AFTER THE ROW CONCERNING THE AMENDMENT OF THE REFERENCE FOR THE NATURAL GAS ROYALTY Producers deny accusations of their failure to pay the royalties even though they did not concern them

The Romanian Association for Oil Exploration and Production (ROPEPCA) yesterday denied, in a press release, the "grave and unjustified" accusations made against the Romanian producers of natural gas, "accusations which concern the alleged insufficient payment of natural gas royalties", which it says are "being discussed in public increasingly often".

"The members of the Association think that these statements have no real merit, and their appearance in the public space can only be explained by the use of insufficient information concerning the manner for the calculation of royalties", said ROPEPCA.

Most likely, the Association is referring to the row started concerning order 525 of December 22nd, issued by the ANRM, which concerned the change of the method for the calculation of the royalty for natural gas (meaning the minimum price admitted on the natural gas transactions considered by the Romanian state in order to implement the royalty) was going to be updated to the level that natural gas currently sells for on the market.

The order was never published in the Official Gazette.

On the other hand, liberal senator Daniel Zamfir accused former prime-minister Mihai Tudose of firing ANRM president ANRM Gigi Dragomir in December, over that order, and said that currently, the reference price for calculating the natural gas royalty is 45.71 lei/MWh, and it hasn't been updated since 2008, as producers currently sell natural gas for a price of 89 lei/MWh in the market.

Thus, the accusations that ROPEPCA is speaking about are mostly directed at the Government, and not at the gas producers. The latter have most likely their royalties correctly, especially since the reference price hasn't been updated in ten years, despite the fact that this has been imposed by the Court of Accounts since back in 2010.

ROPEPCA writes: "«The technical instructions concerning the takeover and the sale of the quantities of oil and representing the royalty», as they are evidenced in the Order of the ANRM no. 98/1998, but this states the fact that the amount of the output is determined by taking into account the prices used by the holders of oil concessions in exploiting their own oil quantities, prices which are not allowed to be lower than the reference prices set and announced quarterly by the ANRM. In other words, the reference price for domestically produced natural gas published by the ANRM is nothing else but a minimum limit, below which the price used for calculating the royalties can't go below".

Some sources in the market have recently commented for the "BURSA" newspaper: "It is true that the reference price is the minimum price allowed in the natural gas transactions taken into consideration by the Romanian state in order to apply the royalty, and producers pay a royalty on the price they sell at, if it is higher. Still, they also have bilateral contracts, in which they are interested in using the reference price, which hasn't been updated since 2008, in order to reduce their payable royalties".

Harald Kraft, the president of the ROPEPCA, said: "We stress the fact that the Romanian oil industry has strictly followed the instructions received from the ANRM and has fulfilled its obligation to pay royalties, by applying in the calculation formula the royalties the maximum of the reference price set by the ANRE - in its role as a representative of the Romanian state in the concession agreements - and the sale price, according to the applicable legislation".

Also, the association of Romanian oil producer companies "expresses its profound disappointment at the manner in which an important and functional sector of the Romanian economy is publicly discredited, through false and misleading statements".

"The clarifications of the ROPEPCA are pointless, because no one has accused the producers of anything", market analysts say, who add: "They pay as much as they are required. The criticisms have been directed at the ANRM, which has postponed for years the updating of the reference price, and of the Government, which has blocked the order of the ANRM, starting with December 2017".

So far, the government has not responded to these accusations.

Sources close to the situation have recently reported for "BURSA" that, prior to being issued, the Order in question was presented by the ANRM to the General Secretariat of the Government, where it ran into opposition from Andreea Lambru, deputy secretary general of the Government: "Later, the ANRM informed the Audit Body of the Prime-Minister, in order to get the approval of Mihai Tudose. The representatives of the ANRM got the OK, so that the order has been issued and sent to the Government and for publication in the Official Gazette. Not only was the Order not published, but on December 27th, Mihai Tudose personally called Gigi Dragomir and asked him to withdraw the Order. The prime-minister also called the ANRM directly, to ensure that the withdrawal would happen. Once it did, Mihai Tudose decided, on December 29th, to dismiss Dragomir, through an order of the prime-minister".

ROPEPCA reunites 17 of the most important holders of offshore oil concessions agreements concluded with the Romanian government. The members of the Association own the majority of the oil concession agreements for the exploration, development and onshore production blocks in Romania, which together represented combined investments of 650 million dollars for the year 2016, a turnover of nearly 2.9 billion Euros, social security contributions of 300 million Euros, responsible for creating and maintaining 14,800 jobs.