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Geothermal Energy Systems Assessment - A Strategic Assessment of Technical, Environmental, Institutional and Economic Potentials in Central and Eastern European Countries

2 Volume II.B: Country Profile - Romania

2.1 General Background Information

With its 22 million inhabitants and 237,500 square kilometres Romania is a country rich in both human and natural resources, including gas, timber, petroleum and coal.

The Romanian government has committed itself to reform programmes⁷ and made EU accession its highest priority. Romania's medium-term economic strategy (endorsed by all major political and civic constituencies in spring 2000) is in accordance with EU requirements.

Table 1
GDP Growth Rate (annual per cent 1995-1999

Source: www.worldbank.org

Throughout the 1990s, Romania lagged behind most of its Eastern European neighbours in the pace of economic restructuring. While some reforms has taken root, the overall pace of development is slow. From 1997-99 the economy declined 14 per cent (table 1). This left Romania with one of the lowest living standards in Europe and it also hampered the country's efforts to join the European Union. However, evidence of the Romanian governments commitment to an economic reform led the European Union to invite Romania to begin negotiations for EU accession in December 1999.

By 2000, after years of high inflation, economic decline, and large trade and fiscal deficits, Romania's economy finally showed signs of recovery. Booming exports are improving the country's precarious balance-of-payments position and encouraging growth. According to national estimates, economic growth was 1.6 per cent in year 2000. Moreover, forecasts for the medium term (2001-2004) predict average annual growth of approximately 5.6 per cent, thereby finally putting national economic development on the right track.

Table 2
Key Figures for Romania

Source: A combination of statistics from various sources⁸

2.1.1 Map of Romania

2.2 The Energy Sector

After the 1989 revolution, Romanian authorities planned to restructure the country's energy sector as part of a transition to a market-driven economy. This included introduction of competition within the energy sector and adjustment of energy prices to international prices - two of the major objectives of Romania's EU integration for the energy sector.

2.2.1 Energy Supply and Sonsumption

Total primary energy supply in Romania dropped by 35 per cent during the period 1990-1998 (table 5). Energy use per capita (table 3) dropped by 33 per cent during the same period. Import of energy also dropped by approx. 48 per cent (table 5).

Table 3
Annual energy use (toe per capita)

Source: IEA, International Energy Agency

In the period 1994-1996, Romania experienced a positive growth rate in energy use pr capita (table 4). These years were also characterised by positive growth in GDP (table 1). According to preliminary national estimates for year 2000, energy consumption in Romania recorded an increase of 2.7 per cent, thereby following the trend of national economic development. With an improved economy for 2001 - 2004, Romania could experience an increase in energy use which, with reliance upon present energy sources, will cause a serious environmental impact.

Table 4
Annual Growth Rate of Energy Use per capita

Source: IEA, International Energy Agency
Example: ((1991-1990)/1990) * 100 = per cent change
Average (1990-1999) =1.89

Table 5
Total Net Imports of Energy (Mtoe), TPES (Mtoe) and Electricity consumtion (TWh)

Source: IEA, International Energy Agency

2.2.1.1 Energy Supply and Consumption in Relation to GDP

Romania decreased the TPES/GDP ratio by 20 per cent during the period 1990-1998, mainly as result of serious structural problems within the energy sector and the economic recession in the country.

Table 6
TPES/GDP (toe per thousand ´90 USD)

Source: IEA, International Energy Agency

As in other countries with old energy distribution networks, Romania suffered from loss of energy during transportation (see table 11). Compared with table 6 above, table 7 illustrates that the decrease in energy use based on 'end user' figures (TFC/GDP) is 30 per cent, which is actually 10 per cent more than in table 6 (TPES/GDP). This means that due to an inefficient or old energy distribution network much energy is being wasted.

Table 7
TFC/GDP (toe per thousand ´90 USD)

Source: IEA, International Energy Agency

2.2.1.2 Energy Supply and Consumption Based on Energy Source

Natural Gas

Romania's natural gas consumption plummeted by 48 per cent from 1990 to 1998 (see table 8). As consumption dwindled, production followed suit, nearly mirroring the decline and continuing to leave Romania in need of imports to meet its natural gas needs (around 30 per cent is imported). Proven natural gas reserves in Romania dwindled as the country's economic decline worsened, discouraging new exploration.

Table 8
TPES (Mtoe) / Energy Source

Source: IEA, International Energy Agency
* Energy source is not significant or not present

Russia is Romania's main foreign supplier of natural gas and in December 1999 Romania gained access to the Soyuz pipeline supplying Russian gas to Western Europe, after linking its pipeline system to the pipelines of Ukraine. The 12-mile pipeline link between the Ukrainian city of Khust and Satu Mare in north-western Romania will allow Ukraine to transport up to 4 billion cubic metres (13 billion cubic feet) a year of additional Russian natural gas to Romania. In the future, the Khust-Satu Mare pipeline will transport gas to Romania from Turkmenistan, Kazakhstan, and Uzbekistan as well.

