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SNGR - Societatea Nationala De Gaze Naturale Romgaz SA News Story

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Last Trade - 24/11/21

Sector
Energy
Size
Mid Cap
Market Cap £2.22bn
Enterprise Value £1.63bn
Revenue £798.2m
Position in Universe 295th / 1786

Black Sea Oil & Gas project a litmus test for Romanian offshore gas investment

By Luiza Ilie
    BUCHAREST, Sept 3 (Reuters) - Black Sea Oil & Gas (BSOG) is
pressing ahead to be the first company to tap Romania's offshore
gas fields despite a disputed tax that has stymied other
projects, but if the levy remains it could impact its operations
in the country, its chief executive said. 
    The company's project to extract an estimated 10 billion
cubic metres of gas will become a litmus test of the European
Union state's ability to attract investors and tap its estimated
200 billion cubic metres in the Black Sea.
    Several gas producers have spent years and billions of
dollars preparing to tap those reserves, but all except BSOG put
a final investment decision on hold three years ago when the
previous government imposed an extra tax on offshore projects.
    "The start of production is not contingent on the
legislation being repealed, but it does have an impact on how
BSOG further engages in Romania," CEO Mark Beacom told Reuters.
    "We have had continuous reassurance that the law will be
amended but ... we have yet to see a draft amendment posted for
public debate. Should it continue to remain in force, the
partner group could look to other measures for seeking
resolution of this issue."
    In February, Beacom said production could start in November,
but that deadline could now be delayed slightly as construction
works at the project's onshore treatment plant may not be
completed by the year-end, he said.  urn:newsml:reuters.com:*:nL8N2KT620
    He added BSOG was analysing renewable energy projects using
its existing infrastructure, including onshore solar and wind
parks and an offshore pilot green hydrogen power plant.
    The tax is preventing companies such as OMV Petrom
 ROSNP.BX , majority-controlled by Austria's OMV  OMVV.VI  from
moving forward with its deepwater project where it discovered
1.5-3 trillion cubic feet of gas, and contributed to Exxon
Mobil's  XOM.N  exit from it.  urn:newsml:reuters.com:*:nL8N2HL6LW
    Russia's Lukoil  LKOH.MM  and Romanian state producer Romgaz
 SNG.BX  also had a separate offshore project. 
    Gas producers, the energy regulator and analysts have said
Romania needs to press ahead with tapping offshore reserves as
its onshore gas fields are dwindling and the country needs to
phase out coal in line with EU targets.
    The centrist government has said offshore legislation would
be amended in parliament this year. But its plans might be
further delayed as tensions in the ruling coalition escalated
and the government is now at risk of collapse.  urn:newsml:reuters.com:*:nL1N2Q40P1    
    Failure to change legislation would undermine Romania's
credibility, put billions of dollars of revenue at risk and
increase the country's reliance on Russian gas imports.
    Beacom said he did not believe the legislation will remain
in place for long, "given the current natural gas demand, the
significant rise of gas imports and prices in Romania, as well
as in the EU, and offshore law's counterproductive nature for
Romania that ensures no further investments will be undertaken."
    OMV Petrom Chief Executive Christina Verchere agreed.  
    "Based on what we've been told, the offshore law will be
done this year and we need it to be done this year," she said on
Friday.     
    Romania had the highest effective tax rate on offshore gas
production among relevant European states at 23%, more than four
times higher than average, according to a study by consultancy
PwC Romania for the oil and gas employers' association. 

 (Reporting by Luiza Ilie; Editing by David Evans)
 ((luiza.ilie@thomsonreuters.com; +4021 527 0312; https://www.reuters.com/journalists/luiza-ilie))
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