ROPEPCA Advocacy Achievements

“SUCCESS IS A LONG PROCESS. IF YOU’RE MAKING STEADY PROGRESS ON THE PATH TO YOUR GOALS, YOU HAVE ALREADY SUCCEEDED. FEEL PROUD OF THAT.” –HAL ELROD

The operating climate for the oil and gas upstream in Romania is complex with the fiscal and legislative frameworks being unstable and unpredictable. In 2018 there were over 1500 normative acts. ROPEPCA’s aim is to represent our members with a strong, unified voice, in dialogue with stakeholders to advocate for a functional framework, efficient and fair market conditions which support the economy of Romania.

Through our sustained advocacy, since 2012, we have had some notable achievements and continue open dialogue with all stakeholders to improve key aspects of our business environment, which impede investments and job creation.

Among ROPEPCA’s tangible achievements, we are proud to note:

1. GEO 34/23.04.2013

Problem: Limit possibility of placing well-pads

Efforts: Active participation in the public consultation process regarding the amendment of the Law on permanent pastures. Advocated with MPs and diplomatic community.

Result: The inclusion in the list of exclusions of petroleum operations. ROPEPCA amendment adopted ad literam

2. Special Construction Tax

Problem: Increase in taxation for well constructions

Efforts: Active participation in the public consultation process; advocated with the Government, political leaders, IMF, other business associations, press

Result: The SCT was decreased to 1% in 2015 and fully removed starting 2017

3. GEO 50/2015 amending the Fiscal Code

Problem: Oil and gas companies did not qualify for micro-entreprises

Efforts: Active participation in the public consultation process regarding the modification of the Fiscal Code in 2015

Result: Amending the provisions on tax depreciation and the income of micro-enterprises in the international practice in order to encourage investments in the oil sector.

4. Retroactive natural gas royalties calculation

Problem: Following several Court of Accounts investigation on NAMR’s intake of gas royalties, it was established that the State has lost a significant amount of money due to the method of calculating the natural gas reference price. The investigation resulted with the obligation for NAMR to change the method for calculating the reference price and, potentially, with the State aiming at recovering the said losses from petroleum companies following in-depth ANAF inspections.

Efforts: A task force with all affected ROPEPCA members was formed for responding in a similar manner to the ANAF inspections and active advocacy was made with the Government and NAMR. Contracted Deloitte Study on royalties and other taxes.

Result: All involved companies finalized the ANAF inspections with good outcomes, no retroactive royalty value was requested from member companies.

5. Gas sale price capping introduced in July 2018

Problem: The Government issued a Government Decision capping the gas producer price at 55 lei/MWh, in order to allegedly reduce monopoly in the market

Efforts: Communication in the press through media relations and press releases

Result: The head of the leading political party at that time called us for a meeting to ‘negotiate’ our silence in the press, for which the GD was removed

6. State Inspectorate in Construction (ISC) tax on the quality of constructions

Problem: The ISC tax is applied on all constructions, amounting to 0.5% of the value of the construction, also being applied to all kinds of petroleum constructions, despite the law stating that technological installations are exempted from the tax.

Efforts: Through active involvement and communication with ISC, based on legal justification, we tried to show that wells and other petroleum constructions qualify as technological installations and should, hence, be exempted from the tax.

Result: ISC admitted through an official letter that the tax does not apply to subsurface constructions, being only applied to surface support constructions. These, according to the letter, are to be qualified by the engineer projecting the construction.

7. GEO 114/2018

Problem: The GEO was setting a fixed price for natural gas sold in Romania by domestic producers (68 lei/MWh) and a 2% ANRE tax for all companies in the energy sector

Efforts: Actively advocated at all levels (Government, Parliament, press, politicians, opinion leaders); commissioned Deloitte to carry out an impact study

Result: We contributed through our efforts to the gradual elimination of the price cap (in April 2019, through GEO 19/2019 the fixed price was set to be applied only for the quota of production covering household consumption – about 40% -, in January 2020 the fixed priced was replaced through GEO 1/2020 by a capped price and, starting July 2020, the cap was removed) and to the removal of the 2% tax starting January 2020, through GEO 1/2020

8. ANRE Upstream Pipeline

Problem: ANRE requested for infield pipelines to be licensed, not differentiating them from export pipelines in the interpretation of the upstream pipeline definition and, hence, creating administrative and time consuming burdens for producers

Efforts: Actively advocated with ANRE and European Commission through correspondence and numerous meetings.

Result: Infield pipelines that are part of a production facility are no longer required to be licensed by Order 177 of ANRE from 20th of August 2019

9. Central Market Obligation

Problem: GEO 64/2016, setting the rules for liberalizing the wholesale natural gas market, introduced a CMO for producers to trade 50% of their production on central market; the law adopted also introduced a 40% purchase obligation from the exchange for buyers

Efforts: Actively advocated against any such trade barriers; in the end, advocated jointly with RBSTA and FPPG for the replacement of the CMO with a gas release program

Result: In July 2020, the CMO was replaced with a GRP, setting hence an obligation for producers to offer on the exchange, and not to actually sell. A corresponding obligation for buyers to submit buying offers was introduced. Producers with less than 3 TWh are exempted from the GRP.

Apart from the above results, there are other topics where ROPEPCA was actively involved, creating dialogue with stakeholders and providing valuable information to its members: (expandable section)

1. Amendment of the Petroleum Law

Efforts:

Drafting, together with representatives of the relevant institutions, an optimal draft for amending the Petroleum Law no. 238/2004, in the sense of its modernization

Participating in all the debates, as well as initiating discussions with all relevant stakeholders on the need to modernize the Petroleum Law no. 238/2004

A small result was that we managed to successfully mitigate against PL-x 438/2018, a draft law meant to oblige producers to obtain the right to use the land (rent/buy or others) for short time operations, such as geophysical data acquisition

2. Declassification of oil and gas data and information

Efforts:

Repeatedly submitted our standpoint and discussed about it with relevant stakeholders such as NAMR and the General Secretariat of the Government

Participated in this year’s public debate initiated by NAMR, aiming for a balanced secondary legislation

3. Natural gas reference price

Efforts:

Always advocated for the reference price for natural gas produced in Romania to relate to locally realized prices

A small result was the alignment of the reference pricing, during the applicability of the 68 lei/MWh price cap, with the realized price in Romania for the quantities meant for household consumption.

4. Coronavirus crisis

Efforts:

Keeping our members informed about the situation status and measures adopted, through periodic reporting.

Prepared and advocating for a COVID-19 resilience package, including measures meant to come in support of our members.

What are we currently working on?

We are continuing with the following efforts, at a general level, ending up positively influencing public opinion and consolidating ROPEPCA’s image as an industry’ representative platform. Still under development are the following:

Carrying out, through specialized research companies, informative studies regarding the oil industry (the impact of the industry on the economy, the charging system, the functioning mechanisms of the gas market), promoted through the press and transmitted directly to the decision-makers.
Obtaining clarifications regarding various normative acts from the initiating central authorities, with a view to their uniform application throughout the country
Participation in working groups at ministerial or inter-ministerial level, on legislative issues with impact on the oil industry
Participation in public debates and meetings of specialized committees on legislative issues of interest with impact on the oil industry
Creating partnerships with other associations or organizations in the field (FPPG, RBSTA, Petroleum Club, etc.)
Made an oil and gas industry White Paper, consolidating all problems faced by titleholders, to be launched when the right time may come;
Made a video material emphasizing the benefits of oil and gas in day-to-day life, to be launched when the right time may come;

Involved through individual sponsorships and donations in a CSR activity planting 1,000 trees, action which should be repeated and grown among members