Parliament discusses draft Offshore Act

With the energy crunch deepened by the war in Ukraine and the sanctions against Russia, Parliament is looking at a new bill

Mihai Pelin, 11.04.2022, 14:00

This
week the Parliament of Romania is set to discuss a new draft Offshore Act, the
endorsement of which would allow for investments for offshore drilling for
natural gas in the Black Sea and for the development of the country’s petrochemical
industry.

The
bill has been approved already by the National Liberal Party, the Social
Democratic Party and the Democratic Union of Ethnic Hungarians (UDMR), which
make up a majority in Parliament at present and are determined to take
responsibility for the bill.

According
to deputy PM and UDMR president Kelemen Hunor, in 2026-2027 at the soonest
Romania will be able to extract natural gas from the Black Sea. He also
explained that an economic crisis also brings along opportunities, forcing
authorities to attract investors and to see what changes must be made in order for
the country to switch from thermal power plants burning coal to ones running on
gas.

In
turn, PM Nicolae Ciucă, recently elected president of the National Liberal
Party, approves of the bill, arguing that it will help Romania reduce its
reliance on Russian gas.

The
Social Democratic leader and Chamber of Deputies Speaker Marcel Ciolacu also
backs the bill, and says there is political determination and legislative,
governmental and executive coherence for it to be endorsed.

The
Offshore Act has been stuck in Parliament for over 4 years, with several drafts
having reached various stages of the regulatory process. The new draft tabled
to Parliament has been subject to discussions in the ruling coalition for
several months now.

One
scenario is for the Romanian government to receive a minimum of 60% of the
proceeds from the natural gas, with the balance to be kept by private companies.

The
current legislation stipulates a 30% to 70% progressive tax on the additional
revenues made from the natural gas price rises, and companies are bound to sell
50% of the output through the Bucharest Commodity Exchange.

The
Offshore Act is eagerly awaited by companies
interested in drilling for gas in the Black Sea. Several gas producers,
including OMV Petrom, an Austrian company in which the Romanian
government also holds stock, spent billions of US dollars for a decade on preparations
to tap into the estimated 200 billion cubic metres of gas on Romania’s
continental shelf.

Since Romania’s domestic demand stands at around 11
billion cubic metres per year, this would turn the country into an exporter of
natural gas.

The
US company ExxonMobil also announced they would invest in the venture, however
in 2019 they decided to sell their stock to the Romanian state-owned company
Romgaz.

Over
the years, the level of taxes levied on the extraction companies was one of the
main barriers to developing the natural gas reserves in the Black Sea, making investors
reluctant and getting projects suspended, to the benefit of natural gas imports
from Russia. (A.M.P.)