Emerton conducts strategic study of Romania's gas market

30 May 2019 Consultancy.eu 3 min. read

Romania’s oil & gas federation (FPPG) has worked together with energy experts from Emerton to deliver an in-depth strategic market analysis of the Romanian gas market, with the aim of drafting a roadmap for future improvement. 

The 50-page report concludes that while substantial steps have been made over the past years in terms of market attractiveness and efficiency, in particular on the back of the gradual gas market liberalisation, a number of “major hurdles” are still impeding the emergence of a mature gas market in Romania. 

For starters, the Romanian gas grid has been found to be quite isolated from the European gas market. This means that during peak demand periods such as winter, Romania is heavily dependent on gas imports. The reliance is concentrated on two countries: Russia (for the provision of gas) and Ukraine (which is the transmission country between Russia and Romania).

Romanian technical import capacities and their utilization rate in January 2019

Further, the issue of poor liquidity of the wholesale gas market “negatively impacts the whole Romanian gas sector by limiting the attractiveness of investments in gas production and generating low competitive intensity on the retail market” according to the experts. Adding to this is that the mechanisms put in place to cover the cost of gas supply in the regulated sale tariffs are lacking transparency and predictability. 

The result is a market that strongly limits potential new players from entering the market, impeding – according to many much needed – competition in the sector.

Price cap

The recent introduction of the 68 RON/MWh price cap is expected to exacerbate most of the existing hurdles and generate harmful long­term impacts on the Romanian gas sector. The Emergency Ordinance GEO 114/2018 introduced by the Romanian Government at the end of 2018 (and amended late March 2019) imposed a 68 RON/MWh price cap on a substantial part of the volumes traded on the wholesale gas market. 

Funds required to provide a robust protection to vulnerable energy consumers

Although such a measure mechanically prevents the Romanian household consumers from being exposed to potential price increase in the near future, the application of GEO 114/2018 will in the eyes of FPPG and Emerton “clearly exacerbate the illiquidity of the wholesale gas market and generate harmful medium to long-term impacts on the security of supply and gas affordability” for end users.

The researchers contend that the GEO 114/2018 is not addressing the disfunctions of the Romanian gas market at its roots but will furthermore amplify the hurdles impeding the efficient and balanced development of the sector. “The mere introduction of a price cap is structurally inconsistent with the conditions which would allow the development of an attractive and competitive market for producers, retailers and consumers,” reads the report. 

Objectives of the proposed roadmap


In order to overcome these hurdles, the report puts forward a roadmap consisting of six strategies:

  • Deregulate the wholesale price
  • Incentivize the investment in the upstream sector
  • Enhance the interconnections with the EU gas market
  • Improve the wholesale market liquidity and develop a reliable price index
  • Enhance the competitive intensity of the household market by boosting its attractiveness
  • Improve the protection of the vulnerable customers 

More information: The full report by Emerton can be downloaded from the website of FPPG.