Page 9 - Euroil Week 38 2019
P. 9
EurOil POLICY EurOil
Romania backtracks on policy
ROMANIA
Romania is revising legislation brought out last year that was unpopular with investors.
ROMANIA’S government is looking to improve conditions for its gas developers by relaxing tax- ation and removing a requirement that they sell half of their gas domestically.
The government published draft amend- ments to its offshore law for public debate on September 20. Investors had complained that the law, passed last year, had undermined potential returns on their projects.
The amendments that sweeten offshore legislation come just a month after President Klaus Iohannis and US President Donald Trump signed a joint statement in Washington that explicitly mentioned the need to change the investment law in Romania to make it more predictable, and a few days before Prime Minister Viorica Dancila’s upcoming visit to Washington.
“Romania and the United States will analyse ways to improve the investment climate in the field of energy for the benefit of both countries,” according to the joint statement of the two pres- idents during Iohannis’ visit.
US major ExxonMobil and US private equity firm Carlyle Group are both investing in offshore gas developments in Romania. ExxonMobil is working with Austria’s OMV Petrom at the Neptun Deep site, where they are targeting 84bn cubic metres of gas, while Carlyle operates the 10-bcm Midia gas discovery
The amendments are needed “to keep the Romanian offshore sector competitive and encourage foreign investors,” the authors of the bill explain. In terms of tax, the bill increases the benchmark gas price above which produc- ers have to pay an extra tax and allows them to deduct past investments in the upstream sector up to the limit of 60% of the revenues for the pur- pose of calculating the supplementary tax, ver- sus 30% in the current form. The expenditures on past investments are fully deductible for the purpose of calculating the corporate profit tax under the bill.
Romania is looking to backtrack on other recent legislation unpopular with investors. In August, Parliament’s industries and services
committee voted to repeal legislation on gas price caps and turnover tax. A bill will still need to go through into law before the policies are removed, however.
While these are positive steps, there are con- cerns that the damage may have already been done. OMV Petrom has repeatedly delayed tak- ing a final investment decision (FID) at Neptun Deep, pushing its launch back. This in turn has delayed infrastructure developments designed to export gas from Romania’s Black Sea fields, including a planned pipeline through Hungary and Austria and another across Moldova.
“The current legislative environment does not provide the necessary prerequisites for a multi-billion investment decision,” OMV Petrom said in its last earnings statement. Still, it said it was “keen” to see Neptun Deep realised all the same.
“We will continue the dialogue with the authorities to understand the way forward,” it said.
OMV Petrom welcomed the government’s change of course this month.
“The fact that the authorities are considering changing the oil and gas legislation is an impor- tant step forward,” the firm told local media. “Reopening the dialogue on a fundamental topic for Romania is welcome.”
Last year’s legislation could also sap interest in Romania’s upcoming oil and gas licensing round – its first in almost a decade – in which it is offering rights to 22 onshore and six off- shore blocks. The National Agency for Mineral Resources (NAMR) published the tender in the government’s official gazette on July 24. But it still needs to be published in the EU’s official gazette before opening. Once launched, investors will have 120 days to file bids and then 15 days to ini- tiate contract negotiations. Negotiations will last no longer than nine months.
Romania will be competing to attract inves- tors with other countries in the region that also have licensing contests underway. Bulgaria, Cro- atia and Ukraine are currently seeking oil and gas developers.
Week 38 26•September•2019 w w w . N E W S B A S E . c o m P9
