Page 7 - Euroil Week 32 2019

EurOil COMMENTARY EurOil
As two thirds of oil demand is covered by imports, producers need look no further than Romania’s four privately-owned refineries to market their crude production, although over- seas sales are also a ready option. Gas too can be sold both locally and exported via Romania’s ve cross-border pipelines to neighbouring states, many of which are anxious to reduce depend- ence on Russian gas.
e main deterrent to investing in Romanian oil and gas is policy-related. Authorities have been preparing another licensing round since 2014, with delays tied to scal and regulatory uncertainty. Far from quelling investors’ fears, the government late last year introduced legisla- tion which several operators have warned could bring development to a standstill.
Bucharest has introduced a cap on house- hold gas prices until 2022, and had planned to x industrial prices as well before abandoning this plan. It has also imposed restrictions on gas exports and a 2% turnover tax on gas and elec- tricity companies. e European Commission has even warned these measures could contra- vene EU energy liberalisation laws.
Existing Romanian producers were quick to criticise the measures, with private equity rm Carlyle Group, which is developing the 10-bcm o shore East Midia project, threatening to exit
the country earlier this year if they remained in place. Carlyle later said it would proceed with the $400mn development anyway, but the fate of the larger Neptun Deep project is still up in the air.
Despite having spent $1.5bn preparing Nep- tun Deep, OMV Petrom has repeatedly post- poned taking a nal investment decision (FID) because of policy changes. In an earnings report on July 31, the company reiterated that “the cur- rent legislative environment does not provide the necessary prerequisites for a multi-billion invest- ment decision.”
Worse still, Romanian media have recently claimed Exxon is looking to withdraw from the production site, although the US major is yet to comment on its plans.
Romania will be hoping its latest tender will be as well received as its previous round, in which 20 of the 30 onshore and o shore blocks that were o ered were awarded. But with the country’s leading producers complaining openly about the risks that current policy poses to their projects, and Neptun Deep e ectively at a stand- still, investors are more likely to think twice. Romania’s licensing contest will also be compet- ing with other tenders underway in the oill and gas markets of Bulgaria, Croatia and Ukraine, which though less developed o er more lucra- tive scal regimes. ™
Week 32 15•August•2019 w w w . N E W S B A S E . c o m P7