OMV Petrom begins production-sharing negotiations with Georgia

Romanian oil and gas group OMV Petrom, which won the tender for an offshore perimeter in Georgia this summer, has started negotiations with the country's authorities for a production sharing agreement.

The deal's completion depends on the successful negotiation of a production sharing agreement, said Peter Zeilinger, senior vice president of the Austrian group OMV, and former director of the upstream segment at OMV Petrom.

"The block will be formally awarded if negotiation of a production sharing contract is successfully finalized," OMV Petrom said in a statement in June. Zeilinger now explains that OMV Petrom has a six-month negotiation period, during which it tries to reach a mutually beneficial agreement. After this period, OMV Petrom must make specific commitments for this project, said Zeilinger, quoted by Economica.net.

"We see the same geological structure in Georgia as in Romania," the OMV official said at an online conference on hydrocarbon resources in the Black Sea.

Zeilinger pointed out that the tax terms for operations in Georgia and Bulgaria, where Petrom recently entered the Han Asparuh offshore block, near Neptun Deep, are friendlier for this business than those in Romania.

A production sharing agreement, like the one in Georgia, is different from the royalty system in Romania, he argued, implying that the group prefers this version.

Under such an agreement, the state and the oil company divide their profits from the sale of hydrocarbons, under agreed terms, and the expenses related to exploration, until the start of production are tax-deductible, all based on an exploration program undertaken by the investor.

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