The Government has prepared a draft bill, expected to regulate the new royalty system for concessions of mineral, petroleum and hydro-mineral resources. The draft law brings the awaited differentiation between onshore and offshore royalties:

Onshore Production:

  • In onshore oil & gas production, royalty rates will remain unchanged, however reference price calculation methods will be reported directly to Brent oil quotations (expected next year to undergo the biggest structural change in the last decade) instead of to Suez Blend oil or to Urals quotations. If the selling price is higher than the Brent reference price, the royalty calculation will be based on the higher selling price.
  • The 2008 unchanged gas reference price of RON45.71/MWh will instead be represented by the gas price on the centralised wholesale market of OPCOM. Currently, the gas price ranges, according to ANRE, are between RON 66-67/MWh during summer and RON 71-72/MWh during winter.
  • The 2007, 3% gross revenue rate arising from underground gas storage operations will be maintained.
  • Another royalty (the rate of which is not yet determined) will be introduced and, applicable to the value of gross revenue achieved through transmission systems, other than the national petroleum transmission system; as well as from the petroleum operations performed through private oil terminals. The rate however is not yet determined, but will be subject to a Government approved methodology prepared by the relevant authority.

Offshore Production:

  • The royalty will consist of a fixed and variable rate, depending on the volume of oil and gas extracted.
  • The reference price will take into account the references of Brent oil or the gas quotation of OPCOM.

Another important aspect of the new draft law is that it allows the Government to make decisions to update these royalty rates at the request of the relevant authority. Such decisions would be based on economic analyses, and the application of the official RON/EUR exchange rate published in the Official Journal of the European Union.