Regional Factbooks

General Information

Romania, with 22.6 million people, is the second most populous country in Central and Eastern Europe. Geographically, Romania is somewhat smaller than New York and Pennsylvania combined. Located in Southeastern Europe, Romania borders the Moldova, Ukraine, Hungary, Yugoslavia and Bulgaria; and in the southeast borders the Black Sea. The Romanian currency, the Leu (L), has an exchange rate of approximately 25,000 L per U.S. dollar (as of January 2001). In 1999, the gross domestic product (GDP) was $87.4 billion (purchasing power parity) and per capita GDP was $3,900. Romania has a free trade agreement with the states of the European Free Trade Association (EFTA) and an association agreement with the European Union (EU). It is also a member of the Central European Free Trade Association (CEFTA), the World Trade Organization, and the Council of Europe (COE). In 1993, Romania had its Most Favored Nation Status with the United States restored on a permanent basis. In 1994, Romania was the first Eastern European State to sign the NATO Partnership for Peace in Brussels.

As part of economic reform measures passed in 1990, the energy sector was reorganized by establishing two types of autonomous state enterprises: Regis Autonomous (RAs) for the production and supply of energy products, and Commercial Companies (CCs) for support services and activities. This enabled the government to separate policy and regulation from operational functions, to bring accountability, and to institute commercial practices in the energy sector. RAs are state holding companies for sectors considered strategic by the Government of Romania including electric power, oil, natural gas, lignite, and coal. CCs are joint stock companies established under commercial law.

The energy sector is under the supervision of the Ministry of Industries, which formulates policy and strategy. Operational responsibility rests with the RAs and CCs. In June 1998 a restructuring program was adopted by RENEL, the Romanian Regie Autonomous for Electricity. This resulted in the creation of CONEL, the National Electricity Company. In October 1998, the National Electric and Heat Regulatory Authority (ANRE) was set up as an independent institution to regulate the electricity market.

On July 31, 2000, the Romanian government published a decision to divide CONEL into four companies:

• Transelectrica S.A. -- National company for the transport of electrical energy - electric transmission, electric market management, and foreign electric system interconnection. Transelectrica operates the National Power Transmission System. The part of Transelectrica which administers the energy market is called Opcom, S.A. Opcom processes electricity proposals from market participants, analyzes the bids, and determines the merit order of power unit loading.
• Termoelectrica S.A. -- Commercial company for the production of tlectrical and thermal energy - electricity generation from thermal power plants, district heating, and related fuel supplies. It is expected that eventually some power plants owned by Termoelectrica will be privatized and independent power producers will be created. This is expected to attract foreign and domestic capital.
• Hidroelectrica S.A. -- Commercial company for the production and delivery of hydroelectric power.
• Electrica S.A. -- Commercial company for the Distribution and supply of electrical energy.

Under the structure before the decision, Termoelectrica, Hidroelectrica, and Electrica had been 100 percent-owned by CONEL. The Ministry of Industry and Trade will be coordinating this restructuring program. The plan is to eventually transform the state-owned electricity monopoly into a competitive energy market.

The current government policy is to develop an energy sector that promotes a market-oriented economy. Legislation, either currently under development, or in the process of being passed to help implement this policy, includes: (1) a new petroleum law; (2) replacement regulations for electricity and heat with respect to technical standards and the relationship between suppliers and customers; (3) a new electricity law for regulating CONEL, access to the electricity transmission system, and investment in the electrcity sector; (4) new regulations on standards for the use of electricity; and (5) a law on energy conservation.

Romania's energy situation is summarized in this section by examining the energy resources, energy forms, and infrastructure.

An historical summary of Romania's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 1.

Petroleum consumption has been rising since reaching its lowest point in 1994. Romania's refining industry is the largest in Central and Eastern Europe. In the early 1990's, its 10 refineries had an annual crude distillation capacity of 34 million tons, far exceeding domestic demand for refined petroleum products. In 1992, the refining industry launched a restructuring project which closed 9 million tons of excess capacity. Capacity reduction was coupled with increased specialization in developing high-demand products such as lubricants, bitumen, and fertilizers. Romania has been under continued pressure from the World Bank to make additional capacity reductions in the refining industry.

In the late 1980s, Romania was one of the top three oil drilling equipment manufacturers worldwide. Although the current output is much smaller, Romania's oil drilling facilities are starting to recover from the steep drop in demand during the early 1990s, resulting from the collapse of foreign markets. This recovery is largely due to of the increased demand for specialized and sophisticated machinery to upgrade existing equipment and technology. This includes Romanian onshore and offshore oil exploration, which is a growing market for modern equipment. U.S. companies are well positioned to provide the necessary equipment and technological assistance to the Romanian industry.