In order for these potential imports to reach Romanian households, the country has begun to modernise its aging gas distribution system. Romania has initiated the process of replacing corroded steel pipelines with polyethylene pipelines, and underground storage capacity is being increased. Romgaz¹⁰ is seeking to upgrade the country's 9 000-mile pipeline network, attempting to cut down on natural gas leakage and modernising measuring stations to make gas consumption more efficient.

Oil

Romanian domestic crude oil production has steadily declined over the past two decades, from about 294 000 barrels a day in 1976 to only 127 000 barrels a day in year 2000. Although Romania was once a fairly important oil producer and exporter, today Romania is forced to import around half the oil it needs for domestic consumption and consumption has been increasing since 1994. Primary supply of oil has gone down by 37 per cent during the period 1990-1998 (see table 8).

With proven petroleum reserves of 1.4 billion barrels - the largest in Eastern Europe - Romania is poised to reclaim it's standing as the region's most important oil producer. The Romanian government has committed itself to increase domestic production of oil in order to reduce the country's reliance on import. The removal of state price ceilings, plus relatively high world oil prices, have induced the national oil company (SNP Petrom) to restart some of its idled oil wells.

Romania has now opened up its oil sector to outside investors. This, together with the introduction of western technology and production methods, is expected to boost Romania's reserves and production in the next few years.

Coal

While Romania still has sizeable coal reserves, the country's coal production has fallen dramatically, 57 per cent from 1989 to 1998. Similarly, coal consumption plummeted 60 per cent in the same period. The sharp decline in coal production and consumption is mainly seen as the result of the efforts of the Romanian government to restructure the coal sector, including a reduction of state subsidies and closing of inefficient mines. Primary supply of coal has also dropped significantly during the period 1990-1998 (see table 8). In addition, Romania's economic contraction in the 1990's caused coal production to fall substantially.

As has been the case in other CEECs, the social impact of mine closures has been significant, as tens of thousands of coal miners have lost their jobs. Moreover, rising coal prices are affecting individual households, mainly in the countryside, who depend on coal for their coal fire.

2.2.1.3 Consumption of Electricity

Final consumption of electricity was reduced by about 32.5 per cent from 1990 to 1998 (table 9), again with 1995 and 1996 as peak years¹¹. Since the late 1990's Romania has been able to generate a large share of electricity production from hydro power (see also table 19).

Table 9
Final Consumption of Electricity (Mtoe) and Main Energy Source for Production*

Source: IEA, International Energy Agency
* Up to 1992, electricity generation was primarily based on gas; from 1993-1996, gas was replaced by coal; and since 1997, hydro energy has increasingly been primary base for electricity generation (30.64 per cent of total in 1997 and 35.29 per cent of total in 1998).

2.2.1.4 Energy Consumption Based on Sectors

The industrial sector accounted for a full 69.5 per cent of total energy used in Romania in 1998, with residential consumption making up only 17.8 per cent of the total and transportation just 12.7 per cent. Of this consumption, natural gas accounted for 37 per cent of the total, with oil (33.5 per cent) and coal (16 per cent) as other main fuel sources. Based on TFC figures, energy use in the industry sector declined by 58 per cent during the period 1990-1998, transport sector by 10 per cent and other sectors by 33 per cent (see table 10).

Table 10
Annual Energy Use (TFC, Mtoe) / Sector

Source: IEA, International Energy Agency
* Agriculture and especially residential sectors are main 'consumers'.

2.2.2 Energy Efficiency

The TPES/TFC ratio increased by 16 per cent during the period 1990-1998 (table 11) meaning that Romania's energy distribution network efficiency has been worsened during the years. However, since 1996 Romania started to improve this trend and the energy efficiency is, based on statistical data, now turning towards a positive outlook. The country has started to modernise its aging gas distribution system, including the replacing of corroded steel pipelines with polyethylene pipelines.

Table 11
TPES/TFC

Source: IEA, International Energy Agency

2.2.3 Physical Energy Infrastructure

Thermal energy supply is provided in 45 localities through centralised district heating systems. The transportation grids and moreover the secondary grids are in an advanced stage of wear, which leads to a big loss of energy, having serious consequences for consumers. It is therefore necessary to reconsider thermal energy supply at the national and local level; the necessity of grid modernisation; small-scale co-generation; efficient equipment promotion within a modern legal and institutional framework; together with new standards in building insulation.

Petroleum Pipelines

Romania has 4 475 km petroleum pipeline all owned and operated by Conpet, a joint stock company partly (70 per cent) owned by the Romanian State Ownership Fund.

Natural Gas Pipelines

There are approx. 12 000 km. of gas pipelines in Romania with a capacity of about 211 m³ per day. In 1996, Romgaz was planning to replace 30 miles of its 1 770-mile pipeline system. The Russian gas supplier Gazprom has entered into a joint venture with Romgaz to build a new pipeline to carry Russian gas to consumers in Romania and neighboring countries. The first segment of this 120-mile pipeline was commissioned in 2000, and the rest is scheduled for completion in 2002. Most of the natural gas imported into Romania comes from Russia, with some of this gas arriving via a pipeline through Ukraine.

