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ANRM issues order establishing gas reference price be calculated depending on Vienna stock exchange
The National Agency for Mineral Resources (ANRM) issued on Friday the order establishing that the reference price for natural gas extracted in Romania, depending on which the royalty owed by producers to the state budget will be calculated, will take into account the quotations of the Vienna CEGH stock exchange, according to a pres release of the institution.
The order was sent for publication to the "Monitorul Oficial" (Official Journal) and will enter into force starting with its release date.
Thus, the reference price for natural gas extracted in Romania will be calculated depending on the trading prices on the hub of CEGH Vienna, also known as Baumgarten, based on a computation formula achieved together with the Petrol and Gas University in Ploiesti.
The Romanian Petroleum Exploration and Production Companies Association (ROPEPCA) stands in a public positionagainst the National Agency for Mineral Resources (ANMR) order, approving the methodology for establishing the reference price for natural gas extracted in Romania.
The document reads that the reference price for natural gas extracted in Romania will be calculated according to the trading prices of the hub from CEGH Vienna, based on a calculation formula made together with the Oil and Gas University of Ploiesti.
Romanian natural gas producers have so far paid the royalty for the gas produced at the level of the revenue generated, a basic principle for any tax applied to income. It is to be understood that the so-called “reference price” is nothing but a minimal value for the royalties base, which cannot be undercut.
”Other public institutions, including ANAF, take into account the income generated from the sale of gas for calculating various other taxes. Why does ANMR disregard the same basis for calculating the royalty? The proposal to relate the royalty for the gas produced in Romania to a virtual figure from abroad, a figure much higher than the domestic prices, shows a lack of sovereignty and a total indifference regarding the way the natural gas market in Romania functions,” the release reads.
ROPEPCA considers that ANRM decided to issue this order without taking into account the positions expressed by the main indigenous natural gas producers during the public consultation held on February 7, 2018, but basing this order exclusively on the conclusions of a study signed by a university professor belonging to the Oil and Gas University of Ploiesti.
”The reference price must be represented by the market price in Romania. We believe that an external market does not represent the Romanian market, we have nothing to do with the Baumgarten hub in Austria where the gas is sold several times and is not correct for paying royalties in Romania,” Harald Kraft, President of ROPEPCA said. According to him, a fair approach would be to pay royalties at the market price realized by the producer in Romania, not from outside.
ROPEPCA notes that at present Romania does not export gas, so it is not really related to the European market, and that compared to other markets, the Romanian market is not liquid enough, it can not report, for the moment, to the external HUBs for gas trading, including CEGH.
Also, prices from HUBs outside Romania do not reflect the actual value achieved by natural gas producers in Romania, which is significantly lower due to the costs of delivering natural gas from the reference points to external HUBs. As an example, the temporary fluctuations on the Romanian market reported to the European HUBs can be of EUR 4-5/Mwh or even higher.
Moreover, natural gas producers have a legal obligation to sell part of their domestic production on the centralized market in Romania, which makes the reference to an external hub even less relevant.
It is worth mentioning that, in general, transactions at a HUB are predominantly made through intermediaries who, most often, sell the product bought before from a producer, oil production companies. In such cases, the quotations used include also the profit of intermediaries, as well as the transport expenses.
”We believe that it is not fair for this element to be a part of the calculation of the reference price,” ROPEPCA also points out, considering also that the use of the reference price of the Day Ahead Natural Gas Market (DAM) is not applicable to long-term contracts.