Romania is a key player in the European oil and gas market, being the largest natural gas producer in Central and Eastern Europe. Romania has one of the largest processing capacities in Eastern Europe and recently progressed with the development of the Black Sea reserves, currently estimated anywhere between 42 to 84 billion cubic meters of natural gas.
The first delivery of offshore gas took place in June 2022 (the Midia Gas Development), while the contract for the transport of natural gas to be extracted from the Neptun Deep offshore perimeter was signed in March 2023. Romania also secured financing for developing its first gas distribution network able to transport green hydrogen in the Oltenia region and the project is scheduled to be commissioned mid-2026.
In terms of grid capacity, the national transmission system operator Transgaz S.A. (Transgaz) continues to make small but steady steps in achieving the modernization and expansion of the national gas transmission system by making use of the available European grants. Towards the end of 2022, Transgaz commissioned and started gas exports to the Republic of Moldova through the Iasi-Ungheni pipeline and executed the memorandum of understanding for the development of the natural gas Vertical Corridor that will enable bi-directional flows of natural gas between Greece, Bulgaria, Romania, and Hungary.
In the context of the rise of energy prices caused by the war in Ukraine, Romania introduced a complex scheme for capping gas supply prices, which also limits the freedom of natural gas producers in choosing the destination and price of their extracted gas and discourages natural gas wholesale trades. Under the scheme, gas producers have the obligation to sell against a fixed price (currently RON 150 per megawatt-hour) those quantities required for the consumption of household clients and heat producers ensuring the supply of the population, as well as those necessary for covering the technological consumption of Transgaz and of the concessionaire distribution operators.
At the same time, the gas release program – namely the program forcing gas producers to offer at least 40% of their annual production on the centralized market in addition to the auction calendar approved by the ANRE – has been extended by two additional years until December 31, 2024. A new gas storage obligation has also been introduced for gas suppliers, requiring they store at least 30% of the quantities needed for the consumption of end clients from their portfolio between April 1, 2022, and October 31, 2023.
At the same time, most wholesale trades of gas carried out for a price higher than the acquisition price plus a 2% profit margin are subject to a new windfall tax (called the contribution to the Energy Transition Fund). Moreover, successive trades of gas carried out with the purpose of increasing the price are now sanctioned with a fine equal to 5% of the annual turnover of the relevant participant.
Finally, with a view to implementing the Council Regulation (EU) no. 2022/1854 on an emergency intervention to address high energy prices, on December 29, 2022, Romania adopted a solidarity contribution on the revenues in the crude petroleum, natural gas, coal, and refinery sectors. The contribution is equal to 60% of the surplus profits for the years 2022 and 2023 and applies to taxpayers (and sometimes their affiliates) that carry out activities in the above-mentioned sectors, provided the revenues derived from such activities are equal to or greater than 75% of their turnover. The government’s emergency ordinance implementing the solidarity contribution is currently awaiting approval by the Parliament of Romania. Although the ordinance was initially approved with amendments aimed to expand the number of participants falling under the obligation to pay the solidarity contribution, the parliament’s amendments have been rejected by the president and are, thus, now under re-examination.
By Raluca Gabor, Managing Associate and Head of Energy, Stratulat Albulescu
This article was originally published in Issue 10.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.