2.2.4 State-Owned Energy Enterprises

To date, Romania's energy sector reform process has been relatively slow and the limitation in restructuring and privatisation has meant that Romania has experienced only limited progress.

According to the Romanian Medium Term Energy Strategy for 2001-04, privatisation pace and methods shall provide sufficient income for the chosen energy companies, consolidation of energy safety and fulfilment of postprivatisation objectives. Competition, infrastructure modernization, strengthening of financial viability and market competitiveness capability of the energy companies as well as social protection will be part of this. Distribution may be entirely privatised, however production in thermal power plants can be only 25-40 per cent privatised

Services that produce losses and do not show recovery prospects will be closed or withdrawn. The Romanian and foreign investors will be encouraged to create joint venture companies, with the existing energy companies each participating with shares. Some co-generation and thermal power plants will be transferred to local administrations and will be converted to commercial companies in which "Termoelectrica SA" will be able to have shares. There is a plan to privatise two such companies each year.

In June 2000, the Romanian government approved the reorganisation of Romgaz, the natural gas utility owned by the state, in order to comply with European Union regulations and to continue the liberalisation of its energy sector. Romgaz is to be restructured into four business units: Transgaz, for transport; Depogaz, for underground storage of natural gas; Exprogaz, the production unit; and a distribution company. The state plans to sell 100 per cent of the distribution company and 30 per cent of the production unit while it wants to keep 100 per cent ownership of the transportation unit.

Privatisation of SNP Petrom, the state oil company, has proceeded slowly. The government has undertaken a gradual program to revitalise the company and prepare it for partial privatisation, including liberalising prices, closing its most inefficient operations (many in the refining sector), and selling some of the more profitable ones. While foreign funding is being sought to modernise more than 1 800 miles of pipelines, the government must retain at least a 51 per cent share of the company by law. The government has considered selling as much as 30 per cent to 40 per cent of the company, with employees likely to be awarded a 10 per cent stake.

A reconstruction of the Romanian state-owned power company Conel is planned, starting with the distribution part in 2002. Conel, which has annual revenues of about $3 billion, supplies 8.2 million customers, and accounts for 97.6 per cent of electricity produced in Romania. Conel owns 36 subsidiaries generating heat and electricity and 42 electric network subsidiaries, but the intended restructuring will create separate subsidiaries for thermal generation, hydropower generation, transmission, and distribution.

The separate Conel companies are scheduled to be transferred to the State Ownership Fund and included in the government's privatisation program. Conel will retain ownership of the national grid, and will become the parent company for the supply and generation subsidiaries. The country's transmission and distribution systems are scheduled to become regulated monopolies.

Romania's power restructuring program is intended to promote competition between the various companies, in line with European Union regulations. As a first step, in October 2000 Romania's government decided to enlarge to 15 per cent the opening of the country's electricity generation market and it is planned to open gradually the local energy market, reaching at least 30 per cent by 2004.

2.2.5 Prices and Regulation

According to Romanian authorities, the tariffs policy will consist in passing the state regulated administration of tariffs to independent authorities. The methodologies for setting the tariffs for both electricity and heat will in the future be based on marginal costs of production, transport, distribution and supply. Alignment of legislation to the European legislation requires further amendment of tariffs to external costs, reflecting the impact on the nature and the environment, and introduction of simulative options for energy efficiency projects or utilization of renewable energy.

Since 1997, energy prices in Romania have increased considerably and the price settings are now getting close to market prices. This is mainly a consequence of the implementation of the IMF and World Bank loan agreements, where transparency and price deregulation have been main objectives for the energy sector. The energy prices may get another lift when a newly agreed loan agreement package with the IMF will be implemented shortly.

However, since the sharp price increases on energy consumption during the last couple of years have affected the economy of both industry and households in Romania, the government has decided to maintain energy subsidy schemes for all consumer groups in the country. Cross-subsidies between industrial and domestic households, however, have been completely removed.

The real cost of energy in Romania is high, partly as a consequence of a highly inefficient energy supply system in the country, where obsolete and damaged generation and distribution systems are operating with significant energy losses, and partly because of financial problems, related to non-payments of energy bills by consumers.

The energy supply today is therefore often a costly affair for the supplier (in the case of heating, regularly the municipalities) and much attention is therefore currently given to alternative energy supply mechanisms and forms in order to get rid of a weighty expense on the budget.

2.2.6 Environmental Issues

Romania is suffering from some of the region's worst environmental degradation. The country contains an abundance of natural resources and Europe's greatest source of bio-diversity. However, years of neglect and misguided economic development policies under communism has destroyed or put at risk much of Romania's environment.

In December 1995, the Romanian parliament adopted the Environmental Protection Law, providing the basic framework for environmental protection in Romania. However, commitment to protecting the environment has continued to be weak. The Ministry for Environmental Protection has established inspection offices in each of the 42 regions but these offices are generally understaffed and do therefore not have the capacity to carry out the required inspections.

