Romania’s gas windfall tax may reduce Black Sea investment

New offshore law was adopted by Romania’s Chamber of Deputies on 9 July 2018.

Commenting on the new law, Will Scargill, Senior Analyst at consultancy GlobalData says: ‘Although the 30–50% gas windfall tax introduced by the Romanian offshore law is lower than the onshore tax, it will disappoint exploration and production companies E&Ps who had hoped that no additional tax would be imposed once the government took into account the higher risks and costs of their deepwater Black Sea operations.’

‘The two major projects awaiting a final investment decision (FID), Midia and Domino, exhibit strong economics based on the current high European gas prices and the effect of the new tax on their break-even price is relatively small. However, the imposition of the new tax combined with the 50% domestic market obligation also introduced by the law will limit the opportunity for Black Sea investors to benefit from price upsides resulting from the de-regulation of the Romanian gas market. This can only result in reducing the overall investment attractiveness to E&Ps of operations in the Romanian Black Sea.’