The Ungheni-Chisinau pipeline

Interconnecting Moldova’s energy sector: how can we help?

pesteMoldova depends 100% on the Russian gas and 80% on the electricity produced in Transnistria based also on Russian gas. In 2014, Romania and Moldova launched with great fanfare an interconnector (Iasi-Ungheni) that promised a relevant alternative to Gazprom for Moldovan consumers. A year and a half later, the pipe is used far below capacity, covering a mere 1% of Moldovan gas consumption. What is to be done?

In a report launched in February in Chisinau, we show that:

  • Investments must be made both in Romania and in Moldova so that the pipeline could indeed transport significant gas quantities. In Romania, half of the funding (EUR 55 million) is available in the Large Infrastructure Operational Programme 2014-2020, while the other half should be provided by Transgaz. In Moldova, the EU contributes only 10 million EUR compared to the estimated cost of 80-90 million EUR, while the rest would be covered in a semi-commercial loan from the EBRD and EIB. We think it is difficult to recover the investment by transport tariffs and that the EU should finance a larger share of investment.
  • There is a reason why the EU should be interested in financing the pipeline Ungheni-Chisinau, but under very clear, firm and easily monitored conditionality: using the pipeline Ungheni-Chisinau and providing access from Chisinau to the large transit pipelines, EU gas market could also be interconnected with Ukraine. But this can only be done if Moldova really implements European rules: a strong and independent regulator ANRE  and non-discriminatory access to networks for all suppliers, Gazprom or Romanian gas suppliers.
  • The gas interconnectionis not enough. Moldova’s dependence on Gazprom originates in the historical debts for gas consumed; arrears were as high as 65% of GDP in 2014 and continue to grow. The largest consumer of gas is the power plant from Cuciurgan, which sells more expensive electricity than in Romania and does not pay for the gas it consumes. Moldova is captive to the Cuciurgan power plant; the solution is to interconnect with Romania also on electricity. Given the 15-20% price difference between the energy produced by Cuciurgan and the electricity on the Romanian market, the investment could be recovered quickly.

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