The large volume of available funds for the energy industry in Romania and the wave of new projects that are currently being prepared bring up an issue little debated in the past years: the number, quality and power of local general contractors. To try to find out more and understand some aspects of them, we discussed with Ciprian Păltineanu, CEO of INSPET SA, a company with tradition, connected at the same time to the new trends.

Dear Mr. Ciprian Păltineanu, how does the general contractor market look like today in Romania and what is INSPET’s position in this segment?

The history of construction-assembly contractors for fluid projects – similarly to that of road, railway, civil engineering contractors – extends over a period of over 70 years in Romania. Initially organized based on geographical criteria and acting in the system of a non-market economy, in the period before 1989, these companies went through major transformation with the introduction of capitalist economy principles. Many such companies failed to adapt to the new economic paradigm, exiting the market. But there were also some noteworthy exceptions, famous companies, which managed to reinvent and stay at the top of the industry. In addition to these companies with tradition, a multitude of new players have emerged – smaller, newly established companies, medium and large-sized companies, and companies in related fields, which decided to expand their activity in the market segment of fluid projects – energy or water – for reasons of complementarity of opportunity. And the evolution of these new players is uneven, depending on market conditions and the specific aspects of each company – technical equipment and staff, experience in project management, access to financing, capacity and workload etc.

INSPET is one of the companies with tradition that continue to deliver performance at the highest level, consistently, in the industry that established us. We celebrated over three decades as an independent company, inheriting the experience of the predecessors accumulated uninterruptedly since 1950, during which time we were consistently at the top of fluid projects, for over 20 years being ranked first nationally in terms of the main object of activity. Over the past 30 years, we have executed over 300 important projects worth a total of over EUR 3 billion, recording revenues of over EUR 1 billion, paying in due time over EUR 200 million in taxes, duties, and contributions to the state budget and investing over EUR 50 million in new production capacities and other capital goods.

What are the types of works that you can manage and for what categories of beneficiaries?

The recent experience within the BRUA project, of strategic European importance, has proven that INSPET is able to address large-scale projects, coordinating associates and subcontractors with varied activities, with significant time and budget constraints and implement them in the most difficult social and economic situations, such as during the COVID-19 pandemic. As association leader for the construction-assembly of 180 km of DN800 PN63 pipeline and three gas compressor stations, in the end responsible before the beneficiary for the execution of projects, taking over when necessary additional works, including the execution of works from the associates or subcontractors that for various reasons failed to comply with their contractual obligations. Therefore, INSPET’s involvement in a project is a guarantee for the beneficiary that the contractual terms will be strictly observed.

After BRUA, the largest projects completed were the compressor stations within the development of the national gas transmission system in the North-East area, with Transgaz as beneficiary, and the drying station in Bilciurești, with Depogaz as beneficiary.

We can address any large-scale projects; for optimal efficiency, we target projects of up to EUR 100 million per year, in partnership with other reputable companies, complementary, for energy companies with the majority state capital, public utility companies, multinational energy companies in the country and abroad, central and local public authorities.

The traditional activity sectors are the trunk pipelines and the related installations of high-pressure energy fluids, a smart distribution network for natural gas, water and sewerage, with the related installations. Depending on requirements, we also get involved in civil engineering works or prefabrication of metal structures and profiles for industrial, road, or railway infrastructure construction.

Management capacity, engineering expertise, financial power, access to the qualified workforce – which of these aspects is more problematic today in Romania and what are INSPET’s solutions?

In general, we tend to be most critical with the close and dear ones, so I can afford to address critically, but always constructively, the vulnerabilities of the Romanian economy.

At the national level, we probably notice a certain deficit in each of the mentioned aspects. Unfortunately, there are others too. I believe that some of the most sensitive aspects, that can negatively affect national economic performance, including business environment, work ethic and – to a certain extent – the public procurement system.

Regarding the business climate, we need more legislative stability and predictability (the rules of the game cannot change overnight, to allow defining multi-annual business plans). It is imperative to develop a pro-business mentality, a fair partnership between state and the private business environment (based on mutual respect and honest dialogue, focused on national interest in a broad sense) and combat double standards (the rules must be the same for all, and the entire business environment must exclude unreliable companies or businessmen).

We get involved in public consultations, both through the various professional or employers’ associations whose members we are and institutionally, as big taxpayer, with proposals of solutions that from our point of view can provide a fair rebalancing of the business environment. Unfortunately, we feel that many such consultations are purely formal and the business environment still does not manage to find its position as dialogue partner of the state.

Work ethic is currently a vulnerability, but which – if addressed accordingly, as we see that Romanian professionals can perform at high level abroad – can become a strength and propel us into Europe’s elite. We need to work unsupervised with the same focus, quality, pace and responsibility as if we were supervised, to increase productivity and efficiency of work, to combat the waste of resources, including time, but also an increased focus on teamwork and collaboration. Conversely, from companies, a motivating and fair remuneration is needed, to reflect collective and individual performance.

