In the context of COVID-19 impact on the global oil and gas industry and the Government priority of relaunching the national economy, ROPECA calls for urgent measures to stimulate investment in oil and gas industry. The key towards attracting investment is stable, predictable, transparent regulations harmonized with the international best practices.
One of the major concerns of the investors in this sector are the changes brought to the Petroleum Law no. 238/2004 by GEO no. 27/2020, adopted in February, prior to the COVID-19 crisis being felt in Romania and which has the potential to hinder investments in this time of crisis and uncertainty and beyond. The GEO was issued with a reference to the necessity of transposing Directive 94/22/CE, and imposed increased State control over oil and gas transactions for national security reasons.
In the current form, the amendments introduced might jeopardize future investments through undermining investors’ confidence This in turn will have negative spill-over effects on the employment rate, support services industries and will reduce the state revenues, leading to substantial impediments in re-launching the economy in the post-emergency period.
What changes does GEO 27/2020 bring to the Petroleum Law?
The fact that the State can refuse awarding any petroleum agreement to non-EU companies for reasons of national security will reduce non-EU investors’ confidence and potentially limit competition for new licenses and new projects in Romania. Lacking a transparent and stable procedure for reviewing such non-EU license applications, the investors may find the framework neither attractive nor predictable enough to secure project financing.
Moreover, existing petroleum agreements can be unilaterally terminated by the Government, at NAMR’s proposal, for reasons of national security. Without a proper compensation scheme, the termination of ongoing concessions for national security reasons constitutes a violation of the binding rules of a contract and violation of the existing BITs. Such a provision introduces significant risk for investments and exposes the State to litigation risks, with high economic impact and long-term effects on the upstream development.
The Government approval, at NAMR’s proposal, of the change of control in petroleum agreements titleholders will introduce additional procedural impediments impacting the way many oil companies raise money and manage the subsurface risk for projects, leading to less investment and adversely affecting an already embattled Romanian economy.
As transfers of petroleum agreements are now also subject to Government approval, at NAMR’s proposal, without clear deadlines will make the transfer process slow and uncertain, discouraging investment and driving investors to other countries with lower risks. The provision creates a double tier approval process (NAMR/Government), with no clear terms and procedures, which may render the transfer conditions burdensome in comparison with other EU countries. This will lead to a negative effect on the Romanian economy and employment.
The risks and concerns with regard to GEO 27/2020 are further detailed in the attached infographic.
ROPEPCA acknowledges that the subject of national security, especially in the context of energy, is a sensitive one, being an uncontested priority for countries rich in energy resources, like Romania. This is why we are submitting for your consideration the assessment of companies operating in the oil and gas sector concerning potential bottlenecks to be created by the issued changes, in order for Government policy to aim at strategically enforcing national security aspects, on a case by case basis, without hindering potential investments in the industry and investors’ confidence over all.
The oil and gas sector is one of the most important economic engines for Romania, with its high economic impact and investments in the sector need to be stimulated at this time. Therefore, to advocate for a strong and sustainable Romanian economy, ROPEPCA invites the Government to revise GEO 27/2020 in the sense of ensuring non-excessive interpretation of the EU legislative framework.
Since its establishment in 2012, the Romanian Petroleum Exploration and Production Companies Association (“ROPEPCA”) is a promoter of the petroleum industry, in order to support the development, diversification and competitiveness of the industry. ROPEPCA reunites the most active companies in the industry, concession agreements titleholders, bringing to Romania American, Australian, Canadian, Egyptian and European capital, as well as companies that provide support for upstream operations.
Currently, ROPEPCA members hold most of the petroleum concession agreements for the onshore development and production blocks in Romania, representing for the years 2014-2018 cumulated investments of more than RON 24 bn, contributions to the state budget of RON 50 bn, and the creation and maintenance of 14,000 jobs.