daniel apostol rra - fppg

Oilman Day: Oil and gas industry continues the efforts to support the modernization of Romania

PRESS RELEASE

September 8, 2020

On the occasion of Oilman Day, FPPG thanks the tens of thousands of dedicated people in the industry. Despite the major restrictions generated by the pandemic, they were permanently on duty and provided absolutely vital energy resources for the Romanian economy. Happy Anniversary!

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PRESS RELEASE – August 4, 2020

In the context of the latest information in the public space, The Oil and Gas Employers’ Federation (FPPG) would like to take this opportunity to reiterate the major importance of strategic projects in the energy field, especially BRUA – Bulgaria-Romania-Hungary-Austria interconnector.

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ziua petrolistului - fppg

PRESS RELEASE – Oilman’s Day – september 8, 2019

The Romanian oil and gas industry

September 8th, the Oilman’s Day: On their anniversary, oilmen demand public policies to encourage investments in the sector, to increase the role of industry in the development of the national economy and for the efficient protection of vulnerable energy consumers. The Romanian oil and gas sector once again calls on the Parliament and the Government to ensure a transparent, stable and predictable regulatory framework for the benefit of consumers, the state and investors.

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comunicat de presa brm - fppg

Press release – september 5th, 2019

FPPG rejects the alarmist and unfounded statements about the effects of returning to a free and functional gas market.

OUG 114 did not lower the gas bill

GEO 114 was presented as a measure aimed at reducing the gas price for domestic consumers. In reality, the gas bill has not decreased. On the contrary, the price for industrial consumers increased, which was reflected in the price of consumer goods.

The elimination of the provisions of GEO 114 and the return to a free and functional market would lead to the reintroduction in the market of a 4.3 bcm (representing the obligations for the regulated market), which will allow the decoupling from the import prices.

Moreover, the increase of interconnection capacities planned for next year, from Bulgaria, Hungary and Ukraine will enable more gas to gas competition with a diversification of sources of gas, LNG for example.

Vulnerable consumers must be protected

The main argument against the liberalization of the gas market is the protection of the vulnerable consumer. Vulnerable consumers must be protected by mechanisms that can coexist with a free market, as is the case in other countries. Unfortunately, even with support of consultant like Emerton to define a scheme, a functional mechanism for protecting them has not been implemented in Romania whereas it has been done in other countries in Central Europe, it is therefore required urgent action now.

Gas market liberalization is a necessity

In 2001, during the negotiations for EU accession, Romania committed to the liberalization of the gas market until 2007. It took place for a short period, from 2017 to December 2018, when by the introduction of GEO 114, Romania regressed as far as the gas market is concerned. In these years, two infringement proceedings were opened against Romania on the gas market.

The impact of decades of delays in liberalization translates into paradoxes such as the fact that only 30% of households in Romania are connected to gas networks.

A regulated market does not attract investment – in recent years we have witnessed the exit of some big companies from the market and the slowing down or even blocking of major investment projects. At the same time, local gas production decreased and was replaced by imports, given that Romania has the potential to cover its gas needs exclusively from domestic production. Currently the rate of imports has increased to about 28%.

Given these circumstances, the immediate liberalization of the gas market is necessary, by eliminating the provisions of GEO 114 regarding the gas price, in order not to affect the gas supply to Romania. It is also necessary the concrete protection of the vulnerable consumer and the implementation of comprehensive energy efficiency programs, which have the direct effect of significantly lowering the energy bills.

 

comunicat de presa - fppg romgaz

PRESS RELEASE – FPPG salutes 110 years of energy and welcomes Romgaz

On the occasion of celebrating 110 years history of natural gas production in Romania, FPPG welcomes Romgaz among its members.

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anrm pret - fppg

ANRM approves a reference price that does not reflect the realities of the Romanian market

PRESS RELEASE – 13.02.2018 

The Oil and Gas Employers’ Federation (FPPG) disapproves ANRM’s decision to set the reference price for natural gas, which is calculated according to the trading prices of the CEGH hub in Vienna, according to a study made by the Petroleum Gas University of Ploieşti, price which does not reflect the realities of the Romanian market. 

Given that Romania does not export natural gas and no molecule reaches the hub from Baumgarten, the determination of the reference price based on the CEGH index incorrectly reflects the value of the natural gas extracted in Romania, so this consequently contravenes to the Oil Law no. 238/2004, which stipulates in art. 49 para. (2) that ‘the oil royalty is fixed as a percentage from the value of the gross output extracted’. 

The economic theory and the professional standards applicable in Romania and on international level require the market value to be determined on the basis of the sale-purchase transactions related to the respective assets. Thus, the value of natural gas in Romania is that obtained through the transactions made by the producers, not an artificially established price. 

Romania is  becoming an isolated case worldwide, a place where the reference gas price is calculated on the basis of transactions made in another country where there are no deliveries of natural gas extracted from Romania. Even in European countries, where there are major natural gas trading hubs (eg. the United Kingdom, the Netherlands), no hub price indices are used for the calculation of specific royalties / taxes.  Usually, it is taken into account the actual prices realized by the producers of natural gases. The same is true in non-hub producing countries (eg. Norway, Denmark). Alternatively, in other European countries (eg. Germany, Austria), a reference price is calculated based on the actual transactions made in the respective countries. In addition, the use of the Next Day Market price (PZU) as a benchmark is not relevant to long-term contracts subject to other terms and other price formation mechanism. 

The current formula uses the CEGH index without deducting transport costs. Even if in the future there will be supplies of natural gas extracted from Romania at the Baumgarten hub, the value of the natural gas exploitation of the producers will be the CEGH price minus the cost of transportation from Romania to Austria. 

All this means that producers pay royalties at an incorrect value, a formula that is inconsistent with international practice and even regulations previously issued by ANMR for determining the reference price for crude oil that took into account transport costs (eg. Order 98/1998 ). 

The Romanian producers will thus pay royalties correlated with an unrealized price, with an administrative price unrelated to the realities of the value of gas traded on the local market. 

FPPG firmly rejects ANRM’s claims regarding the absence of data from the holders. All data requested by ANRM were provided and, in addition, the producers provide ANRE with monthly reports on gas transactions made. These reports could provide credible information for determining the value of natural gas in Romania as a weighted average. Prices made on the basis of purchase contracts are also those admitted by the tax authority for determining taxes and fees. 

FPPG specifies that the producers have so far paid the royalty to the maximum of the price and the reference price, so the State collects the right contribution in relation to the value of the exploited resources in accordance with the applicable legal provisions. Oil and gas industry producers are among the largest contributors to the state budget, with a significant positive impact on the economy through investments made and the number of direct and indirect jobs created and maintained over time. 

All these points of view were expressed by the entire industry in the public consultation organized by ANRM on 7 February 2018, without the Agency having strong counter-arguments to fundamental economic principles. 

The Oil and Gas Employers’ Federation  continues to be available for real dialogue with ANRM, with other authorities involved and with specialists in this field to analyze and modify this new  methodology used for determining the reference price so that royalties are calculated correctly based on the value of the natural gas producers.