Romania updated its legislation in order to keep up with the recent and projected developments in the oil and gas sector.
In early July, the Deputies Chamber issues the final vote on the Law on Offshore Petroleum Operations (the “Offshore Law”), which was initiated by the government back in 2017 and approved by the Senate in February 2018. The vote was controversial and the adopted version of the Offshore Law is an amended version of the bill voted by the Senate.
Whilst the Offshore law introduces certain derogations in terms of facilitating land access in the coastal areas, the most controversial topic relates to the taxation regime.
In addition to the royalty (ranging between 3 -13.5% of the production value), the offshore producers shall be subject to a progressive windfall tax (from 15% to 50% applicable to different sales price thresholds) on the supplementary income from the sale of Black Sea production. The maximum level of deduction of the investments in the upstream segment cannot exceed 60% from the value of additional revenues.
The offshore producers are also required to trade at least 50% of the Black Sea gas production on the Romanian commodity markets (OPCOM and BRM), leaving only 50% to market through freely negotiated contracts.
The Offshore Law is expected to be promulgated by the President of Romania. It is yet to be seen what the offshore producers will announce in terms of future investments upon effectiveness of the Offshore Law. Nevertheless, this long debated piece of legislation should open new business opportunities for the oil & gas industry.