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Ruling coalition tables offshore drilling bill with Parliament
Romania's coalition government filed changes to an offshore gas tax law in parliament on Friday, the first step to unlocking investment in the Black Sea.
Gas producers have spent 15 years and billions of dollars preparing to tap Romania's estimated 200 billion cubic metres in the Black Sea, only to delay or put their projects on hold four years ago when an additional tax was introduced, Reuters reads.
The European Union state's estimated gas reserves pale compared with Russia's, but analysts said they could still make a difference in central and eastern Europe, particularly after Russia's invasion of Ukraine, helping the region to diversify gas supplies and bringing Romania billions in revenue.
The first gas could be extracted in late 2026.
Coalition leaders have repeatedly said the law will be amended in the first half of this year after repeated delays.
The changes filed on Friday include a smaller progressive tax tied to gas sale prices than the current law, with investors able to deduct some costs and investment up to 40% of it.
The new bill states the tax regime will not change for the duration of the projects, a guarantee of stability needed for investors in the EU state, which has a track record of sudden and non-transparent regulatory changes.
The bill also removes export restrictions for the gas, except in emergency situations.
Provisions of the bill will also apply to onshore perimetres deeper than 3,000 metres, which will help state gas producer Romgaz SNG.BX tap its Caragele gas field in central Romania, where it announced its biggest find in three decades in 2017.
In the Black Sea, OMV Petrom ROSNP.BX, majority-controlled by Austria’s OMV OMVV.VI discovered 1.5-3 trillion cubic feet of gas it had planned to extract jointly with Exxon Mobil XOM.N until the company's exit. Romgaz is acquiring acquire Exxon's stake.
Petrom is expected to make a final investment decision next year.
Black Sea Oil & Gas (BSOG), controlled by private equity firm Carlyle Group LP CG.O, will start extracting gas from its smaller offshore project in the second quarter of this year.
Prime Minister Nicolae Ciuca said on Friday in southeastern Braila that the offshore drilling law will ensure predictability for investors and competitive taxation through which the government will take in 60% of revenues and investors 40% of them.
He added that this law will free up investment in the exploitation of resources in the Black Sea and in Buzau County.
"Today, together with the other two leaders of the coalition, Mr Marcel Ciolacu and Mr Kelemen Hunor, we signed the offshore drilling law together, a long-awaited law, because once it enters into force, legislative predictability for investors will be ensured, investment in both onshore and offshore drilling will be freed up, so that Black Sea resources can be exploited and also the deep-sea onshore resources of Buzau County. The novelty this law brings is competitive taxation through which the government secures 60% of revenues and investors 40% of them. Because of this law, we will have for the first time the Black Sea Oil Gas company delivering natural gas, I think that no later than the middle of the year, it exploits a block where it will be able to provide approximately one billion cubic metre a year. Exploitation in the Neptune Deep block will begin as early as late 2026, early 2027," said Ciuca.
He added that the bill submitted on Friday will make it possible for deep gas exploitation in Buzau County to start in 2024. He added that a sufficient amount of gas will allow the development of the chemical industry and lower prices.