Romania to hike royalties for oil production, storage and transport by double-digit rates

Royalties on the exploitation of Romania's crude oil and natural gas resources, flat since the privatization of oil company Petrom in 2004, will increase by up to over 28%, according to a draft emergency ordinance on the government's agenda on October 27, quoted by Profit.ro.

Local oil companies objected to an even milder form of the ordinance. Under a softer previous version, the royalties were supposed to be indexed by inflation and only after the permit given by the oil company upon negotiations with the mineral resources agency ANMR.

The Petrol and Gas Employers' Federation (FPPG), which includes the largest producers of hydrocarbons in Romania OMV Petrom, Romgaz and Black Sea Oil&Gas among its members, requested the authorities on October 10 to abandon the idea of indexing the oil royalties to the inflation rate, warning that, otherwise, member companies could be forced to start litigation.

The royalty rate for exploitation will increase from 3.5% - 8.5% currently, depending on the production of the deposit, to 4.5% - 16%. In the case of natural gas, the royalty rates are to be increased from 3.5% - 13% to 4.5% - 15%.

The ordinance also considers the increase in royalties owed by the operators of the national natural gas and oil transport systems (Transgaz and Conpet) and that of the Constanța oil terminal (Oil Terminal), from 10% to 11.5 % from the value of the gross revenues.

The royalty on natural gas storage, owed by the Depogaz subsidiary of Romgaz and Depomureș from the Engie group, increases from 3% to 3.5% of gross revenues.

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