Romania’s pledge to become a key gas producer in Europe could be derailed by new offshore oil and gas exploration legislation.
Currently, the country covers almost all its gas use from its domestic onshore production. This could double over the next two decades when — or perhaps sooner if — offshore sources are added to supply.
As reported by Deutsche Welle (DW), Germany’s international broadcaster, untapped oil and gas potential of up to 200 billion cubic meters, or bcm, in the Black Sea has attracted the interest of the world’s oil and gas majors.
In fact, Romania produces 10.5 bcm of gas a year, mostly onshore, and consumes 11-12 bcm, making it largely independent of Russian gas.
According to DW, this is something that other countries in the region can only envy. Other EU members are in fact scrambling to define coherent energy strategies that don’t make them too reliant on Russian imports, hence the spike in interest in Romania, as well as US and Norwegian gas.
Hungary was the first to sign up for Romania’s Black Sea gas after Budapest agreed with US firm ExxonMobil for deliveries starting in 2022, covering half of Hungary’s yearly gas consumption of 10 bcm.
Bur Romanian state-owned gas transporter Transgaz must first finish phase two of the BRUA gas pipeline that would enable gas transports from Romania to Hungary to reach 4.4 bcm a year.
Now, with the new legislation, taxes will be frozen for the period of offshore gas production.
According to investors, Bucharest’s fiscal regime is now one of the least attractive in the Black Sea for gas. The law also includes a 50% domestic supply obligation for gas and a requirement for 25% of workers to be Romanian citizens, which some suggested may also contravene EU laws governing open labour market practices.
DW also noted that Romania may also lack the infrastructure to consume even half of the estimated offshore gas production.
“For this, we need interconnections, market liberalization and a stable legal framework,” Francois-Regis Mouton, director of EU affairs at the International Association of Oil and Gas Producers (IOGP), told local Agerpress.
The government hopes the new legislation will bring in up to €17.5bn over the next 20 years.
“Tax stability is completely removed, which makes it impossible to make final investment decisions,” offshore concessionaires association ARCOMN said in a statement.
And this could affect exploration of the Black Sea Neptun block, a joint venture between OMV’s Romanian unit OMV Petrom and ExxonMobil.