Romgaz Signs Memorandum for Joint Investment with Giant Socar

Romania’s largest natural gas producer and state-owned company, Romgaz, signed a memorandum regarding a joint investment in a liquefied natural gas (LNG) terminal on the Black Sea with Azerbaijan’s state-owned oil giant SOCAR.

Project history and decision-making

Romania, Georgia, Azerbaijan, and Hungary signed an agreement on a natural gas transport project to the EU through AGRI in 2010 in Bucharest. It calls for the construction of two liquefied natural gas terminals, one in Constanța and one in Georgia, with costs ranging from 4-6 billion euros each. The Georgian Oil and Gas Corporation (GOGC, Georgia), MVM (Hungary), and Romgaz, each owning 25% of the capital, control the project company SC AGRI LNG Project Company SRL, which was founded in February 2011. 

The AGRI project planned to deliver natural gas to Georgia, Romania, Hungary, and other Eastern European nations from the Caspian Sea region. The gas was to be liquefied in Georgia and carried aboard specialist ships through the Black Sea. On the Romanian shore, in Constanța, was where the regasification procedure was to take place. To build the terminals required for importing liquefied natural gas (LNG) as part of the AGRI project, the Azerbaijani oil company SOCAR and the national gas carrier of Romania, Transgaz, formed an agreement in July 2016.

Memorandum implications and unfolding

Romania lacks the necessary facilities for gas transportation at such a national and international scale. There are no regasification or liquefication facilities nor suitable pipelines for gas extraction in the port opening at the Black Sea. The memorandum, at its core scope, stands as a basis for joint investment in an LNG facility on the Black Sea to solve this problem and help with both gas import and export and the construction of the imperative facilities.

There was already a development plan made by Transgaz two years ago, that analyzed and forecasted what the whole process of gas drilling and transportation would imply, from logistics to availability and the capacity that would be allowed.

“Taking natural gas from the shore of the Black Sea through an LNG terminal involves the interconnection of the national natural gas transportation system to the LNG terminal by building a natural gas transportation pipeline, approximately 25 kilometres long, from the shore of the Black Sea to the pipelines T1 and T2”

Transgaz General System Operator

The two companies, Romgaz and SOCAR, formally state their intent to look into possibilities for working together to establish a liquefied natural gas project in the Black Sea through this Memorandum of Understanding. In order to transfer gas from the Caspian region to Romania, the project would include a natural gas liquefaction terminal, a regasification terminal, and other installations and equipment. Based on the research’s findings, the signatory businesses propose to begin negotiations to reach an agreement on the terms and conditions of the development of the Black Sea LNG project. The study will determine the technical, financial, and economic viability of such a project.

As such, the implementation will start with a feasibility study jointly funded by both parties, with the objective of receiving optimistic forecasts from it, leading to two finalized and active terminals, on the shores of the Caspian Sea and the Black Sea so that the corridors bringing gas from the Caspian Sea basin to Europe, can be diversified and supplemented accordingly.

″It is a new project, both for us and for Azerbaijan.[…] We expect to see the completed feasibility study in a very short time . We have engaged an international company to carry out the feasibility study and in this way we have the guarantee that it will be completed in a short period of time, because we need this gas and the construction of the necessary capabilities to bring him”

Romanian Prime Minister – Nicolae Ciuca

Romgaz also transmitted through a press release that the initiative of the two companies, in the current energy context, represents a new opportunity for the Romanian market and the nations in the region, to ensure their access to natural gas resources in the Caspian Sea area. This adds a significant positive impact on energy security for the states of Central and Southern Europe – East.