On January 1 Romania and neighboring Bulgaria became the latest members of the European union, swelling its ranks to 27 states. But Romania still has some catching up to do if it is to comply with all the EU's policies, not least so in energy where progress has been slow.
Romania has modest oil and gas reserves of its own and exploration is continuing in the Black Sea despite territorial disputes with neighboring Ukraine.
In its last monitoring report on Romania's Accession, the European Commission found that Romania had made sufficient progress in those areas that the EC had previously singled out for change, to ensure that its accession to the union on January 1 was not delayed.
However, progress has been uneven, with much reform and restructuring still needed in the industrial sector, including energy, where the pace of reform has been slow and some of the current structure dates back to the days of Communist rule before 1989.
Romania has modest oil and gas reserves of its own and exploration is continuing in the Black Sea despite territorial disputes with neighboring Ukraine.
It also has its own coal reserves, an extensive network of hydro power plants and a single reactor nuclear power plant at Cernavoda - with a second unit due online in 2007 and other units planned.
According to a July 2005 country report by the US Library of Congress, Romania has the potential, unique in the wider region, to be self-sufficient in energy for several decades.
For the moment, however, it is not self sufficient, and continues to import energy in the form of oil and gas, especially from Russia.
More restructuring, price reforms needed
In its May 2006 monitoring report the European Commission identified a number of areas that needed further attention, including restructuring of the energy, mining and transport sectors and further progress in privatizing state enterprises.
In the most recent September monitoring report, the EC said there had been "some progress" in energy, in particular the continued "adjustment" of energy prices in line with costs.
There had previously been broad cross-subsidization of power and gas prices to protect end users from real market prices - a practice not uncommon in other countries across the region prior to their accession to the EU.
Gas price reform began in 2003 when for the first time residential and non-residential prices began to diverge.
Gas regulator ANRGN says that cross-subsidies across the two categories of customer have now largely been eliminated and that market prices for gas have risen in line with the rising cost of gas imports from Russia.
But the EU has warned that "In order to strengthen competition within the internal market, the gap between international and domestic producers' gas prices should be narrowed," meaning that the price of domestically produced gas should rise so that it is in line with prevailing market rates for imported gas.
The ministry of economy and commerce seems to have taken these comments on board.
In late November 2006 gas market regulator ANRGN said the ministry had approved plans to increase the price paid to domestic gas producers to $170/1000 cubic meters from a $145/1000 cubic meters over 2007.
This equates to a 24% increase over the year, but the hikes would be staggered with no increase in the first quarter and then rising $10/1000 cu m in the second quarter, $5/1000 cu m in the third quarter and another $10/1000 cu m in the final quarter.
ANRGN said that the aim is to bring the price of domestically-produced into line with imported Russian gas by the end of 2008.
But industry analysts quoted in EUE's sister publication warned that this would be a tough target to meet, requiring an increase of a further 70% between end-2007 and end-2008 to take domestic prices up to the level of imports. And that is on the assumption that the price of imported gas does not rise.
Created: April 12, 2007
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