Two major companies operating in Romania — Romgaz and OMV — are including investments into petrochemicals in their long-term plans, in advance of an anticipated hike in natural gas production from 2020. Their plans, along with Chimcomplex's ambitions to create a local chemicals giant, could lead to the revival of the local petrochemicals industry. 

Romania’s chemical/petrochemical industry developed during the communist regime collapsed in the transition period amid poor management, frauds, lack of a coordinated development strategy and aggressive competition from foreign players. 

The fate of Oltchim, once one of the largest chemicals companies in Southeast Europe, best illustrates the demise of the whole industry. With a significant shareholder reluctant to make investments, plagued by corrupt management and lacking firm support from the state, the company eventually went bankrupt. 

The collapse of Rafo refinery (now for sale again) and related chemical plants, as well as the story of local fertilisers producers that went bankrupt as the natural gas sector was liberalised, complete the picture. Other chemicals-processing production units higher on the value chain had been closed down during the first years after the fall of the communism. 

But the chemical industry as a whole is now enjoying a better outlook again as natural gas production is likely to soar after 2020 and investors look more inclined to capture the opportunities.

Major Romanian natural gas producer Romgaz has included petrochemicals among the new markets envisaged in its 2018-2020 Development Strategy, and OMV is considering developing a petrochemical unit at its Romanian refinery Petrobrazi as well as set out in the group’s 2018-2025 Development Strategy, after shutting down such a unit several years ago. 

Bucharest is looking to develop gas transportation infrastructure to deliver its Black Sea gas to other markets, including the Bulgaria-Romania-Hungary-Austria (BRUA) pipeline. However, Hungary seems unwilling to push Romania’s gas toward Western Europe — Hungarian officials said in mid-2017 they would not complete the pipeline towards Austria and despite later reaffirming their commitment to the project, reportedly no work has been done on the Hungary-Austria section since then. 

Accordingly, Romania is likely to become more active in retaining the gas in the country for domestic processing, or re-directing the gas toward other countries, namely Moldova and Ukraine. 

Preventing gas exports has always been on the local authorities’ hidden agenda, for various reasons, in contrast to the European Commission’s single market policies. Transgaz is considering opening one more interconnector with Ukraine after already preparing to bring gas to Moldova, which indicates that Romania might prefer to re-direct its resources towards countries more vulnerable to (and more willing to resist) pressure from Russia. Hungary’s current leadership is relatively friendly towards Russia, which might be a factor considered by state-controlled Transgaz and Romgaz when making major investment decisions.

Fertiliser production, besides petrochemicals and other segments of the chemical industry, hold robust development potential. Romania, which has a large agricultural sector, imported €10bn (5.5% of GDP) worth of chemical products in 2017. There is only one petrochemical unit in Romania, operated by KazMunayGas at Rompetrol Rafinare on the Black Sea coast.

The petrochemicals industry popped up into the development strategies of the two major energy companies recently at the same time as Chimcomplex is preparing to take over the key assets of Oltchim, and plans to develop a major chemical group at national level. Chimcomplex has said it plans to create the Romanian Chemical Company, which will become an important player on the regional market. The business plan of the new entity is based on the relaunch of the Romanian chemical industry and includes the possibility of increasing industrial output to more than €1bn per year within seven years of the Oltchim takeover, and creating more than 9,000 jobs, Agerpres news agency reported earlier.

Chimcomplex has not taken over Oltchim’s petrochemical unit, which thus seems doomed to be dismantled, after it was purchased by Oltchim from OMV Petrom, but it plans to rather use the petrochemical facilities at the Onesti industrial platform.

Other chemical production units closed down in the past are available for re-opening, including Rafo refinery (on the same Onesti industrial platform) which was put up for sale in March this year. The refinery has not operated during the past decade and entered insolvency procedures at its own request in 2016.