The creation of a joint Kazakh-Romanian Energy Investment Fund, announced in October this year, opens new opportunities for international partnership. Shareholders of the new investment structure are the Government of Romania and the KMGI Group, owned by the Kazakhstan National Oil and Gas company KazMunayGas. The State Secretary of Ministry of Energy of Romania, Robert Tudorache, commented on the conditions under which the Fund is created and will function, how the relevant authority evaluates the activities of KMG International in Romania and the region, and what are the overall prospects for the development of Kazakhstan-Romania cooperation in the energy sector.
Mr. Secretary of State Robert Tudorache, in October of this year you paid a working visit to Kazakhstan as part of the official delegation. What business events did you participate in?
Together with colleagues from the Government of Romania and representatives of Romanian energy companies, we took part in the joint Romanian-Kazakhstan commission on economic, scientific and technical cooperation within the framework of the “Kazakhstan-Romania” Business Forum, the “KIOGE 2018” International Oil and Gas Exhibition, as well as the Business Forum in the oil and gas industry.
In general, we took part in several very productive meetings, within the framework of which we were able to express the interest of Romanian oil and gas companies in the export of special equipment for this sector, as well as in the development of long-term partnership with Kazakhstani companies.
Was this your first visit to Kazakhstan, one of the largest suppliers of raw materials and energy resources? What is your impression?
Yes, it was my first visit to Kazakhstan. In general, it was a pleasant discovery for me to see that the Romanian and Kazakh peoples are similar in many ways. Especially that both of our countries have an important resource – highly qualified specialists in their respective fields. They are trained and competent personnel who make a significant contribution to the industry they work in.
It should also be noted that both states – Romania and Kazakhstan – have an exceptional development potential and are on the path of sustainable growth. Therefore, I think it is very important that we had an opportunity to meet and discuss ways of achievement of joint economic objectives, while coordinating them in the way to ultimately lead to substantial benefits for both parties.
In this regard, it should also be noted that Romania appreciates the increasing participation of the Republic of Kazakhstan in the international dialogue on energy security. The Black Sea region is a strategic zone in ensuring energy security. Romania opens the gates for the supply of energy resources from Kazakhstan to the Balkans and other European markets. More than 80% of oil imports to Romania are from Kazakhstan and the Russian Federation. The diversification of energy supplies is important. Considering all these factors, I am sure that there are many opportunities for cooperation between our countries.
What were the main topics of discussion during the meeting with representatives of Kazakhstan Ministries and Authorities?
With the representatives of the Ministry of Energy of the Republic of Kazakhstan and other relevant authorities, we discussed the development of cooperation in the nuclear energy field, mainly in regard to the supply of uranium and nuclear fuel components.
In addition, a significant direction that unites Kazakhstan and Romania is a wide common circle of interests in the energy field. This was one of the main reasons for the visit of the Romanian delegation to Kazakhstan – the identification of opportunities for economic cooperation, especially in the energy sector – production, transportation of hydrocarbons, and the production of petroleum machinery.
As a representative of the field-specific authority, how do you assess the activities of the KMGI Group, the shareholder of which is the Kazakhstan National Company “KazMunayGas”, and the results achieved by the company in recent years?
It is worth noting that in recent years, the role and importance of KMG International Group in the development of the energy sector in the region has been increasing. We are pleased to note a significant improvement in the financial and operating results of the company in recent years, achieved with the advent of Kazakhstani management.
For several years, “Rompetrol Rafinare” has been demonstrating positive performance indicators – in 2017, the company went into profit and managed to achieve remarkable results at both refineries – “Petromidia” and “Vega”. This year the company demonstrated high growth rates as well. Since the beginning of 2018, KMGI also shows good growth dynamics of key financial and operating indicators.
During your first visit to Kazakhstan, you made a statement about the intention of KMGI and the Ministry of Energy of Romania to announce the establishment of a joint Kazakh-Romanian Investment Fund. What preparatory work was carried out by the parties at this point?
Both sides, the Ministry of Energy of Romania and KMGI, have worked closely over the past few years on this issue and a statement of the parties’ intentions was made after the preliminary approval and coordination of all organizational issues that preceded the formal signing of the Agreement in October of this year.
In general, this strategically important and significant step for both parties to create a joint Kazakh-Romanian Investment Fund was preceded by several rounds of negotiations and extensive preparatory work to harmonize all the legal and practical aspects of the Agreement, the interaction mechanism of the parties, the definition of the organizational and shareholder structure of the Fund. I believe that the final Agreement and the agreements reached within it equally consider the interests of both parties and are a long-term mutually beneficial solution, opening up real opportunities and prospects.
What primary tasks does the newly created Investment Fund solve?
