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