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Royalties on resources – negotiations and draft proposals

de Adrian N Ionescu 19.2.2017

The management of the inter-ministerial committee in charge of drafting the legislation on royalties has been taken over by the Ministry of Economy from the Ministry of Finance (MFP) said on Wednesday Ionut Misa, Ministry of Finance State Secretary, quoted by Agerpres.

All players remain at the table”. I cannot give any definite date (regarding the completion of the new law that will establish the royalties– editor’s note). We all know that it has been postponing from one year to another for 7-8 years. We have sat down at the table with the idea that this year, if not even in the first quarter, we shall be able to complete the piece of legislation,” said Misa.

A month ago, the former Minister of Finance stated that handed over the draft law on royalties to the new minister.

The current Minister of Finance, Viorel Stefan, had planned to complete the law on royalties in the first quarter of this year.

Additional tax on resources processed outside Romania

The current Minister of Economy, Alexandru Petrescu, advocates for the setting up of the royalty system “at the right level from the regional perspective, by different types of resources. If they are found only in Romania, we must come up with a certain royalty rate. If they are found at the regional level, we should somehow reach trade harmonisation, to become attractive in the region,” said Alexandru Petrescu late last month.

The Minister of Finance Viorel Stefan supports the introduction of an “additional tax of 20% on profits obtained from the exploitation of the natural resources that are not processed in Romania. If the natural resource went into a processing facility from Romania, the tax would not apply,” said Viorel Stefan at the beginning of the year.

Difficult negotiations

Currently, the royalties range between 3.5% and 13.5% of the value of the production, depending on the size of the deposit to be worked.

The royalty system for oil and gas remained unchanged since 2004 when it has been established in the view of Petrom’s privatization. The system has been extended twice, in 2014, by the Ponta government and later, de facto, by Ciolos government, who did not get to promote the amending law.

The most well-known producer is OMV Petrom, which extracts about the whole country’s oil production and nearly half of the natural gas production.

OMV hinted at some point that it could slow down investment in the Black Sea perimeters, where it discovered important deposits of natural gas unless the royalty rates are set at a convenient level.

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