ROPEPCA contests the limitation by G.D. of the price for natural gas from domestic production

The Romanian Petroleum Exploration and Production Companies Association – ROPEPCA is deeply concerned about the draft Government Decision, whereby the executive wants to limit the domestically produced gas sale price from producers to suppliers to RON 55/MWh by 2021, under the pre-liberalization level of RON 60/MWh, motivating that, in the absence of such a measure, domestic gas will be increase to over RON 80/MWh in 2019. Domestic gas producers contest both the object of this decision and the way it is taken without proper consultation with the parties involved. ROPEPCA argues that limiting the domestically produced gas sale price is a counter-competitive measure designed to place domestic producers in a discriminatory position in relation to the import of natural gas.

In the medium to long term, such a measure leads to increased dependence on external sources. Increasing imported quantities will have a negative impact on both the security of supply for consumers and the price beard by them.

It should be noted that the state collects 60% of this increase in gas prices after market liberalization, by its over-taxation. Moreover, royalties have to be paid according to the reference price established in relation to the Baumgarten exchange, where prices are much higher than in Romania.

ROPEPCA believes that precisely in order to ensure a fair competition environment for the Romanian natural gas sector, the Government must take measures that will not discourage investments in domestic natural gas production,” said Harald Kraft, ROPEPCA President.

Investments in development of deposits, which are carried out with high production costs, are jeopardized by such a decision of the Romanian Government. Imposing a price of RON 55/MWh calls into question the economic viability of some deposits, which could attract their closure, with an impact on production and jobs.

“A Government Decision that limits the domestic gas sale price from producers to suppliers is inconsistent with the free market status; this decision will discourage domestic gas production for which Romanian companies are investing significant amounts in the exploitation of deposits and job creation,” says Harald Kraft.

The Romanian Petroleum Exploration and Production Companies Association is composed of 16 concession agreements titleholders. These agreements were signed by member companies with the Romanian state, based on the Petroleum Law in force. At present, ROPEPCA members hold the majority of the petroleum concession agreements for the onshore development and production blocks in Romania, representing for the year 2017 cumulated investments of EUR 900 million, a turnover of almost EUR 3.4 billion, contributions to the state budget of EUR 300 million, and the creation and maintenance of 13,700 jobs.