proven to overlap a gas deficit at the level of several regions in Europe, determines acquisition every year of the most expensive gas, exclusively due to the moment when the acquisition is made. In conclusion, in my opinion, the fact that the statements on a possible gas crisis are made to attract Gazprom’s opinion is Fake News. Why is it necessary to launch such news? The boogeyman Gazprom is used to prepare a new measure desired in the market: convincing the population on the normality of increasing gas prices!

Is there sufficient gas stored in the underground storage facilities?

Compared to the winter of 2011/2012, period invoked by NMA as the comparison element for the following winter, there is less gas stored. Even if we had stored a similar amount of gas, or even if an amount of gas equal to the capacity of the current storage facilities had been stored, we would still have to import gas. Thus, analyzing the daily consumption trends forecasted for the winter of 2017-2018 (the scenario of consumption similar to the winter of 2011/2012), in conjunction with a minimization of storage costs and thus of the price to end-consumers, the amount stored this year is optimal. If a larger amount of gas had been stored, it would have been anyway necessary to purchase gas from imports, but the result would have been a double increase in gas prices, determined by the acquisition of gas from import at consumption peak and by the coverage of costs with gas stored and not extracted. In conclusion, in my opinion, the statements according to which there isn’t sufficient gas stored in the storage facilities, resulting in a possible gas crisis and an increase in prices, are Fake News. Why is it necessary to launch such news? The idea of a mismanagement is used – failure to store sufficient gas amounts, as the reason forcing us to buy gas from import and, thus, the culprits for the increase in gas prices are identified. Psychologically it is easier for the population to accept an act – the increase in the price of gas – as long as the culprit is found and punished.

Will gas prices increase by 50% this winter?

An element often mentioned is that we will face an increase in gas prices. This element is accurate, as there will be an increase in gas prices in the winter of 2017-2018 We should know the main reasons that will determine this increase:

  • The Methodology for the approval of prices and determination of regulated tariffs in the natural gas sector, used for 10 years in Romania,
  • The lack of the “Implementing Rules for the new Gas Law” (the gas law amended by GEO 64), which, although should have been issued by 30 November 2016, do not exist, and thus the suppliers are not required to make proof of gas acquisition in conditions of minimization of the cost of resources allocated.
  • The incapacity of an obsolete infrastructure (for transmission and distribution), not adapted in the past 50 years to the current necessities, in order to capitalize on Romania’s gas resources, thus forcing consumers to resort to imports.
  • Gas acquisition from import only in the peak consumption period, when prices are very high
  • The primary and secondary legislation, allowing prices and tariffs to escalate to the end-consumers.

Even so, I believe that the average price of gas (as commodity) on the gas market in the winter of 2017-2018 cannot increase by more than 15% (compared to the average price of gas during summer), even in the worst-case scenario. In conclusion, in my opinion, the statements according to which the average price of gas will increase in the winter of 2017-2018 by 50% are Fake News. Why is it necessary to launch such news? The persuasive method is used, invoking a large increase in prices, which is strongly counteracted, and the population will easily accept a small price increase (i.e. the price increase desired from the start).

What is the real role of the Media Project “Natural Gas 2017”?

The period between the start of gas market liberalization and the issue of GEO 64 (the present, actually) was a real El Dorado for some companies in Romania, the legislation issued being on their side. The danger of eliminating the leverage that established “legal oligopolies” on the gas market in Romania risks being reflected in the decrease in their profit. Thus, these companies are starting to react using those they have on the payroll in the society. The desire of certain gas suppliers is to perpetuate the present situation for as many years as possible. Chaos on the gas market, which increased strongly this year, through the manifestation of institutions acting as legislators, is increased week after week through the Media Project “Natural Gas 2017”, chasing away any potential world or European-class gas player, the only ones that could really determine achieving a real and functional gas exchange in Romania. Thus, the country is pushed to perpetuate Chaos on the Market, with the total destruction of confidence in the gas market, eliminating as many gas suppliers as possible and with the long-term increase in the influence of Russian gas.

Translation from Romanian by Romaniascout.

Image courtesy of graur codrin at