What the Frack

One of the interesting things about the petroleum industry is that it employs a hell of a lot of smart people and because of all the enormous profit margins, it tends to attract a lot of attention from the financial industry. Thus there’s a lot of people writing about it, including what’s happening in Romania.

Last week I saw that (seemingly – some people are hanging onto faint hopes) the last nail was hammered into the coffee of the Nabucco pipeline, a grandiose plan to route petroleum products overland from Turkey through Bulgaria and Romania and onto Austria.

The EU had been heavily in favor of this pipeline, as was the United States, for the sole reason that it would completely bypass the country of Russia in transporting petroleum products from the Caspian Sea (primarily Azerbaijan but also potentially a few other countries including Iraq). Romania especially was eager for this pipeline to be built, both for purely financial reasons (transport fees through Romanian territory) as well as a key political one – energy independence from Russia.

At the moment, every country from Germany eastward (including Romania) is almost entirely dependent on Russia for natural gas. Even though only about a quarter of Romania’s natural gas comes from Russia (roughly half comes from domestic sources), Gazprom calls the shots on the price that Romania is charged and at the moment Romania has literally no leverage.

Gazprom could hike prices at a moment’s notice and there’d be virtually nothing Romania could do. With prices already high enough and the government in full austerity mode, any increase would cause massive domestic problems here in Romania.

So the Nabucco project was an ambitious attempt to bypass the Russians but it looks like the Nabucco pipeline is dead in the water because the Azeris ultimately decided to finance a much shorter (and cheaper) pipeline called the TAP. The gas will still get routed around Russia but won’t benefit Romania at all, meaning it will still be dependent on Russian imports.

That’s where the matter stands at the moment. But thanks to Wikileaks, I was able to dig through six years of previously classified cables from the U.S. Embassy in Bucharest, a significant number of them concerning the natural gas (and other forms of energy) situation in Romania.

For example you can read this hilariously illiterate and misspelled (which I fixed here on the blog) cable from then-American Ambassador to Romania Nicholas Taubman on March 10, 2006 concerning Romania’s long-term strategy on energy independence:

The government of Romania realizes that true options will take some time to materialize, but is now more aggressively pursuing energy partnerships with third countries. Romania is clearly in an advantageous position geographically should one or more “southern corridor” energy projects emerge.

Pulling together complex deals, however, has not alway been Romania’s forte. We will need to continue to demonstrate our interest and support for Romania playing an active role in the diversification of energy supplies across Europe and the Black Sea region whenever we can.


Likewise you can read this cable from April 10, 2008 showing exactly what Romania’s strategy was:

Although clearly nervous about neighboring countries’ recent deals with Gazprom on South Stream, Romania remains a steadfast Nabucco supporter and so far shows no indication of wanting to cut its own deal with the Russians.

Still, the Romanians seek regular reassurance that the U.S. is fully engaged and that Nabucco remains viable despite recent developments. We will continue to welcome visits from DAS Bryza and other key USG officials to help persuade Bucharest to stay the course on energy. Politically, Romania’s leadership needs to demonstrate progress on energy supply diversification, not just with regard to Nabucco, but also on other projects such as the LNG terminal proposal.

This strategy backfired completely on January 7 and January 9, 2009, when Russia ordered the complete shutoff of gas flowing into Romania via Ukraine (there are two pipelines, shut down on different days). Obviously this caused quite a panic in Romania as it was the middle of winter. There were reserves of gas on hand and a back-up plan to use fuel oil in certain facilities (reserves + back-up was estimated to last about two weeks according to Romanian officials) but clearly this was a major kick in the nuts.

On paper, the reason for the cutoff was due to a dispute between Russia and Ukraine but one of the pipelines that Gazprom shut off (the Mediesul Aurit) was dedicated exclusively to delivering gas to Romania and thus there was seemingly no reason to shut it off. A few days later (on January 20), the flow of gas was turned back on and everything went back to “normal”.

Going through the cables, you can see how panicked the Romanian government became, frantic to push both the Nabucco pipeline (then still in the planning and financing acquiring stage) as well as to double the capacity of natural gas storage reserves. Basescu in particular, to no one’s surprise (as he was a former sea captain on the Black Sea), was pushing for Constanta to become a CNG terminal, capable of receiving supplies (via the Black Sea) from Qatar.