As you know, the Agreement on the establishment of a joint Kazakh-Romanian Fund was signed between KMGI and the Societatea de Administrare a Participatiilor in Energie (SAPE), owned by the Romanian Ministry of Energy, in October this year. This Agreement was concluded in accordance with the provisions of the Memorandum of Understanding, previously signed between KMGI (the former Rompetrol Group) and the Government of Romania. This document also spelled out the mechanism of privatization of shares that the Romanian state owns in “Rompetrol Rafinare”, and the procedure for creating a joint Energy Investment Fund.
As noted during the signing of the agreement, the creation of the Fund is a mutually beneficial strategic step aimed at the final resolution of historical issues between the parties. In particular, the Memorandum provides for the KMGI Group to buy from the Romanian Government 26.7% of its 44% stake in “Rompetrol Rafinare” for $ 200 million.
At the same time, it is an effective mechanism for the implementation of new capital-intensive energy projects, the financing of which will be carried out at the expense of KMG International’s own funds and loan capital at the Fund level. One of the main tasks of the Fund is to generate additional commercial profits and pay dividends to shareholders. That is, in the long run, the activities of the Fund will have a significant multiplier effect on the development of the industry and bring real economic benefits to both parties.
What was the main reason and basis for the Romanian Government to adopt a positive decision on this issue?
As a representative of the Ministry of Energy, I can say that one of the decisive factors for the adoption of such a strategic decision by the Romanian side was the KMGI implementation of a large-scale transformation program and the modernization of production assets, which as a result led to the increasing performance indicators of the company which is a one of the main players in the Black Sea region.
At the same time, I believe that the creation of a joint investment structure testifies to the achieved strategic partnership between KMGI and the Romanian Government, and is an indicator of recognition and support for KMGI activities in the region.
During the signing of the Agreement on the Establishment of the Fund, the parties stated that this is a mutually beneficial decision, bearing real and equal benefits for shareholders. Could you highlight the prospects following the creation of a new investment structure for Romania?
The reached agreements truly forecast obvious long-term benefits for both parties. The creation of a joint Fund will not only attract additional investments in the energy sector of Romania, but will also be an important signal for accelerating the pace of development of this industry. In addition, the Fund is expected to be a successful example of building public-private partnerships for other companies operating in Romania. It is also an effective mechanism for the implementation of large energy projects that suggest creation of new jobs, growth of tax payments to the budget, and development of infrastructure.
What projects will be implemented under the umbrella of the Fund?
The Fund will be engaged in investments in the field of energy, its priorities are the development of the energy sector of Romania.
Projects planned for implementation under the umbrella of the Fund will be carefully reviewed in accordance with the principles of investment transparency, based on clear criteria and evaluation mechanisms. Both the Romanian state and KMGI have equal opportunities to submit project proposals for funding.
In particular, currently, the parties are already considering two projects that can be implemented within the framework of the Kazakh-Romanian Fund. It is assumed that these projects will have a significant positive effect on the Romanian economy and will contribute to the creation of about two thousand jobs.
These projects, in particular, include the construction of a cogeneration plant at the “Petromidia” refinery, which will produce combined heat and power, as well as the expansion of the Rompetrol gas station network in the Romanian market through greenfield investments (construction from zero cycle). Investments in both projects amount to about $ 220 million. The implementation of these projects will give new impetus to the development of the Romanian economy, the local energy sector, and the investment environment.
How do you assess the investment climate in Kazakhstan in terms of cooperation in the energy sector? What prospective niches, in general, do you see for strengthening the economic cooperation between the two countries?
After the working and business meetings held in Astana and Almaty, I would like to draw attention to the extensive and promising possibilities provided in Kazakhstan in the field of business development, especially in the energy sector.
I firmly believe that Romania can become a reliable partner of the Republic of Kazakhstan in Eastern Europe. Our country, through its strategic geographical location in Europe and the Black Sea region, can become a “gateway” to ensure access and supply of energy resources from Kazakhstan (the largest oil producer in Central Asia) to Eastern Europe as well as to the EU markets.
In the first half of December, Romania will celebrate the main national holiday – the Great Union Day, and then Christmas. Kazakhstan also celebrates the Day of the First President and the Independence Day on these dates. What would you wish for your Kazakh partners and the peoples of the two countries regarding these significant dates?
On the eve of such significant public and historical holidays, I would like to wish the peoples of Kazakhstan and Romania prosperity, well-being and sustainable development. As I noted above, our countries have much in common and are at the stage of activation of bilateral cultural and business ties. Let the outlined paths of cooperation in energy, trade and economic spheres extend and reach the next qualitative level.
Up to date, our interaction with Kazakhstan partners was built on constructive dialogue and cooperation. I believe that the creation of a joint Fund, as well as the growing role of the KMGI Group in the region, the development of new projects between the business circles of the two countries will all contribute to further integration and strengthening relations between Kazakhstan and Romania at all levels.