A number of risks and uncertainties remain for Moldova in the energy sector, in particular, in terms of gas and electricity supply.
This is stated in the government materials justifying the extension of the state of emergency in the country for another 45 days starting from June 24. It is said that despite the 5-year gas supply contract signed between Moldovagaz and Gazprom, the risk of unilateral termination of the contract by the Russian side because of the failure to audit the financial debt remains. Also, given the necessity to renegotiate the contract between the companies in October 2022 in terms of supply volumes, this aspect increases the uncertainty about reliability of natural gas supplies to Moldova and the price. In the absence of alternative sources of gas supply at a competitive price, the risk of Moldova's inability to purchase gas and access to transportation capacity remains. It is noted that while the supply contract between the companies remains in force, there is a risk of persistence of high gas prices, due to market fluctuations caused by instability in the region and the constituent part of the gas purchase price setting formula regarding the reference to FTT international exchange prices, which may mean that additional decisions of the Emergency Situations Commission may be required to ensure solvency of consumers for energy resources and Moldovagaz possibilities in relation to an external supplier to keep the national economy in balance. It is emphasized that there is a risk of failure to execute on time the project "Moldova Security Supply", which is to be financed by EBRD through a loan for the purchase of natural gas volumes on regional markets and their storage in underground gas storages in neighboring countries. The loan processing involves a number of formalities and approvals that require more time to complete. The government noted the risk of rising electricity prices in the region, which will have a direct impact on end-user prices/tariffs and may require government intervention to ensure their support, particularly for vulnerable consumers. At present the prices on European electric energy markets are about 4 times higher than the prices for electric energy from the Moldovan HPP. At the same time, there is a risk of increase in oil prices, problems with oil supply and limitation of oil products reserves in conditions of changing supply chains and regional/global energy crisis. The Cabinet of Ministers notes that presently most of the electric power is bought from the Moldovan HPP, which operates on natural gas, supplied under the same contract (under which natural gas is supplied to the right bank of the Nistru River), and should Gazprom cut supplies unilaterally, there is a risk of a considerable rise in prices for electric power, if it is purchased from other sources in the region. Given that at the moment the draft of the special law on electricity purchase for the period until March 31, 2023 has not been finalized and approved yet, there is a risk that the current mechanism of electricity purchase may not be applied if the state of emergency is not extended. The government also points out that the reconfiguration of gas supply routes at the European level, the increased share of LNG, the intention to purchase gas centrally at the EU level, including for the Eastern Partnership countries, are elements that may require quick solutions. //23.06.2022 - InfoMarket.