Romania has struggled in the transition to a market economy, and the country lacks sufficient resources to confront its problems and protect its environment adequately. As a result, Romania continues to be plagued by industrial air pollution, as well as water pollution by industrial and municipal wastewater discharges, agricultural runoff, and insufficient treatment of toxic pollutants discharged by industry into municipal sewers.

Although Romania's energy consumption has decreased significantly in the past 10 years, as factories have cut back on production or closed down altogether, the country's inability to restructure its energy sector has resulted in only limited stimuli for energy saving in the longterm.

Romania's energy sector has a strong impact on the country's environment in relation to oil, gas, and coal production. Thermal power plants, burning lowefficiency solid fuels and high-sulphur content heavy fuel, contribute to air pollution. The low-quality coal that Romanian households burn for heat adds to poor air quality in urban centres. Thus, while the country's carbon emissions have dropped since 1990, Romania's energy and carbon intensity remain high. The expected economic turnaround will therefore put into question the country's ability to maintain its reduction in carbon emissions and meet its Kyoto Protocol obligations. Under the Kyoto Protocol, which Romania signed in 1999 but has not yet ratified, the country is an "Annex I country" required to reduce its emissions of greenhouse gases to 8 per cent below 1990 levels by 2008-2012.

Much of Romania's decrease in CO₂ emissions is due to industrial production cutbacks, rather than energy efficiency measures. Although the implementation of modern pollution-control technology will help continue the downward trend of Romania's emission levels, Romania should be wary of the example set by other transition countries. Table 12 and 13 illustrate that Romania managed to cut down on CO₂ emissions from 1990 - 1998 by about 44 per cent.

Table 12
Carbon Dioxide Emissions from the Consumption and Flaring of Fossil Fuels

Source: EIA, Energy Information Administration
* Preliminary

In order to preserve the reductions in emissions achieved during the last 10 years, Romania will need to implement a number of measures. Reductions of pollutant load to the air, water, and land will be severely hampered, unless the local environmental protection agencies responsible for implementing environmental management programs are capable of modelling, monitoring, and regulating pollution sources. Romania has established a National Committee on the Ozone Layer in order to implement some of the international treaties the country has signed.

Table 13
CO₂ (kg of Carbon equivalent) per capita

Source: EIA, Energy Information Administration
IEA, International Energy Agency
* Preliminary

Romania reduced CO₂ emissions per TPES by about 8 per cent (see table 14) from 1992 to 1998, either due to down cuts down in energy intensive activities and inefficient energy production, or due to introduction and implementation of cleaner technology. Based on information from table 15 it is evident that Romania reduced CO₂ emissions during the period 1992-1999 by approx. 52 per cent while energy consumption (TPES) has went down by approx. 35 per cent from 1990-1998, thus there has been some degree of CO₂/TPES improvement.

Table 14
CO₂ (kg. of Carbon equivalent) / TPES (Mtoe)

Source: EIA, Energy Information Administration
IEA, International Energy Agency

In the short-term, Romania is faced with the challenge of continuing to clean up its environment, while halting ongoing pollution and environmental degradation. One of the current government's priorities is to contain the hot spots of industrial air and water pollution by enforcing the Environmental Protection Law more vigorously.

To increase public knowledge of the environment and participation in policymaking, Romania is setting up environment councils as forums for discussion, beginning with a pilot program in Constanta. Guidelines for public participation are being developed so that NGOs can complement governmental work in the area of environmental protection.

Table 15
Fossil Fuel-Related CO₂ Emissions in Romania, 1990-99 (in million tonnes of carbon)

Source: http://fossil.energy.gov/international/romnover.html

2.2.7 Renewable Energy

Romania increased energy production from renewable energy sources by approx. 700 per cent from 1990 to 1998, mainly because of a significant increase in hydro energy, introduced in 1997 (table 8).

Table 17
Contribution from Renewable Energies and Energy from Waste¹²

Source: IEA, International Energy Agency

2.3 Geothermal Energy in Romania

In Romania, exploration of geothermal resources started back in the 1960's. Romania, like other CEECs, possesses considerable low-enthalpy geothermal resources (40-120º C). Today, more than 200 drillings (800-3,500 metres) have been carried out. From 1995-99, 14 new geothermal wells were drilled in Romania. The drillings (1 500-3 500 metres) were financed through national funding and were rather successful; only two drillings showed to be non-producers. Currently only 1-2 new drillings are carried out per year. This is due to limited governmental funding but also to the fact that many promising geothermal sites have now already been identified within the country and is awaiting further exploitation.

Although significant geothermal resources have been identified in Romania, direct utilisation of the heat is underdeveloped. Total capacity of the existing wells in Romania is about 480 MW. However, currently only 152 MW is used, from 96 wells, producing hot water of temperatures ranging from 45 to115 °C. More than 80 per cent of the wells are artesian producers and only six wells are re-injection wells. Main direct use of geothermal energy is for district heating (37 per cent), bathing (30 per cent) and greenhouse heating (23 per cent). Other types of use are industrial process heating and fish farming.

