Romanian president: Petrom should pay royalties at least the level in Arab countries

Romanian oil and gas company OMV Petrom should expect to pay royalties of at least the same level as in Arab countries from 2014, when Romania will renegotiate royalty payments by Petrom for using the country's oil resources, said Romanian president Traian Basescu. He recently voiced his disapproval publicly of the record profit posted by Petrom during a tough economic period. Petrom paid royalties last year totaling 7.5 percent of the total value of production. His comment came in response to a question on what could the president do, after voicing concern over Petrom's price policy. “What I expect, and I think it is the right moment, is that in 2014, when the royalties discussed again, Petrom will have to understand that royalties in Romania will not be smaller than in Arab countries,” he said. Middle East royalties on petroleum taxes are among the highest in the world and for some countries represented the economic growth engine. In the US, president Obama recently announced a plan to hike royalties to some 18.5 percent, from the current 12.5 percent. Royalties in Romania vary between 3.5 percent and 13.5 percent for oil extraction, depending on the volume of production from a certain area. Economy Minister Lucian Bode recently met Petrom's CEO Mariana Gheorghe and OMV CEO Gerhard Roiss in Bucharest to discuss royalties. “I have more ideas about royalties. For example, I would not leave royalties for consumption as extra revenues for the state budget. But rather, put them in a development fund, similarly to Norway and the Arab countries,” said Traian Basescu, who further complained about the low level of royalties in Romania. Traian Basescu, who believes OMV Petrom’s policy is ‘incorrect’, cut all ties with the company, which is the largest private company in Romania. Majority owned by Austrian OMV, Romania’s Petrom posted a record profit last year, of EUR 886 million, which brought the president’s disapproval. "I am the one who cut all ties with Petrom, in protest over the excessive profit during a time of crisis,” said Basescu. He has had numerous discussions about Petrom’s profit-making policy in the past, including with the Austrian president (Gerhard Roiss, editor’s note). “The response was: we will see, we will try, we will discuss, but the reality was they didn’t take it into account,” said the Romanian president. editor@romania-insider.com