Romania: State-owned companies fail to expand abroad

Two of the most important companies controlled by the Romanian government, Transgaz and Romgaz, failed recently to expand abroad, due to tough competition or lack of proper strategies.

On April 19, a consortium led by Spanish company Reganosa, including Romanian state-owned monopoly Transgaz and the European Bank for Reconstruction and Development (EBRD), lost the bid for Greece’s grid operator DESFA, Athens accepting a EUR 535 million offer from the rival consortium led by Italy’s Snam.

DESFA runs a gas transport network by pipelines of 1,459 km in Greece. The winning bidder was a consortium of Italy’s Snam, Spain’s Enagas Internacional and Belgium’s Fluxys.

For Transgaz, the bid was the first major attempt to step outside Romania, in an area dominated for decades by Russian giant Gazprom, the main gas supplier of the countries in the region.

The only success for Transgaz in its attempt to expand abroad was the purchase of Moldova’s Vestmoldtransgaz, company operating the Moldovan section of the Iași-Ungheni gas pipeline.

After the acquisition of Vestmoldtransgaz, Transgaz have the full control of the gas interconnection between Moldova and Romania, including the future extension of the Iași-Ungheni pipeline until Chișinău.

Vestmoldtransgaz was put up for sale by Moldova’s government for MDL 180 million (EUR 9 million) and the Transgaz is obliged to invest EUR 93 million within the next two years.

Another major Romanian state-owned company, the natural gas producer Romgaz, is about to give up two exploration concessions in Slovakia, after closing its business in Poland.

Romgaz took over 25 percent of the rights related to three gas and oil perimeters in Slovakia in 2008, in partnership with Alpine Oil & Gas (50 percent and operator of concessions) and JKX London (25 percent).

But exploration works have become difficult due to the opposition of the local population and to the problems in obtaining permits from the Slovak authorities.

Worse, the two partners of Romgaz announced their intention to give up the Slovak exploration concessions, leaving the Romanian company alone after an investment of close to EUR 7 million.

For Romgaz, the Slovak exploration is the second failed attempt to expand abroad. In 2016, Romgaz decided to withdraw from partnerships with two companies, Aurelian Oil & Gas and Sceptre Oil & Gas, for exploration work in two perimeters in Poland, due to the lack of commercially valuable deposits and misunderstandings with partners.

These unsuccessful investments indicate the weak ability of Romanian companies to expand on other markets.

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