Deputies have approved the Offshore Law on the Black Sea gas exploitations

On Wednesday, the Deputies’ Chamber voted, as the decisional body, with 170 pros, 3 cons and one abstention, the Offshore Law on the conditions under which the Black Sea gas exploitation can be performed. The investors are obliged to trade 50% of the gas on the Romanian stock exchange, and 25% of their employees must be Romanians. The Offshore Law was approved by the Deputies Chamber as the decisional body, with 170 pros, 3 cons and one abstention. On Wednesday, the Deputies’ Chamber adopted an amendment to the Offshore Law belonging to PNL, according to which the holders of the oil agreements are subject to the tax regime that is specific to the exploration, development and abandonment activities carried out based on the existing agreements. “Art. 18, par.1: The holders of the oil agreements related to the offshore oil perimeters which are ongoing at the date of the entry into force of this law, will be subject, throughout the implementation period of these agreements, to the royalty level, oil royalty percentages, gross production thresholds corresponding to these percentages, and tax regime applicable to the exploration, development and abandonment activities carried out based on the existing agreements on the date of the entry into force of this law”, provides the PNL amendment voted by the Deputies’ Chamber. PNL MP Virgil Popescu mentioned that it concerns a principle about PNL cares very much, for which reason “it is not negotiable”, since this principle is the principle of stability and predictability. On Tuesday, the joint Industry, Public Administration and Budget Committees of the Deputies’ Chamber adopted a favorable report with amendments for the draft law on certain measures which are necessary for the implementation of the oil operations by the holders of oil agreements related to oil offshore perimeters. “We have not abdicated, and I am glad that there are some standing principles, I am talking about the percentage of 50% of the gas production traded on the Romanian stock exchange, the calculation with a 30% deduction from the additional income tax remained, so that when we draw the line, the Romanian state and the investors will have a balanced gain. Romanian state and investors are equitably sharing the profit of the Black Sea gas. We have accepted that the gas belongs to us, the Romanian state, and technology belongs to them, and we have accepted, and it’s a natural thing for investors to deduct their investments”, stated on Tuesday, at the end of the meeting, the President of the PSD Group in the Deputies’ Chamber, Daniel Suciu. Referring to the profits that the Romanian state and the investors will gain as a result of implementing the Offshore Law, the ALDE Vice Chairman Varujan Vosganian said on Tuesday that according to the assessments, the report is “50/50, with certain oscillations”. “The point around which all the assessments are made is 50/50, of course, with certain oscillations, depending on the scenarios and assumptions each of us has. But we appreciate that notwithstanding the assessment on the commercial agreement itself, we must add other elements too, such as VAT, other fees and taxes and contribution to the budget, then the fees deriving from the gas pipeline flows, the effects in the horizontal industry, therefore the effects of this law will be beneficial to the Romanian state”, Vosganian pointed out. Regarding the fees applied to the companies by the Romanian state, the draft states that “The holders of the oil agreements related to the offshore oil perimeters which are ongoing at the date of the entry into force of this law, will benefit, throughout the implementation period of these agreements, from the royalty level, oil royalty percentages, gross production thresholds corresponding to the existing percentage on the date of the entry into force of this law”, according to the text of the law that was sent to the plenum of the Deputies’ Chamber for the final vote. Also, the holders of oil agreements related to offshore oil perimeters, including their branches and/or belonging to the same group of economic interest which actually carry out both extraction activities and activities related to selling natural gas extracted from these perimeters, must calculate, declare and pay the tax on the offshore additional income. “Additional income means the difference between the weighted average price of the natural gas sold from the own domestic production from the offshore perimeters, and the purchasing price of the natural gas from the domestic production for the household and non-household customers in 2012, respectively RON 45.71/MWh, multiplied with the volume of gas sold from the domestic production from the offshore perimeters”, according to the law. The tax on the offshore additional income is calculated by applying one or more calculation percentages, as the case may be, to the additional income gained from selling the natural gas extracted from the offshore perimeters; the amount of the investments in the upstream segment is deducted from this tax. The tax on the offshore additional income takes into account the reference price established by ANRM for the calculation of the royalties. Transactions below the reference price are subject to the tax applied to the reference price. “The percentages for the calculation of the tax are calculated based on the selling price of the natural gas practiced by the holders of the oil agreements related to the offshore oil perimeters based on the price grid from below, adjusted annually starting from January 1, 2019, to the annual index of the consumer price, as follows: a) 30% of the additional income for the prices up to RON 85/MWh inclusive; b) 15% of the additional income gained as a result of practicing higher prices than RON 85/MWh and lower or equal to RON 100/MWh; c) 30% of the additional income gained as a result of practicing higher prices than RON 100/MWh and lower or equal to RON 115/MWh; d) 35% of the additional income gained as a result of practicing higher prices than RON 115/MWh and lower or equal to RON 130/MWh;...

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