Chamber of Deputies approves the Offshore Law on Black Sea gas exploitation

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The Chamber of Deputies has voted on Wednesday, as the decision-making body, the Offshore Law on the conditions in which the Black Sea gas exploitation will take place. Investors will have to trade 50% of the gas on the Romanian stock market and 25% of employees must be Romanian.

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 draft 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.

The Chamber of Deputies has adopted on Wednesday a PNL amendment to the Offshore Law, according to which the owners of the oil agreements are subject to the specific tax regime applicable to exploration, development and abandonment activities based on existing agreements.

The commissions of industry, public administration and budget with the Chamber of Deputies adopted on Tuesday a favourable report with amendments to the draft law on some measures necessary for the implementation of oil operations by the offshore blocks owners of the oil agreements.

Regarding the profits that the Romanian state and the offshore investors will collect, ALDE Vice President Varujan Vosganian said on Tuesday that the share is “50-50 with some oscillations”.

“The level around which all evaluations point to is 50-50, surely with certain oscillations in the scenarios and assumptions. However, we should also consider other elements such as VAT, other taxes and duties, and contributions to the budget, then taxes from gas pipeline flows, effects on the horizontal industry, and therefore the effects of this law will be beneficial to the Romanian state,”Vosganian said.

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