We implemented programs of evaluation and remuneration depending on performance, programs that we constantly calibrate to get the maximum commitment. INSPET is also one of the companies that have implemented a stock incentive plan to motivate the key personnel.

As regards the public procurement system, very beneficial in its role to ensure an unbiased platform that allows the selection of the best offer in terms of quality-price ratio, suffers in practice, in certain cases, discretionary interpretations that tend to disadvantage some bidders to the benefit of others, endangering the purpose of the system, to have quality projects and works, successfully completed, at the best possible price.

A multitude of public tender procedures in SEAP has uneven qualification requirements, at the discretion of contracting authorities and their consultants, sometimes too loose, other times extremely strict, without interpreting similar works in the same manner. For example, in some cases, there are no criteria on the economic and financial situation of bidders, although large-scale works require significant financial effort, which can put insufficiently capitalized companies in difficulty while delaying or blocking execution. Other times, there are symbolic requirements of technical and professional capacity, which most often are covered through third parties (sometimes foreign companies with little activity, which provide formal support) which in reality do not execute anything of the work. In other cases, such as water or heating works, requirements become however unjustifiably strict: although gas infrastructure works are of much higher complexity (involving combustible fluids at high pressures), they are not recognized as similar, so serious and experienced bidders, perfectly capable to execute those works, are excluded.

Detail requirements pushed to absurd regarding the technical bids – documents that become very beefy – allow a great degree of subjectivity and allow contracting authorities to abusively disqualify, on formal grounds, serious bidding companies that have made small mistakes, in the 1,200-1,400 pages prepared in the 2-3 weeks available to submit the bid.

Also, in the case of the application of subjective scores, in reality, it’s difficult or next to impossible to differentiate which technical bids present very well, which in a satisfactory manner and which in an unsatisfactory manner the execution schedule.

We recommend finding ways to make the preparation of specifications and the evaluation of bids objective, that do not allow the qualification of bidders that are unprepared in reality for that type of works, and not to disqualify or downgrade serious companies, with proven experience in the execution of works, for purely formal reasons.

What is the potential offered for you by the oil and gas industry in Romania and in the region?

Inheriting a 70-year tradition in the energy fluids infrastructure, the Romanian oil and gas infrastructure is part of our DNA: we remain attached to large strategic projects that target the development of hydrocarbon extraction, processing, transmission and storage infrastructure in order to secure energy resources. We are especially interested in the development of new gas resources, where Romania can position itself as an important player, both offshore and onshore, and in the development of hydrogen production, transport and storage infrastructure.

Is there still potential to develop the gas infrastructure in Romania, considering the society’s decarbonization goals?

INSPET is a constantly evolving company; we are ready to participate in climate transition, being a signatory of the European Green Deal. We have our own targets to limit the carbon footprint, both for investment works by direct labor and – where possible, from the perspective of beneficiaries – within works for third parties. We invest in renewable energy production infrastructure and explore a potential expansion to construction and assembly works in this sector of activity.

On the other hand, even if we exclude at the moment the current geopolitical situation (war in Ukraine, nearshoring, inflation, pandemic), there are still three aspects that we need to address simultaneously:

• strategic approach to reducing global warming,
• strategic and tactical approach to reducing the energy dependence of the European Union and
• strategic and tactical approach to encouraging EU’s industrial and economic competitiveness.

Consequently, I strongly believe that the development of the gas infrastructure in Romania is mandatory, for both strategic reasons (to secure as soon and as sustainable as possible cheap energy supply in Romania and Europe, then following to make a fine-tuning from the perspective of the energy mix and carbon capture and storage plants in order to reduce the climate footprint), but also for reasons of social hygiene (according to the UN Sustainable Development Goals, access for the population to cheaper and cleaner energy is also necessary from the perspective of reducing inequalities between the rural and urban areas and between the various social classes).

Romania, as the entire region in fact, needs increased gas storage capacities, with shorter and more efficient injection/withdrawal cycles. What business potential do you see in this segment?

First of all, new storage facilities are needed. The more, the better – I don’t think at this point, in Europe, there is a country that can say that it has a too large storage capacity, and Romania is – with few exceptions – still way behind most of the countries in the region. Hungary, Poland, Austria have storage capacities several times higher than those in Romania.

Then – because storage alone is not sufficient – gas compressor/treatment/drying facilities are needed, to ensure an optimal injection/withdrawal flow and therefore more reduced cycles.

Are you interested, do you see a potential role for INSPET in hydrogen storage and transport?

We are working on a number of projects related to hydrogen, both in terms of research and investments. Although we are a relatively small company – if we compare with the energy companies with majority state capital or international investors – we have allocated an important budget for these works and hope to see a broader ecosystem, which collaborates within competitive limits to increase chances of success and international competitiveness of the domestic industry that is taking shape, more end-users and – why not – at some point an electrolyzer factory made in Romania.

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This interview first appeared in the printed edition of Energynomics Magazine, issued in October 2022.

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