The second two items (increased reserve capability and an LNG terminal in Constanta) did end up happening somewhat but still haven’t quite “solved” the dependency on Russian gas problem (Constanta, in particular, is only handling about half the volume (of all sorts) that it is capable of).

Meanwhile Romanian politicians (from all major parties) chose to strongly oppose the South Stream pipeline, seen as the competitor to Nabucco, which would route Russian gas around Ukraine and into Europe via Bulgaria. In this cable from September 23, 2008 you can see that the Romanian government was completely against the South Stream pipeline, heavily in favor of U.S. investment in the LNG facilities in Constanta but also considering getting gas from Iran, something the U.S. vehemently opposed.

That was 2008 but now the South Stream pipeline is actually getting built and should come online in 2015, so pissing off the Russians (especially concerning the idiotic base in Deveselu) and failing to cut a deal with them was ultimately another foolish maneuver by the Romanian government.

Not discussed in any of the cables (the most recent ones are from 2010) is the fact that the IMF forced the Romanian government to drop price controls on much of the energy market in 2013, meaning of course that prices have gone up (to the delight of Romgaz). While we’re now in the middle of summer when few citizens at home are using a lot of gas, it’s going to have a strong impact politically when winter gets here.

In terms of petroleum, of course everyone knows that a corporation (KazMunaiGas) controlled by the government of Kazakhstan now owns Rompetrol and OMV (an Austrian company) now owns Petrom, meaning that just about all of Romania’s domestic production of petroleum is in the hands of foreign corporations. Both of these two companies (Rompetrol and Petrom) were once owned by the state but privatized in controversial actions, one under the “guiding hand” of convicted criminal Adrian Nastase and the other by shell companies controlled by convicted criminal Dinu Patriciu.

Regardless of the wisdom (or lack thereof) of these two companies being privatized, the fact that all domestic production is in the hands of foreign corporations puts Romania’s goal of energy independence in serious jeopardy. Just a couple of weeks ago, Prime Minister Ponta went to Kazakhstan to bow and scrape in deference before one of the worst dictators in power today, all of it to ensure future “cooperation” and supplies from Kazakhstan.

And so Romania, due to years of unceasingly inept posturing and failed strategizing (almost entirely based on an irrational dislike of all things Russian) is now worse off than it was eight years ago as domestic natural gas production is down, domestic petroleum production is in the hands of foreigners and everyone in Romania is still dependent (in part) on Russian gas.


The “brilliant solution” the government has come up with is fracking, otherwise known as shale (or schist) gas, which everyone and their brother now agrees is the bestest, most awesomest solution for Romania. Even the USL, which had previously opposed fracking (Ro: gaz de sist), are quite enthusiastic about it and Ponta’s environmental minister, the hideously corrupt Rovana Plumb, gave her official approval for foreign firms to explore and potentially extract shale gas off the coast of southern Romania.

As you probably remember, I was in Vama Veche on May 1 (of this year) and there were plenty of people down there opposing future shale gas extraction for good reason as it’s one of the most toxic and polluting activities legally occurring on the planet today. Greenpeace Romania and most other environmental organizations vehemently oppose it precisely because of how toxic a process it is and how likely it is that fracking in the Black Sea will pollute those beautiful beaches we were all enjoying this summer.

Of course that hasn’t prevented the perennially mendacious Ponta from kissing the Americans’ feet on July 4 at their heavily fortified compound, literally thanking the embassy and American (multinational) petroleum companies for “helping” Romania with these future shale gas extractions, somehow equating this as a way for Romania to become more energy independent. And all of this despite some shockingly well-organized and strident protests from the Romanian people.

Sadly for the people who live here (and the beautiful nature we all cherish), the self-same Romanian government likewise reduced green certificates which promoted renewable energy sources such as wind and solar power, which would actually steer Romania closer to energy independence, not to mention be a far cleaner method of producing energy.

It’s enough to make your head spin and it just further confirms my belief that government incompetence in Romania would take home the gold in every Olympic Games if it were a recognized sport.

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