Oil companies involved in Black Sea explorations criticize Offshore Law, say it affects stability and free market principles

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The law voted by the Chamber of Deputies on October 24 affects the principle of stability, provides new taxes and sets conditions to the companies regarding the way they would sell the output, the Romanian Association of Offshore Concessionaires in the Black Sea (ARCOMN) argues.

The oil companies say that, during the past two years, ARCOMN has attended consultations with the state institutions, all relevant ministries, agencies and competent national authorities, as well as with the involved parliamentary committees, in regard to the elaboration of the regulating of the offshore framework, digi24.ro informs.

ARCOMN stresses the key elements and specific hazards of the industry, the practices at international level in this field. ARCOMN has also presented the assessment of the impact the proposed legislation would have on the offshore potential investments in the Romanian Black Sea area.

“The importance of a stable and competitive financial framework, the establishment of a clear regulation and the observance of the right to freely sell the gas output have represented the main messages ARCOMN has constantly promoted in this period. The vote in the Chamber of Deputies on October 24 has marked the concluding of the reexamination parliamentary process on a new variant of the bill, which affects the principle of stability, provides for new taxes and introduces specific terms on the way production is sold,” an ARCOMN release reads.

ARCOMN expects that, after the release of the final variant, each investor in the offshore industry to assess the impact of the bill on its own business and on the feasibility of the opportunities in offshore investments.

“In the past 10 years, more than USD 2 billion has been invested only in exploration. The development of production facilities for the new projects involves additional investments of several billion USD,” the companies also say.

ARCOMN represents the inters of the following companies: OMV Petrom, Romgaz, ExxonMobil Exploration and Production Romania Limited, Black Sea Oil & Gas Plus International, Lukoil Overseas Atash and Petro Ventures Europe.

The Offshore Law was approved by 170 votes for, three against and one abstention.

“The tax on offshore additional revenues (…) shall be calculated by applying one or more percentages, as the case may be, on the additional revenue from the sale of natural gas extracted from offshore blocks, as determined in accordance with Annex 2, an integral part of this law, a tax from which the value of the investments in the upstream segment is deducted. The tax on the offshore additional revenues takes into account the reference price set by ANRM for the calculation of the royalties. Transactions below the reference price are taxed at the reference price. The percentages for the calculation of the tax shall be calculated on the basis of the sales prices of natural gas used by the offshore petroleum agreement holders on the basis of the price grid adjusted annually as of January 1, 2019 onwards by the annual consumer price index as follows : 30% of the additional revenues for prices up to RON 85/MWh included, 15% of the additional revenues obtained for prices higher than RON 85/MWh and lower or equal to RON 100/MWh, 30% of the additional revenues for prices higher than RON 100/ MWh and lower or equal to RON 115/MWh,” the Offshore bill reads.

According to the draft, the maximum limit for deducting investments in the upstream segment may not exceed 30% of the overall tax on the offshore additional revenues.




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