Page 7 - EurOil Week 46 2022

EurOil COMMENTARY EurOil

to exhaust the limited resources available to suppliers. Since October 11, Ukraine has sus-
Ukraine to weaken the counter-offensive against pended its export of electricity to Moldova. To
Russian positions. cover the electricity deficit, the Moldovan
Under conditions of acute energy defi- authorities resorted to the help of Romania,
cit, caused by the loss of 30-40% of electricity which modified its legislation to be able to supply
production capacities, the Ukrainian author- electricity at a price of €90/MWh, which is lower
ities began to test the technical conditions for than the market price. Subsidising the price of
importing electricity from Slovakia. Just about electricity sold to Moldova is not only a manifes-
four months ago, Ukraine was able to export tation of solidarity in the context of the pressure
electricity to Romania (50-100 MW) and Slo- exerted by Russia, but also a pragmatic policy
vakia (50 MW). In 2021, Ukraine's electricity towards Moldova, where more than third of the
exports went to Moldova, Hungary, Slovakia and population already has Romanian citizenship
Romania. As of October 2022, Ukraine becomes (more than 1mn people).
a net importer of electricity for the first time In addition to the collateral effects to which
since independence. Until the energy system is Moldova is exposed due to the Russian aggres-
repaired, Ukraine will be vitally dependent on sion against Ukrainian energy infrastructure,
the European electricity market, from where it Russia exploits the conditions related to the
can import energy thanks to the synchronisation delivery of natural gas. Given Moldova's dual
of transmission networks in March. However, dependence on Russian gas and electricity pro-
imports of electricity from Europe will inevitably duced from Russian gas in the Transnistrian
affect the tariffs for final consumers and the busi- breakaway region, the lack of consistent gas
nesses, given the spot market prices, whose vari- flows to Moldova ramifies the consequences of
ation in the daily ahead price can range between the energy crisis, which began in 2021.
145 MWh (Slovakia) and 166 MWh (Romania). First of all, citing false problems related to
This will leave its mark on inflation, which could the transportation of gas through Ukraine, Gaz-
exceed 30% by the end of 2022. prom reduced the volume of deliveries to Mol-
The start of the heating season, most likely dova by 30% to 5.7 mcm per day. This represents
already in November, will put the Ukrainian only 70% of the gas contracted by the Moldovan
energy system in difficulty. Precisely during this operator Moldovagaz (50% of the shares belong
period, the Vladimir Putin regime may decide to Gazprom). As a result, the separatist region
to stop the last pipeline gas deliveries of some has reduced the production of electricity, which
42.4mn cubic metres per day, made through the the Cuciurgani power plant exports to the terri-
Ukrainian gas system. tory of Moldova controlled by the constitutional
Such a step may have a double negative authorities.
impact on Ukraine. On the one hand, limited Against the background of the increased gas
access to energy sources (physical and commer- deficit of about 40 mcm, the Tiraspol admin-
cial restrictions) for heating can cause a human- istration announced that the electricity sup-
itarian crisis of significant proportions in the ply to the rest of Moldova will be cut by up to
territories controlled by the Ukrainian forces, 27%. This means that Moldova will have to seek
with cascading effects on the combat capacity of replacement for more than half of the electricity
the armed forces. imported from the Transnistria region, which
On the other hand, the complete discon- accounted for 70% of total electricity imports.
nection of gas supply through Ukraine to the As a result, Moldova started buying additional
EU may generate a new wave of shocks in the electricity from Romania, but already at the mar-
European energy market, with political and ket price of the Romanian Electric Power Market
socio-economic repercussions. In October, Operator (OPCOM) – €132/MWh. The ability
inflation in the Eurozone reached 10.7% and the to purchase electricity from Romania is due to
risks increase even more in a context of geopo- Moldova's accession to ENTSO-E, together with
litical and energy market instability. Ukraine in March.
The dynamic cap on the price of natural gas Although the electricity purchased in Roma-
(and oil) is the solution that the EU is working on nia guarantees energy security, it is almost twice
at a fast pace to reach a common denominator as expensive as that sold by the Transnistria
in November (when the fourth meeting on this region, which does not pay for the gas used to
topic will take place). However, it is not excluded produce electricity, accumulating new debts on
that the application of such interventionist meas- top of existing ones (some $7bn). In other cir-
ures will produce negative effects, such as an cumstances, the purchase at market prices from
increase in the price of gas or the impossibility Romania would allow the abandonment of
of accessing it. electricity from the Transnistria region, which
continually exacerbates the debt problem and
Russia's tactics in relation to Moldova: be- creates dependency and unpredictability. The
tween the position of collateral victim and current energy and geopolitical crisis requires
the Transnistrian lever more cautious approaches towards the commer-
Russian actions aimed at de-electrifying cial and political price related to the purchase of
Ukraine, through premeditated missile and electricity.
drone strikes, have immediate repercussions on The second problematic aspect refers to the
Moldova, which as of October obtained about old debt of the constitutional territory of Mol-
30% of its electricity imports from Ukrainian dova, which would constitute about $700mn,

Week 46 21•November•2022 www. NEWSBASE .com P7