In comparison to other renewable energy sources that exist in the country, geothermal energy may take advantage in the short run from previous experience and applications. In Romania, the industry can manufacture most components used for geothermal projects and national companies are highly experienced in drilling, exploration and equipment of wells.

In January 1996, the European Commission, financed through the Romanian Phare programme released a "Strategy on Renewable Energy Sources in Romania". The Phare-study proposed a short list of projects recommended for funding (based on project proposals submitted by FORADEX¹³). Among the proposed projects were Otopeni and Calimanesti, which afterwards received funding for further development of project activities. The Pharestudy concluded that geothermal energy is already, in most cases, competitive with natural gas and always with fuel oil (This finding has - in the case of Romania - further been evidenced by Marcel Rosca in the case of the Oradea geothermal project, see Rosca, 2000). Finally, the Phare-study stated that regarding economic potentials, top priority should be given to the use of geothermal sources for thermal applications.

2.3.1 Areas and Projects

Proven geothermal resources in Romania have been identified mainly in the Western Plain (including Oradea and Bors), in the Southern Plains (near Bucharest) and in the Olt Valley. They are located in porous, permeable formations; for example sandstone, siltstone or carbonate strata.

2.3.1.1 The Western Plain

The main geothermal reservoir in Romania is located in the Western Plain along the Hungarian-Romanian border, 2 500 km² from Satu Mare in the North to Timisoara in the South. Out of a total potential geothermal energy production of about 5 300 TJ/year in Romania, more than 80 per cent of the potential is located in the Western Plain.

Totally, 88 wells have been drilled in the Western Plain (exclusive those from Oradea and Bors, see below) with wellhead temperatures ranging between 70- 105 degrees C. The main geothermal areas are Satu Mare, Tasnad, Acas, Marghita, Sacuieni, Salonta, Curtici, Lovrin, Tomnatic, Sannicolau Mare, Jimbolia and Timisoara. The main uses of the geothermal water are heating of greenhouses (31 ha), space heating (2 460 flats) and sanitary hot water (2 200 flats).

2.3.1.2 Oradea

The Oradea reservoir is located in Triassic limestone and dolomite at depths of 2 200 to 3 200 metres. The reservoir is exploited by 12 wells with wellhead temperature ranging between 70-105 °C. TDS is 0.9-1.2 g/l.

At present, 2.2 per cent of the total heat demand in Oradea is supplied by geothermal heat including the local university, which has its own geothermal plant. From Romania a proposal has been made to extend the geothermal heat supply in Oradea to cover 15-20 per cent of total heat demand.

The Bors reservoir is found only 6 km from Oradea and is located in fissured carbonate formations. The TDS is 13 g/l and the reservoir temperature is higher than 130 °C at the average depth of 2 500 metres. At present, three wells are used for production and two wells for re-injection. The installed power is 15 MW and the geothermal water is used for heating of 12 ha of greenhouses.

2.3.1.4 Southern Plains

In the southern plain, north of Bucharest, 11 wells have been drilled at depths of 1,900 to 2,600 metres and 5 of the wells are currently active. The reservoir is located in fissured limestone and dolomits. Wellhead temperatures range from 58-90 degrees C, highest in the northern part of the reservoir. TDS is around 2.2 g/l. The total installed power is 32 MW and main heating uses are for space heating and sanitary hot water.

In Otopeni (12,000 inhabitants), near the international airport of Bucharest, a geothermal system, consisting of three production wells and one reinjection well, was finalized in 1988 for production of heat and hot water. The system was designed to meet the heat demand from nearly 2,000 apartments and 25 smaller villages (43 600 Gcal/year). However, due to poor conditions of the system, making it difficult to meet the heat demand, it was closed down in 1994.

In the EU funded "Strategy on Renewable Energy Sources in Romania", 1996 (see also above), the Otopeni geothermal project was one of the projects proposed for funding. In 1997, the Danish consulting company Houe & Olsen (H&O) carried out a feasibility study in Otepeni in collaboration with representatives from FORADEX.

In the feasibility study, one scenario was suggested for reintroduction of geothermal heat in Otopeni, total project costs were calculated to USD 4.8 million. It was anticipated that a 10 per cent grant would be available for the project and that the remaining costs would be covered by a new established geothermal enterprise, consisting of among others the Otopeni municipality (10 per cent). In the end, the Otopeni project was discontinued, mainly as a consequence of lack of (financial) support from the municipality.

During the consultant's meeting in Bucharest with representatives from FORADEX, it was confirmed that the Otopeni project had not advanced any further and it was not considered a priority to re-open the case. Instead FORADEX mentioned the possibility to develop further project opportunities North of Otopeni, since the water temperature there is also high (80 to 90 °C compared to 60 to 75 °C in Otopeni). However, potential in that area would be mainly for balneology and recreation facilities and only to a limited degree for heating.

2.3.1.5 Olt Valley

The Cozia-Calimanesti reservoir produces artesian geothermal water and is located in fissured siltstones at depth of 1 900 to 2 200 metres. Wellhead temperature is 90-95 °C and the TDS of the water is 14 g/l.

