Interview | Razvan Nicolescu, Energy & Resources Industry Leader, Deloitte

12 August 2019

Last year, Deloitte conducted in-depth research regarding the value of Black Sea projects for Romania. How has the situation evolved since? 

Black Sea Oil and Gas went ahead with the final investment decision but the rest of the projects are in a “dormant” state. These circumstances stem from current market conditions, namely imposing a certain gas price and making it mandatory for an unsustainable percentage of production to be transacted on centralized markets. I see it as unsustainable because it prevents long term agreements, which are vital when making an investment decision. When you deal with banks for instance, it is essential to be able to prove that there is demand for your product and that the investment is sustainable.

Romania can no doubt play a more important role in the region but it can also easily become an importer of energy. To reach the desired result of strengthening our role, investments are absolutely necessary. Not just in gas projects, but renewables and generally power generation capabilities, as well as the distribution network. For the time being we are still producing on the basis of investments that were made way back in the 1960s-1970s. If we do not figure out the way to nurture new investments, we will end up in the second scenario.

 

What do you think is the main reason for which Romania’s potential to be a strategic player in the region remains unfulfilled?

The core problem is the present administrative and governing capacity of the country. So many ministers have changed in the past few years, and this makes things complicated, because we lack continuity. Public opinion also plays a role - there are few people that react based on principles, rather they do it based on immediate interests.

On the state’s side, the fastest road to better decisions is to respect the law regarding decisional transparency. This is the best barometer, as it gives you access to perspectives from many relevant stakeholders, be it from the gas or renewables space, big industrial consumers and so on. This contributes greatly to creating a picture regarding the impact on various sectors and understanding whether the measure is positive or not. And it is also a method that involves zero costs.

 

Is there anything that the industry itself can do in order to better the situation?

The industry can express their point of view and ask that when changes are underway in terms of legislation, those changes are to be made only after public consultation. Another key aspect is for the industry to prioritize medium and long-term thinking, and to avoid as much as possible conflicts over short term gains. Producers may want prices to grow, suppliers may win if they decrease, but what is essential is that they remain attached to principles, even if this may entail losses at certain points in time. The thing is that if the principles are not respected, in the long run everybody will come out on the losing side.

The world is changing whether we like it or not, and it is to our advantage to understand the direction in which it is heading. I have no doubt that change will happen in Romania even if it will not be driven by the state. The downside is that it tends to cost more compared to a situation in which the state vision is coordinated with that of the industry.

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