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Romania Upstream Fiscal and Regulatory Report - Frequent Legislative Changes Create Uncertain Environment

Romania Upstream Fiscal and Regulatory Report - Frequent Legislative Changes Create Uncertain Environment

Summary

Successive changes to Romania’s regulatory framework governing the Oil and Gas sector have made for an uncertain investment climate. Romania offers concession agreements for oil and gas exploration and production activities under a concession framework. A new offshore law came into force after significant political wrangling, introducing a new windfall gas tax. However, the industry still faces significant uncertainty as a result of numerous other proposals for tax and market regulation.

Although Black Sea Oil & Gas and its partners sanctioned the Midia gas development in February 2019, the instability is giving pause to other operators. ExxonMobil and OMV Petrom’s Domino project would be on a much larger scale, requiring up to three times the development investment compared to Midia. However, the final investment decision, originally slated for Q4 2018, is now on hold due to the uncertainty.

The full effect of the December 2018 regulatory changes is still not clear, with some issues requiring further interpretation through secondary legislation. The gas price cap may also be scrutinized by the European Commission to evaluate whether it is compatible with European law.

Romania is currently relatively self-sufficient in natural gas, with imports averaging around 10-15% over the past two years and Black Sea resources have the potential to turn the country into a net exporter. However, if the government cannot provide a stable regulatory climate that is conducive to investment, then this potential may become a pipe dream.

The company’s latest Romania Upstream Fiscal and Regulatory Report - Frequent Legislative Changes Create Uncertain Environment, provides details of the terms governing oil and gas exploration and production in Romania, including a raft of changes in legislation in recent months. The report shows a reduced level of competitiveness for natural gas projects as a result of high windfall tax rates introduced in the past year and argues that these changes, combined with new measures such as a gas price cap introduced in December 2018, mean that investors face significant uncertainty.

The report also sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report analyses future trends for Romania’s upstream oil and gas investment climate.

Scope

  • Overview of current fiscal terms governing upstream oil and gas operations in Romania
  • Assessment of the current fiscal regime’s state take and attractiveness to investors
  • Charts illustrating the regime structure, and legal and institutional frameworks
  • Detail on legal framework and governing bodies administering the industry
  • Levels of upfront payments and taxation applicable to oil and gas production
  • Information on application of fiscal and regulatory terms to specific licenses
  • Outlook on future of fiscal and regulatory terms in Romania.
Reasons to buy
  • Understand the complex regulations and contractual requirements applicable to Romania’s upstream oil and gas sector
  • Evaluate factors determining profit levels in the industry
  • Identify potential regulatory issues facing investors in the country’s upstream sector
  • Utilize considered insight on future trends to inform decision-making.


1 Table of Contents
1.1. List of Tables
1.2. List of Figures
2. Regime Overview
3. State Take Assessment
4. Key Fiscal Terms
4.1. Royalties, Bonuses and Fees
4.1.1. Royalties
4.1.2. Drilling Permit Fees
4.2. Additional Oil and Gas Taxes
4.2.1. Tax on Excess Revenue from Gas Price Deregulation
4.2.2. Offshore Supplementary Income Tax
4.2.3. Special Tax on Revenues from Natural Resources other than Natural Gas
4.3. Direct Tax
4.3.1. Corporate Income Tax
4.3.2. Deductions and Depreciation
4.3.3. Withholding Tax
4.4. Indirect Taxation
4.4.1. Value Added Tax
4.4.2. Customs and Excise Duties
4.5. EU Emissions Trading Scheme
5. Regulation and Licensing
5.1. Legal Framework
5.1.1. Governing Law
5.1.2. Contract Type
5.1.3. Title to Hydrocarbons
5.2. Institutional Framework
5.2.1. Licensing Authority
5.2.2. Regulatory Agency
5.2.3. National Oil Company
5.3. Licensing Process
5.3.1. Licensing Rounds
5.3.2. Bidding Process
5.4. License Terms
5.4.1. Duration and Relinquishments
5.4.2. Work Obligation
5.4.3. Domestic Market Obligation
5.4.4. Local Content
6. Outlook
7. Appendix
7.1. References
7.2. Contact Us
7.3. Disclaimer
1.1 List of Tables
Table 1: Regime Overview
Table 2: Romania, Royalty Rates (%), Crude Oil and Condensate
Table 3: Romania, Royalty Rates (%), Natural Gas
Table 4: Romania, Offshore Supplementary Income Tax Rate Increments for Prices Exceeding RON85/MWh
Table 5: Bid Marking Scheme
Table 6: References
1.2 List of Figures
Figure 1: Regime Flow Chart
Figure 2: Romania, Indicative NPV10/boe, IRR and State Take Comparison, Regional
Figure 3: Romania, Legal Framework
Figure 4: Romania, Institutional Framework

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