Romania faces high reputational costs if Black Sea gas exploitation hits snag (EPG)

Romania will be racking up very high reputational costs, as well as costs arising from the arbitration lawsuits filed by oil companies, if the latter halt investments in the leased Black Sea offshore gas blocks, director of the Energy Policy Group (EPG) think-tank Radu Dudau said on Wednesday, during a debate on offshore gas. 

Dudau said that back in 2010, when the oil companies signed the lease agreements with the National Agency for Mineral Resources, they had received assurances regarding the stability of the fiscal framework, but two new taxes have been introduced since - the tax on extraordinary gains from regulation, and an additional 0.5 percent tax on the production of liquid hydrocarbons associated with gas production. 

"These have quite fast taken Romania to the upper part of the European ranking of oil sector taxation. As we are nearing the moment of a decision, the Black Sea operators have all the necessary geological data to make an investment decision, but are awaiting clarification of the tax regime; the offshore law was necessary, but the companies' message was that they don't agree with the terms of the law," Dudau said. 

He added that various figures have been circulated in the public space as to the Romanian state's benefits from these projects, but they have no connection with reality. 

According to the EEP director, if the companies choose not to invest in these projects, the Romanian state will lose on several levels, as Romania faces "very high reputational costs as well as costs resulting from arbitration." 

In early August President Klaus Iohannis sent the Law on specific measures required for the implementation of petroleum operations by the holders of offshore petroleum block licenses back to Parliament for review.