An historical summary of petroleum production and consumption in Romania is shown in Table 2.

The Romanian oil and natural gas equipment industry was the third largest oil and natural gas drilling equipment manufacturer worldwide in the late 1980's. In the 1980's, about 85 percent of the industry's production was exported. Due to the collapse of foreign markets for its products (the states of the former Soviet Union, the former Yugoslavia, and Iraq were major trading partners), this industry is confronted with serious problems. Joint ventures and co-production schemes that would take advantage of Romania's low labor costs, skilled workforce, and export markets could be of interest to both Romania and U.S. companies. The modernization of this industry will require a large influx of western technologies and imports of various state-of-the-art components, materials and parts.

Growth in the oil and natural gas sectors will be stimulated over the coming years by EBRD and World Bank projects aimed at increasing oil and gas production via the introduction of new equipment and new production methods. Western Atlas and M.I. Drilling have already made important contributions to an increase in Romanian oil production. In addition, exploration activities and geological surveys currently conducted by foreign companies may lead to discoveries of new oil and natural gas reserves. Romania's National Agency for Mineral Resources actively promotes the concession of 15 oil and natural gas research areas.

Recently, the Romanian Government signed a joint venture with private foreign firms to launch an LPG project and potential importation of Liquified Natural Gas (LNG). The joint venture plans a pipeline to carry Liquified Petroleum Gas (LPG) to Bucharest, satellite terminals, deep water facilities at the port city of Constanta, and a potential expansion to include the importation of LNG when it becomes economic to do so.

An historical summary of natural gas production and consumption in Romania is shown in Table 3.

An historical summary of coal production and consumption in Romania is shown in Table 4.

The Romanian plan was to use natural uranium as fuel and heavy water as coolant, giving Romania fuel cycle self-sufficiency. The fuel requirement is met by the Pitesti plant which manufactures 100 tonnes of fuel annually.

Work on Cernavoda 2 is continuing and it is expected to be completed in 2005. In March 1998, the Romanian utility CONEL (then called RENEL) reached agreement with Credit Suisse First Boston for financial, commercial, and legal advice to get $750 million in financing to complete Cernavoda 2.

Cernavoda 3 is 15 percent complete, Cernavoda 4 is 5 percent complete, and Cernavoda 5 is 4 percent complete. Construction is not currently proceding on these last three units because they are still awaiting financing.

There are approximately 7,457 miles of gas pipelines with a capacity of about 4,767 million cubic feet per day, or 1,412 BCF per year. Gas pipelines transport gas from Greece and Bulgaria at the rate of about 388 BCF per year. The Romanian natural gas supply company, ROMGAZ, is in an extremely difficult financial position. ROMGAZ has had its accounts frozen by the public finance board of Bucharest for failure to pay local taxes and is therefore unable to afford any excess expenditures on maintenance, operation, or spare parts. Adding to the fiscal pressure is a large amount (over $100 million) of outstanding payments owed the company by customers. More than half is owed by CONEL, the state power company. An operational priority for the natural gas company is the replacement of old distribution and transmission pipelines. Nearly 40 percent of ROMGAZ pipes lack cathode protection, which can lead to early corrosion and pose a serious threat of explosion. In 1996, ROMGAZ was planing 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.

Romania has an extensive interconnected power transmission and distribution network with an overall length of about 368,000 miles, and a total transformer capacity of about 172,000 MVA (Megavolt-amperes). The national grid operates on 750 Kilovolt (kV), 400 kV, and 220 kV for transmission and 20 kV, 10 kV, 6 kV, 1 kV and 0.4 kV for distribution. As a limited member of the Interconnected Power System-Central Dispatching Organization, Romania has strong interconnections with Ukraine and Bulgaria, substantial interconnections with the former Yugoslavia, and weaker links to the Republic of Moldavia and Hungary. CONEL is currently cooperating with the electric power systems of Greece and the former Yugoslavia (both UCPTE members) and is working to become more fully integrated into the UCPTE system. The transmission network is linked by 750 kV and 400 kV tie-lines with Ukraine; two 100 kV lines with Moldavia; one 220 kV line with Hungary; one 750 kV, two 400 kV, and one 220 kV with Bulgaria; and one 400 kV and four 110 kV lines with former Yugoslavia.

Electrica, the state-owned distribution company has 42 branches and supplies power to over 8 million customers in Romania. Of the electricity sold, 34 percent was high voltage, 33 percent was medium voltage, and 33 percent was low voltage. Sales to the various categories of customers in 1998 (in gigawatt-hours [GWh]) are shown in Table 5.

