Energy Crisis

New offshore law to bring Romania 60% of profits from Black Sea gas

Romania 60 profits Black Sea offshore gas

Photo: Gloriaurban4 from Pixabay

Published

May 13, 2022

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Published:

May 13, 2022

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With the amendments to its offshore exploration, development and exploitation law, Romania expects to kickstart investments in gas for its needs. However,  the proposal stipulates the government would be entitled to 60% of net income from the sale of the fuel and that it would have preemptive rights.

The Senate of Romania passed the draft offshore law with 91 votes in favor and 13 against and handed it over to the Parliament’s lower house for adoption. The government claims the legislation ensures the security of supply with regard to the energy crisis and future unforeseen events.

Minister of Energy Virgil Popescu said the first gas from the Black Sea would be extracted in the second half of the year. The law stipulates that Romania will have the right of preemption to purchase gas.

Investors to get tax benefits

The sales tax should be lowered and the progressive tax regime for profits is being reformed. Now the government will be entitled to 60% of the income from the sale of gas, though only after the producers’ investments and depreciation are deducted.

The legislative initiative also covers oil and onshore exploitation

It proposed to increase the upstream investment deduction level to 40% from 30%. The legislative initiative also covers oil and onshore exploitation.

The senators maintained the additional tax for sales of gas at prices above EUR 17.2 per MWh. The funds would be used on upgrades of the gas distribution network and connections to the system, but also on other investments that the government determines.

The government has capped prices and spent or earmarked EUR 1 billion for gas subsidies for consumers since the start of the energy crisis.

Operator of offshore project still displeased with taxation scheme

State-owned Romgaz said earlier this month that it signed the deal to buy Exxon Mobil’s half of offshore gas project Neptun Deep for EUR 1 billion. OMV Petrom holds the rest and its majority owner, OMV, vowed to make the decision on the investment next year. Exploitation at the Neptune Deep field can start in late 2026 at the earliest, prime minister Nicolae Ciucă has said.

Activists warned of environmental, economic and climate risks

Black Sea Oil and Gas criticized the law proposal, citing the continuation of progressive taxation. It warned that it still isn’t certain it would begin producing offshore gas at its Media field. The company earlier said the operations may start by the end of the second quarter.

Environmentalist organizations demanded an analysis of the impact that the implementation of the law would have on the environment, economy and the goal of climate neutrality, and a public debate on environmental risks.

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