It would be possible to produce about 18 MW of thermal from the three existing wells. However only around 8 MW is currently used, mainly for space heating and balneology purposes. The Calimanesti project was proposed in the EU funded "Strategy on Renewable Energy Sources in Romania" from 1996, and the Austrian Government decided to support its development (1 million USD).

Further development of the Calimanesti project is one of the priorities defined by FORADEX. A concrete proposal is the connection of 11 blocks of flats in Calimanesti to geothermal heat supply. According to FORADEX, the funding needed for this project would not exceed USD 500 000.

2.3.2 Organizations Responsible for Geothermal Energy Development

2.3.2.1 Government

Within the government the overall responsibility for energy development lies within the Ministry for Industry. The Ministry has a special department for geological and mining issues.

The National Agency for Mineral Resources (NAMR) was established in 1993 as an independent advising agency to the government. The President of the Agency is appointed by the Prime Minister. NAMR is the central institutional body in relation to development of geothermal energy projects, since the agency is controlling and administrating the use of underground resources in Romania (in order to obtain concessions for geothermal energy development, applicants should pass their applications to NAMR, who will in turns submit their recommendations to the Ministry of Industry for approval.

2.3.2.2 Private Sector

Two companies in Romania have been, and remain, responsible for geothermal drillings and exploitation in Romania, TRANSGEX and FORADEX.

TRANSGEX, the smaller of the two companies, was privatised last year. The company has around 180 employees, hereof around 60 persons working on geothermal energy. The company is mainly present in the western part of the country in the regions of Satu Mare, Bihoor, Salaj and Cluj.

FORADEX is still a state-owned company and has around 900 employees. 50 persons are working on geothermal energy. The remaining staff is engaged in the company's activities within oil, gas, water and diamonds. It is planned that FORADEX should be privatised sometime within a near future in order to allow restructuring and modernization of the company. FORADEX is mainly operating in the area around Bucharest, the southern part and the southwestern part of the country.

2.3.2.3 Universities and Other Research Institutions

The University in Oradea is the centre for geothermal research in Romania with its own geothermal department and geothermal plant. In the department, computer models have been set up to simulate effects of geothermal energy projects.

In Bucharest, the Geological Survey Institute is carrying out research and mapping of existing geothermal resources in the country. Currently, the Geological Survey is working on an update of the national geothermal map.

2.3.3 Institutional Factors Governing Geothermal Energy in Romania

2.3.3.1 Laws and Regulations

The National Energy Regulatory Authority (NERA), an autonomous institution in the process of issuing the secondary legislation in the field, carries out the regulation, authorisation and control in the field of electric and heating energy. The financing of NERA is entirely ensured from extrabudgetary sources, obtained from granting licenses and authorisations and from the contributions from the operators in the system. Currently, NERA employs 51 people.

The main responsibilities of NERA are:

	Issuing the regulation for efficient and transparent functioning of the national energy system
	Issuing authorizations and licenses for economic operators in the sector
	Establishing the methodology for calculating prices and tariffs applicable to the natural monopoly activities in the sector
	Approving standard framework contract between the economic operators in the sector on sales, acquisition, transport, dispatching and distribution of the electric and thermal energy to end consumers
	Establishing prices and tariffs for the captive consumers
	Approving power transit contracts through the national energetic system

NERA establishes power prices and tariffs using a methodology approved by the Competition Office and based on the following principles:

	Consumer protection
	Ensuring the economic and financial feasibility of the operators
	Encouraging the operators to increase the economic efficiency
	Attracting investors
	Rules directly affecting GE

The approval and implementation of the new "Mineral Law" in 1997 has been of particular relevance and importance to development of geothermal energy projects in Romania. With this new law, a company (private/public, national/international) can now obtain concession for geothermal exploitation for a period of 20 years from the state (before it was only one year). The Mineral Law has therefore opened up for private and foreign investments in geothermal energy projects.

Moreover, implementation of the electricity and heating law, adopted in 1998, has started. The law opens up for more flexible consumer-supplier relations within the energy sector, and makes it possible for consumers to buy energy from private suppliers.

2.3.3.2 Energy Strategy

A medio-term "National Strategy for Energy Development in Romania, 2001-2004" was approved by the Romanian government in July 2001. According to the strategy, within the area of efficient energy use and utilisation of renewable energy, the projects to be launched during the period will include the following:

Establishment of the National Energy Observatory. The main task of the Observatory is synthesis of energy consumption data and evaluation of energy indices. These will be based on a unified, trustworthy and efficient database as well as correlation of national and international data concerning energy consumption

Improvement of energy management targeting the establishment of necessary conditions for training and imposing the authority of qualified persons in energy management of industrial consumers

More rational use of electricity and natural gas in industry

Completion of energy efficiency demonstrative projects in Ploiesti and Craiova financed by the Government, EU and Global Environmental Fund

Completion, in co-operation with EU, of the national programme for regulation and metering of thermal energy consumption in urban district heating system connected users

Establishment in co-operation with GEF and WB of the Romanian Fund for Energy Efficiency with the scope to support investments, promote reduction of domestic users' thermal energy cost through programmes in mountain areas targeting replacement of liquid fuel with biomass

Extension of investment programmes started in co-operation with EBRD targeting rehabilitation of centralised district heating systems

Application of EU Directives concerning household appliances and small capacity boilers

2.3.3.3 National Funding Sources for GE Development

The Romanian state budget has since the 1960s financed the drillings of over 200 wells for geothermal exploitation. However, government funding for geothermal investments have been decreasing, from 32 Million USD in the period 1985-89 to 24 million USD in the period 1995-99.

