SOCAR invested about 70 million euros into the local expansion, and the company has 74 fuel stations and over 700 employees in Romania, Hamza Karimov, CEO of SOCAR Romania, tells Energynomics. ”Moreover, we are closely analysing other projects in the energy field, such as trading activities and green energy production,” he says, explaining the importance of the Azeri subsea cable, which would transport 4 GW of electricity to Europe, and of other projects.
How much has the group invested in Romania so far? What other segments and developments are you targeting?
We entered the Romanian fuel market in 2011, and we’ve had a rapid development, succeeding, in just a few years, to become one of the major players on the local market, with 74 gas stations currently open for Romanian customers. With approximately 70 million euros invested so far for our expansion, we currently have over 700 employees across cities such as Bucharest, Botoșani, Suceava, Sibiu, Neamț, Iași, Bihor, Brașov, Bistrița, Buzău, Bacău, Vrancea, Timiș, Ilfov, Cluj, Vâlcea, Arad, and Constanța. This year, we managed to open three more gas stations, and we plan on continuing the expansion next year.
Moreover, we are closely analysing other projects in the energy field, such as trading activities and green energy production.
In April this year, a “Memorandum of Understanding for encouraging cooperation among Bulgartransgaz (Bulgaria), Transgaz (Romania), FGSZ (Hungary), Eustream (Slovakia) and the State Oil Company of the Azerbaijan Republic (SOCAR)” was signed in Sofia, with the goal of strengthening energy security in Europe and allowing Azerbaijan to export more gas to many more European countries.
At the same time, at the end of 2022, an “Agreement on a strategic partnership in the field of green energy development and transmission between the Governments of the Republic of Azerbaijan, Georgia, Romania, and Hungary” has been signed in Bucharest. As Mr. Ilham Aliyev, the President of Azerbaijan, said, an agreement is an important step in the creation of a green energy corridor. The agreement will be an integrated project from offshore wind in the Azerbaijani sector of the Caspian Sea to European markets, including transmission lines and subsea cable under the Black Sea. Through this project, we can transport a minimum of 4 gigawatts of green energy to Europe.
What can you tell us about cooperation in the gas sector?
Also in 2022, Romgaz and SOCAR signed a Memorandum of Understanding through which we want to build a natural gas liquefaction terminal and a regasification terminal, as well as other installations and facilities necessary for transporting gas from the Caspian area to Romania. This year, the two companies signed a new contract for the period April 1, 2023–April 1, 2024. The contract provides for the possibility of delivering gas quantities of up to 1 billion cubic metres until March 31, 2024. In this way, strategic objectives such as the supply of natural gas and the diversification of sources are achieved.
The Southern Gas Corridor and the future submarine cable for transporting electricity produced in Azerbaijan from renewable sources will significantly contribute to ensuring the energy security of the European Union
In 2022, Azerbaijan’s export of natural gas to the European Union market was 8.2 billion cubic metres. In 2023, it will be at 12 bcm. And this is almost half of the total exports. The total natural gas export from Azerbaijan this year will be almost 24.5 billion cubic metres. Also, in 2021, Azerbaijan implemented the TAP project, the last segment of the Southern Gas Corridor.
Azerbaijan is planning to become an important supplier of electric energy to Europe, mainly green energy. Azerbaijan’s renewable energy potential is more than 27 gigawatts of wind and solar power onshore. The estimated potential of renewables in Azerbaijan is about 200 gigawatts, including 157 gigawatts in the Azerbaijani sector of the Caspian Sea.
What should 2024 bring in terms of the changes needed to overcome the current energy crisis?
Everyone talks, and rightly so, about the transition to green energy, but this cannot be achieved without the gas and nuclear components. If Romania were to give up the two, it would become totally dependent on the foreign market.
Energy prices will depend a lot on the European conflicts—Rumba being directly affected by the Ukraine crisis—because insurance increases, the cost of transport increases, etc. Overall, we will see higher prices next year. Of course, the same prices, from 2022–2023, will not be reached again. On the other hand, we observe the increase in the price of oil, which is automatically reflected in the prices of all areas.
One way in which Romania could benefit from lower prices for energy or gas in the next period is in the regulation of prices by ANRE, which should open the market to small and medium-sized companies. Another solution, from my point of view, is related to the internal market and the completion or start of some projects such as the gas reserves in the Black Sea and in the Buzau area, the hydropower plants under construction and thermal power plants, the development of facilities for prosumers, the access to the money from NRRP, and the introduction of contracts for difference.
Romania owns different resources and must keep this advantage in the coming years; otherwise, it will have to import more.
How do you see the development of the bioethanol market in Romania? How about hydrogen?
We, at SOCAR Romania, are interested in extending investment in these kinds of projects on the local market. Since June of this year, the government has decided that the fuels sold in gas stations in Romania must necessarily contain biofuels, in the proportion of 6.5% in diesel and 10% in gasoline. According to European regulations, the renewable energy content of transport fuels must increase from 10% in 2020 to 14% in 2030.
Hydrogen is considered the “new diesel.” There are many companies that are focused on its development, and Romania offers all the ingredients for that medium and long term. In June 2023, SOCAR inaugurated the first-ever green hydrogen filling station on a Swiss Motorway. Sustainably produced hydrogen is a key to low-emission, climate-neutral road transport in the context of the energy transition and an indispensable component in achieving the goals of the Paris Climate Agreement.
How do you see, from a personal point of view, the economic evolution of Romania and the energy sector in the next period?
The year 2024 will be a complicated one for Romania, both from the perspective of the evolution of the conflict in Ukraine and also because of the internal context; the next year will be an electoral one. The current governing coalition has already announced its desire to relaunch consumption, which fell in 2023. From this point of view, the challenges will be related to solving the budget deficit and increasing salaries and pensions. In order to be able to fulfil these measures, Romania needs better VAT collection, a reduction in tax evasion, and, most likely, an increase in taxation for the population and companies.
The new regulations at the European Union level, which put a focus on green energy, will mark a “reset” in the energy sector. As we found, the energy demand decreased all over the world, but it will increase next year precisely from the perspective of renewable energy development.
This interview first appeared in the printed edition of Energynomics Magazine, issued in December 2023.
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