The talks with the bosses of Petrom and OMV, Petrom’s majority shareholder, have already begun. Bode, 37, also says that he will go ahead with the sale of the stakes in energy companies, Petrom included, on the stock market but “we will not sell and will not privatize at just any price.”
He hopes to see progress made with the reactors 3 and 4 of the Cernavoda nuclear plant and with the one billion euro Tarnita-Lapusesti hydropower plant in Cluj County (NW Romania) during his term and reiterates that the first private managers will be appointed to four state-run companies in April. Like any minister just starting his term, Bode has big plans and believes Romania “has the potential to become a major player in the regional energy sector.”
The experience of the last few years, however, shows that most often initial plans and results of those who held the position of economy minister had little in common. Now it is Bode’s turn to face both the political reality, of the stakes surrounding the major state-run companies, and the economic reality. The line will be drawn in a few months.
The royalties that Petrom pays are an extremely delicate topic considering that the company, which is drilling almost every oil reserve in Romania and half the gas reserves of the country, has repeatedly warned that any increase in such taxes could result in a decline in hydrocarbon production.
Moreover, officials of this company also said that with Petrom involved in major projects such as the deep sea drilling in the Black Sea, where investments may reach billions of dollars, if a discovery is made, keeping taxes as they are is necessary.
The 2004 privatization contract, whereby the Romanian government sold the controlling interests in the country’s only oil and gas producer to Austria’s OMV, set the royalties payable by Petrom at 3.5% to 13.5% of value of the annual production until 2014.
“We will have the royalties changed before 2014. The data we have show Petrom paid about 7.5% of its production value in royalties last year, but I’d like to see us take this percentage to a two-digit value,” Bode says.
If a minimum level of royalties of 10% were applied, this would entail an over 33% increase in the amount paid by Petrom to the Romanian government. Whereas Petrom paid 735 million lei (about EUR170 million) in royalties last year, after this hike it should pay about RON1 billion a year. (EUR1=RON4.3488)
(English version by Loredana Frățilă-Cristescu)