It is mainly the public research and development (R&D) activities that have been cut down (from 21 Million USD in the period 1985-89 to 8 million USD in the period 1995-99). Field development activities have increased, from 5 million USD (1985-89) to 10 million USD (1995-99).

Currently the state budget is financing 1-2 new drillings per year and this activity level cannot be expected to increase in the near future. First of all, because the state budget currently is under pressure and secondly, because the Romania government is now expecting that more of the already identified geothermal sites will be exploited further. Since wells already exist on several geothermal potential project sites in Romania, project costs and risks, will be lower compared to projects where no drillings are made.

Finally, it should be mentioned that a framework establishing an environmental fund was adopted in May 2000. The fund is intended to act as an economic instrument to support the development of major public investments within the environmental sector. However, the law remains very general and will probably require a secondary legislation in order to become operational.

2.3.3.4 Status vis-a-vis EU Enlargement / Integration

By incorporating rigorous environmental standards into the acquis communautaire and stipulating that the environmental dimension will be taken into account throughout the entire spectrum of community policies, the EU has made it quite clear to countries aspiring to EU membership that they must clean up their environment.

While Romania's environmental legislation now complies over 90 per cent with the EU, Romania's environmental problems persist. In the years ahead, Romania's challenge will be to comply with EU environmental laws, overcome the legacy of environmental degradation from the communist period, and make an environmentally sound economic recovery.

By the end of year 2000, Romania had closed six of 31 negotiations chapters. During this year, Romania plans to complete the preparation of another 23 chapters. In mid-September 2001, the European Parliament approved the latest progress report on Romania's EU accession process, which will be released later this year. The report saluted Romania's latest progress in issues such as macroeconomic stabilisation and strengthening of the banking system. However, it was also emphasized that Romania is registering delays in implementing structural reforms, especially within agriculture, environmental protection and energy.

2.4 International Collaboration on Geothermal Energy Development in Romania

In conjunction with Romania's Ministry of Water, Forestry, and Environmental Protection (MOWFEP), which is the country's primary government agency charged with environmental matters, the World Bank has planned a Pollution Abatement Project loan package to help address industrial pollution problems significantly impacting human health and productivity. Under the loan agreement, the U.S. Agency for International Development (USAID) is to sponsor specific loan measures regarding the institutional development of MOWFEP, environmental management at the local level, the development of an environmental service industry, and public participation.

The World Bank recently initiated a project to create an Energy Efficiency Project Fund, which should foster a large increase in energy efficiency investments in Romania through development of self-sustaining marketbased mechanisms. The initial capital fund will be provided by GEF, but contributions from other donors may also be identified.

USAID has begun work with seven Romanian EPAs to improve their capabilities for environmental inspecting and monitoring through demonstrations of new techniques, procedures, and systems to better characterize and regulate pollutant emissions. The agency is also developing an inventory of opportunities for reducing greenhouse gases, as well as identifying low-cost reduction measures and discussing emissiontrading concepts. USAID is trying to help spur reforms in Romania to revitalise and restructure Romania's energy sector, by pushing with oil and gas liberalisation, power sector competition, and energy efficiency.

In the years 2000-2002 total EU financial assistance to Romania will amount annually to at least 242 million EURO from Phare, 150 million EURO from SAPARD and more than 200 million EURO from ISPA. ISPA is supporting the sectors of environment and transport with both sectors receiving around half of the annual allocation.

The German Ministry for Economic Co-operation and Development has recently opened a bureau at the Romanian Ministry of Development that will facilitate contacts between German investors and Romanian officials and seek business opportunities in Romania, mainly within the energy sector, environmental protection, IT and infrastructure. German is currently ranked second on the list of foreign investors in Romania.

2.5 Summing Up

Romania has, during the last few years, entered into a more dynamic process of structural changes and economic reforms. After years with economic recession, the growth rate has again turned positive. This recent development process has gone hand in hand with increasing economic support from the main international financial institutions (IMF, World Bank and EBRD) and with an opening up for EU accession negotiations.

The energy sector in Romania has traditionally been 100 per cent run by the state. Reforming this sector is of high priority for the international community. Even though the Romanian government has recently taken some initiatives, reforms are progressing slowly and the Romanian government maintains high influence in the national energy sector.

Whit regard to geothermal energy development in Romania, the country possesses large proven geothermal resources. Economic feasibility studies of geothermal projects show that use of geothermal energy for heating purposes is economically profitable compared to existing heating systems, using liquid fuel oil.

