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Romania: Gas Project Promises Prosperity

Washington, 15 January 1998 (RFE/RL) -- A Romanian-U.S. joint venture in liquefied petroleum gas (LPG) is expected to have an impact far beyond the relatively modest $180 million investment it will be making in Romania over the next four years.

Romanian President Emil Constantinescu says the project will make Romania an energy and raw material hub for Central and East European imports from the Central Asian republics.

The Black Sea LPG joint venture company, which was formally signed into existence last week in Bucharest, will jump-start its operations with immediate construction of a new million ton capacity LPG import terminal in the Black Sea port of Constanta.

Liquefied petroleum gas is a gaseous paraffin hydrocarbon found in crude oil and natural gas. It is made up primarily of propane and butane. It is used as a fuel itself, as an easily transportable source of propane gas used in cooking and heating, and as a raw material for chemical synthesis.

Romania has been critically short of natural gas for heating and cooking for several years. Romanian officials have proposed their country as a natural gateway for ships carrying petroleum and natural gas from the newly developing fields in the Caspian sea, but major oil flows remain a long-way off, dependent on the contentious decisions on pipeline routes for the oil out of the land-locked nations around the Caspian.

Romania's Black Sea port of Constant is, however, a natural for receiving LPG from ocean tankers and distributing it within Romania and beyond into the Danube basin region.

The three American companies involved in the Black Sea LPG joint venture -- UGI Corporation, the largest U.S. marketer of propane gas, Energy Transportation Group, and North American World Trade -- say world demand for LPG is expanding rapidly and that the Romanian venture is at a strategically important area to supply the local needs and to export efficiently and economically using the Danube and the region's extensive transportation network into the rest of East and Central Europe.

The new import terminal will be built at the entrance to the Cernavoda-Constanta Canal, which connects the deep-water port of Constanta to the Danube.

The first phase of the project will be completed by the end of this year so that Romania will be able, for the first time in many years, to meet the peak winter demand for gas.

By 2001, the entire project should be finished, including a 210 kilometer LPG pipeline to Bucharest and the construction of propane facilities in the capital and several other cities.

ROMGAZ, Romania's natural gas authority and one of the three Romanian partners, will mix propane from the LPG with air and inject it into Bucharest's gas grid to help satisfy winter peak gas demand. Renel, the state-owned electricity authority and the second Romanian partner, will use the LPG as another source of clean fuel for its generating plants in and around Bucharest.

ROMPETROL, the state-owned oil and gas holding company, is the third Romanian partner and will be involved in building and expanding facilities to use the LPG around Romania.

When completed, the facilities are expected to provide 600,000 tons of LPG to serve 85 million people in the Danube Basin.

ROMGAZ General Director Emil-Constantin Blaga says the import terminal is important because it will help the country diversity its sources of imported fuel. Renel General Director Aureliu Leca says the electric utility is pleased to be involved because the additional fuel delivery infrastructure will make the privatization of Renel easier.

The President of UGI Enterprises in the Central-Atlantic U.S. state of Pennsylvania, Brad Hall, says his company sees the project is a winner all the way around. The "geography is compelling and the market potential is large," he says.

The co-chairman of Energy Transportation Group in New York, Kimball Chen, says his company believes that Romania is capable of tremendous economic growth "and will be a key player in the Black Sea region."

The American-Romanian LPG joint venture is not the first to see the potential for Constanta. A recent study by Britain's Ocean Shipping Consultants says Romania is "ideally located to serve as transit gateway for many Central Asian bulk commodities such as crude oil, steel, aluminum and steam coal."

Japan only last month agreed to lend Romania $194 million to upgrade the port's facilities, including road improvements. Last week, the European Bank for Reconstruction and Development (EBRD) approved a $13 million loan for construction of new grain-handling and storage facilities in Constanta.

Financing for the Black Sea LPG joint venture is expected to come from the World Bank and a group of commercial banks.