New legislation has created uncertainty in the Romanian upstream sector in recent years, and additional changes to fiscal terms have created instability in the fiscal regime.
A new offshore law came into force in November 2018 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.
Measures to cap gas prices and add new taxes through a new emergency ordinance passed in December 2018 pose a significant risk to gas producers’ income.
IMF-inspired market liberalisation
Romania has been liberalising its market after an agreement in 2012 with the European Commission and the International Monetary Fund (IMF). Although this process has been subject to some delays, it had been expected to be completed in 2021.
However, in late December 2018, the government proposed and quickly passed a series of new taxes and other fiscal measures, including the introduction of a RON68/ megawatt hour (MWh) price cap on sales of domestic gas production from 1 April this year to 28 February 2022.
In addition to the pressures from recent measures, long-term projects aimed at changing the fiscal and regulatory framework of the upstream sector add further uncertainty. It is unclear whether the government still plans to alter royalty rates for the upstream sector.
A fresh licensing round is anticipated
Although a licensing round has not taken place since 2010, the government may launch a licensing round in the short-to-medium term, but this may depend on the resolution of fiscal issues. In 2015 National Agency of Mineral Resources (NAMR) announced 30 blocks would be offered in the 11th bidding round following new petroleum legislation, then planned to be passed in August of 2015.
Continued delays in legislation since 2015, combined with an unfavourable price environment, delayed this process significantly. In 2017 it was reported that 28 blocks, including six offshore and 22 onshore, were to be offered for licensing following the finalisation of changes to the fiscal framework.
Although the offshore law has now been passed into law, it is unclear whether the licensing process will be opened in the short-term.
Romania, regime flowchart
Source: GlobalData Oil and Gas