Within the last few years, the implementations of new laws in Romania on energy and concession rights have improved the conditions for geothermal project investors considerably. The new laws have lowered the investment risks and opened up for more market-based competition between private and public energy suppliers.

On the other hand, the Romanian government does not have any effective programmes or economic support mechanisms (funds, eco tax-systems etc) for geothermal energy development in operation. This may however change soon, since Romania is in urgent need to harmonize with EU rules and regulations within the sectors of energy and environment.

It should be credited to the Romanian government, that since the 1960s it has financed more than 200 geothermal drillings in the country. In that sense, it can be argued that the government has "paved the way" for further development of the geothermal potentials in the country for other actors, private and public.

Until now, the Romanian municipalities have been reluctant to commit themselves financially to geothermal project investments. One reason for this can be that these kinds of energy projects traditionally have been considered as long-term investments, which do not fit into the short-term planning practiced by many municipalities.

Another factor explaining why Romanian municipalities, as well as other potential investors, have not brought more money into geothermal projects is that the financial markets for this kind of energy investments yet do not function adequately in Romania. Banks and lending institutions in Romania often consider the risks and costs related to geothermal project investments too high, mainly because the banks do not know or recognise the real economic potential for these projects.

In order to bring about a "take off" situation for geothermal energy project development in the country it will be of great importance to be able to present a geothermal "success-story" in Romania. Concerning co-financing options for projects, the timing may be right, since external financial support to Romania is increasing dramatically in these years and most IFIs and donors give high priority to energy and environmental projects. Moreover, Romanian municipalities are struggling economically in these years with the existing, old district heating systems, and the same municipalities do have clear economic, if not environmental, incentives to change heating systems.

In conclusion, DEPA is recommended to consider support for implementation of a geothermal (demonstration) project in Romania.

Prospectives and conditions for future geothermal development in Romania look promising and indeed more attractive than just a few years ago.

The geothermal project proposed for possible DEPA co-financing would, in the first instance, be the Oradea project. The Oradea case is considered an excellent opportunity to demonstrate a good, sustainable geothermal project within Romania. The local technical, institutional, environmental and economic conditions in Oradea are positive for geothermal project implementation. Moreover, since Oradea is placed in the Western Plain, the region with the highest geothermal potential in the country, the demonstration effect would be strong, with regard to possible duplication into neighbouring communities.

2.6 References

Cohut, I. and Bendea C. 1999. Geothermal Development Opportunities in Romania.

Cohut I. and Bendea C. 2000. Romania update report for 1995-99.

EBRD. 2001. Romania - Investment Profile.

European Commission - Phare Programme Romania. 1996. Strategy on Renewable Energy Sources in Romania.

EU Commission. 2000. Romania Regular Report 2000 - Progress towards accession.

Government of Romania. 2001. Medium Term National Energy Development Strategy of Romania 2001-2004.

Houe & Olsen. 1997. Otopeni - Final Report.

Rosca, M. 2000. Combined Geothermal and Gas District-heating system, City of Oradea, Romania.

Veliciu, S. & Opran C. 1983. Geothermal Resource Exploration in Romania.

World Bank. 2001. Romanian Country Assistance - Strategy Paper.

2.7 List of Institutions Visited and Individuals met

Romanian Geothermal Association:
Mr. Ioan Cohut, President

National Academy for Mineral Resources (NAMR):
Ms. Maria Iuliana Stratulat, President
Ms. Magdalena Stoia, Director
Ms. Floriana Sora, Technical Officer

Ministry for Environmental Protection:
Mr. Augustin Dudas, Chief Inspector, Bihor County
Mr. Dorin Borota, Engineer

Geological Survey of Romania:
Dr. Gheorghe Udubasa, Director
Dr. Serban Velicio, Scientific Director

Prefectura, Bihor County:
Mr. Aurel Tarau, Prefect
Mr. Horia Jarca, Director
Ms. Lucia Surdu, European Integration and External Relations

Municipality of Oradea, City Hall:
Mr. Kapy Stefan, Vice Mayor
Mr. Constantin Jurca, Vice Mayor
Mr. Emilian G. Sala, Director, Financial/Economic Manager

University of Oradea:
Prof. Dr. Vasile Bara, Decan

Municipality of Beius:
Mr. Odobasianu Nicu Silviu, Mayor
Mr. Iuhas Viorel, Vice Mayor

FORADEX:
Mr. Mihail Smarandescu, President
Mr. Mihai Sarbulesco, Chief Engineer
Mr. Rodica Voiculescu, Overseas Activity Division

Dafora group (owner of TRANSGEX)
Mr. Gheorghe Calburean, Chairman

TRANSGEX S.A.:
Mr. Iacobescu Alin, Director General

Geofluid S.A.:
Mr. Miklos Antics, Technical Manager
Mr. Marcel Rosca, Consultant, Thermal Engineering

World Bank:
Mr. Dan Petrescu, Communication Officer

EBRD:
Mr. Mihail Sevortov, Principal Banker

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