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THE GAS SECTOR OF MOLDOVA -NATIONAL AND REGIONAL SECURITY ISSUES

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CESEC Gas Plenary and Working Group Meeting, Brussels, 8th October 2019

THE CURRENT STATE OF ENERGY SECURITY IN MOLDOVA

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Republic of Moldova is dependent on Russian gas which currently enters the country through cross-border interconnection points with Ukraine.

The contracts for supply and transit of natural gas to Republic of Moldova with GAZPROM end on 31.12.2019.

Alternative natural gas sources and routes from EU/Romania will be accessible not earlier than from 2021, according to the deadlines for

commissioning the works within the national infrastructure development plan, updated recently by Romanian transmission system operator

Transgaz SA

Moldova is an important element in the transit of natural gas from the Russian Federation: on the route Ukraine – Moldova – Ukraine – Romania

– Bulgaria and Turkey, on the Trans-Balkan corridor

THE NATIONAL AND REGIONAL SECURITY OF GAS SUPPLY WOULD BE DIRECTLY AND ADVERSELY AFFECTED BY INTERRUPTION OF THE GAS

TRANSIT THROUGH THE TERRITORY OF UKRAINE

SPECIFIC CHARACTERISTICS OF THE MOLDOVAN GAS SECTOR

Moldova is not a natural gas producer (as the neighboring countries Romania or Ukraine);

Moldovagaz JSC is the main supplier of natural gas (and the last option supplier at national level), importing from SAP "Gazprom" 100% of the gas consumed in the country, used by close to 700 thousand consumers (house holds and industry); No natural gas storage facilities or LNG facilities are available in Moldova; The Transnistrian region - a problematic zone on the route of the Trans-Balkan Pipeline, part of the official territory of Republic of Moldova, where the gas infrastructure and activities are not controlled by the national authorities (the left bank of the Dniester);

The annual consumption of the Republic of Moldova is about 2.9 bcm (~15 mcm/d) *– the quantity is provided entirely by SAP "Gazprom" through Ukraine

* MD without Transnistrian region - 1.1 bcm/a; Transnistrian region - 1.8 bcm/a , i.e. about 60 % of Transnistrianregion's gas consumption belongs to the MGRES power station, which produces about 70% of the electricity

consumed by the right bank of the Republic of Moldova.3

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Given the uncertainty of the Russian gas transit through the territory of Ukraine and the current state of regional gas infrastructure projects, the following possible routes for gas supply to the Republic of Moldova for 2020 are being considered:

1. Trans-Balkan reverse flow through IP Isaccea/IP Orlovka to GMS Causheni;2. through the Ukrainian gas transmission system, IP/GMS Alexeevka;3. through the Romanian gas transmission system, IP Iași/Ungheni (needed infrastructure not available

yet).To ensure the country's energy security, routes 1 and 2 as above should be used cumulatively , which would allow to cover the national consumption during peak periods (especially during winter 2020). However, route 2 of imports of natural gas from Central European countries through the Ukrainian transport system is uncertain due to the risk of lacking available capacities of the Ukrainian networks during the peak seasonThe use of route 3 would be possible only after the commissioning of the Ungheni - Chisinau gas pipeline on the territory of the Republic of Moldova and the reconstruction/ modernization works on the Romanian GTS (presumable from 2021-2022 onwards).

TRANS-BALKAN REVERSE FLOW – A POSSIBLE SOLUTION TO ENSURE THE SECURITY OF GAS SUPPLY TO MOLDOVA AFTER 31.12.2019

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SECURITY OF GAS SUPPLY TO REPUBLIC OF MOLDOVA

Isaccea

Orlovka

Căușeni

Grebeniky

• Interconnection agreements with UA TSO: IP Alexeevka – ready to be signed (expected for October, 2019);IP Grebeniky and IP Orlovka/Causheni + Tehnical Cooperation agreement on the common balancing zone GMS Orlovka /GMS Causheni – in negotiations (expected to be signed in near future);Next round of negotiations between MD and UA TSOs planned for the second decade of October 2019.

• Reconstruction works on MD facilities:Razdelinaya- Izmail pipeline repair works to be finalized by the end of November 2019,GMS Caushany will be used in reverse due to commutations on the RI-ShDKRI and ATI systems without additional investments for Option 1 of TBRF. Further reconstruction works at GMS Causheni are planned to ensure full bi-directional flows on RI-SHDKRI and ATI (T1, T2, T3) by the middle of 2020.

• Transnistrian region problem:Moldovagaz initiated discussions for getting a mandate for Moldovatransgaz to sign the Interconnection Agreement on IP Grebeniky with Ukrainian TSO on behalf of Tiraspoltransgaz .

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STEPS TO ENSURE THE TECHNICAL AND COMMERCIAL CAPACITIES FOR TBRF BY MOLDOVATRANSGAZ

The supply of natural gas through the TBP in physical reverse flow to Moldova and Ukraine will depend on the technical and commercial capacities of the GTS on the territory of Bulgaria and Romania, which are currently not specified yet.

Transgaz (RO) extended the timeline for the modernization of GMS Isaccea (reverse flow) from 2019 to 2020 in the Infrastructure Development Plan of the company and has no plans or infrastructure projects in order to develop supplementary capacities in reverse flow through TBP from IP Negru Voda for the near future.

The requirement being about 15 mcm /d for the Republic of Moldova and about 1.8 mcm /d for southern Ukraine's cross-border consumers – the option of 1.5 bcm/a will not be sufficient to cover the consumption of the Republic of Moldova in case no alternative routes are available.

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TBRF - MAIN RISCS AND THREATS FOR MOLDOVA

(!) In case a “Zero UA Transit” scenario, MOLDOVAGAZ has as an alternative plan to buy natural gas from Gazprom through Turk-Stream 2 pipeline, at volumes up to 3 bcm/ annually to cover the country’s national gas consumption, but GTS of Bulgaria and Romania lacks capacity to ensure the needed physical reverse flow on TBP to Moldova and eventually to Ukraine. (!) Due to delayed commissioning by Romanian Transgaz of reverse flow Isaccea 1 and other planned works, MOLDOVAGAZ shares the same concern expressed by UA TSO regarding the further successful accomplishment of this project. MOLDOVAGAZ is also concerned by the lack of Transgaz’ reaction to repeated invitations for discussions on the issue. (!) EC /DG Energy assistance needed in order to further develop the TBRF project to a greater capacity beyond 01.01.2020 (by min. 15 mcm/d for Moldovan consumption + Ukrainian southern region consumption) on the Bulgarian and the Romanian territory, including the solidarity and full engagement of all participating TBRF TSOs.(!) MOLDOVAGAZ is ready to provide any further information as well as to participate in bilateral and multilateral discussions, incl. under EU umbrella.

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FURTHER STEPS AND PROBLEMS TO BE SOLVED

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CESEC Gas Plenary and Working Group Meeting, Brussels, 8th October 2019www.moldovagaz.md