The overall losses of the distribution network in 1998 were 5,252 GWh. Besides running the distribution system, Electrica also operates 192 small hydropower plants with a total capacity of 152 MWe. In 1998, these plants produced 272.5 GWh.

In 1998, Termoelectrica, the state-owned generation company, ran power plants with a total capacity of 14,196 MWe, as shown in Table 7:

In 1998, the electricity output of Termoelectrica was 36,772.4 GWh, which constituted 43.7 percent of Romania's electricity production. The sources were allocated as shown in Table 8:

In 1998, Thermoelectrica's heat capacity was 11,540 tonnes/hr of steam. Under the current reorganization of the electric sector, Termoelectrica is looking for investors to create joint-stock companies or finance plant construction work. Several Termoelectrica cogeneration plants may be privatized.

In 1998, Hidroelectrica, the state-owned hydropower company had a capacity of 5,803 MWe. This consisted of 128 hydropower plants with 295 units, of which 15 were micro-hydropower units. In 1998, 40 percent of Hidroelectrica's output was from the Iron Gates Hydropower plant.

Besides Thermoelectrica and Hidroelectrica, there was 585 MWe of capacity held by captive power plants (autoproducers) and 1,107 MWe held by independent power producers.

An historical summary of electricity generation and consumption in Romania is shown in Table 9.

The upgrading of existing capacity and the start-up of the Cernavoda Nuclear Power Station (supported by Atomic Energy of Canada Limited and Ansaldo of Italy) in the summer of 1996, put Romania into a position to export significant amounts of electricity.

Most of the technology in place in CONEL's thermal plants is from the 1960's and early 1970's. Because of the decline in demand, many plants which have exceeded their operating life have been decommissioned or moth-balled. Only the higher efficiency plants are operated. A number of units are being refurbished to increase availability and efficiency. CONEL is actively seeking foreign partners in an effort to modernize and refurbish their thermal plants.

The U.S. Department of Commerce has ranked electrical power systems as the area with the third best potential for U.S. investment. To increase performance in the electricity generation sector, CONEL is focusing on the following projects, which are top priorities:

• The upgrading of coal-fired plants running on medium- and low-grade lignite (an IBRD loan has already been granted for the project -- approximate value $344.8 million);
• The upgrading of at least two major co-generating plants in Bucharest (estimated investment of over $225 million) and the building of a new plant in Bucharest;
• The completion of Unit 2 of the Cernavoda Nuclear Power Station and 14 hydro-electric power plants; and
• The transmission and distribution system rehabilitation and upgrading program (approximate value $140 million), which includes electrical equipment, services and technical assistance.

CONEL has been receiving technical assistance through the Utility Partnership Program (UPP), supported by the U.S. Agency for International Development (USAID) and the United States Energy Association. From 1992 through 1995, Boston Edison worked with CONEL to support the reform and restructuring efforts of CONEL. Since 1996, Mississippi Power Company (MPC) has been working with CONEL primarily on thermal plant rehabilitation and corporate restructuring in order to support key programs financed by the World Bank, the EBRD, and other international institutions. Representatives from MPC have been sharing their expertise regarding contract negotiation, customer service, and general maintenance and rehabilitation, including strategies to reduce the environmental impacts of lignite-based generation. CONEL has been without a formal partner since Boston Edison withdrew from the UPP in August 1995. Another project, requested by CONEL and sponsored by the U.S. Trade and Development Agency (TDA), is to assess several projects under consideration in the power sector in Romania. CONEL power stations are shown in Table 10.

The expansion and refurbishment includes two phases. In Phase 1, CONEL will focus on the rehabilitation of four 330 MWe lignite-fired units. For Phase 2, CONEL has applied for financial assistance from the International Bank for Reconstruction and Development (IBRD) to develop a strategy addressing energy demand and the future of the power sector to include a Power Sector Reform Program.

Additional challenges faced by CONEL include uncollected debt, environmental problems, and a lack of foreign trade expertise. CONEL hopes to get heavy industries to pay for electricity consumed, and improve its generation efficiency so that it can begin to meet international agreements on climate change and reduce emissions. Finally, in two years, CONEL would like to establish a core program, staffed by foreign trade experts, to cope with increasing competition and international trade.

In 1995, as one of the last East European countries to update its environmental legislation, the Romanian parliament, passed a Law on Environmental Protection. The law replaces an Environmental Law of 1973, which was never fully enforced. The new law also paves the way for the introduction of additional legislation addressing particular environmental issues and introduces the Environmental Fund, which will hold the fines and fees assessed from polluters and use these funds for environmental protection.

With its past focus on heavy industry, industrial pollution is one of the greatest threats to Romania's environment. Toxic air emissions