WATCHING GOVERNMENT ROMANIA TRYING TO REVITALIZE OIL SECTOR

With Patrick Crow from Washington, D.C. Romania is continuing efforts to revitalize its oil and gas industry and attract badly needed foreign investment. It has a good idea of what needs to be done (OGJ, Apr. 4, 1994, P. 37), but getting there has proven to be difficult. For instance, parliament has yet to approve a petroleum law reform bill. The government recently disclosed it now plans to merge its horizontal energy monopolies into a new firm, Petrorom.

June 19, 1995

2 min read

Romania is continuing efforts to revitalize its oil and gas industry and attract badly needed foreign investment.

It has a good idea of what needs to be done (OGJ, Apr. 4, 1994, P. 37), but getting there has proven to be difficult. For instance, parliament has yet to approve a petroleum law reform bill.

NEW STATE FIRM

The government recently disclosed it now plans to merge its horizontal energy monopolies into a new firm, Petrorom.

The umbrella organization would oversee an exploration company, 10 refineries, four pipelines, 41 distribution firms, and three research organizations.

The goal is to achieve better coordination of the Romanian oil and gas industry, the largest in Central/East Europe, and to channel investments to the industry segments that need them the most.

That would sound like a throwback to the pre-1989 days of Communist rule and central planning, but Petrorom also would work to help privatize the oil industry, opening it to domestic and foreign private investment.

And membership in Petrorom apparently will not be mandatory for Romanian energy companies.

Overcapacity at the 10 refineries is a particular problem. Romania wants to cut capacity to about 400,000 b/d from about 540,000 b/d.

Under the reorganization bill, which will go to parliament in the fall, Petrorom would hold a 51% interest in the five largest refineries.

The five smallest refineries, with nearly 100,000 b/d of combined capacity, would be closed or merged with adjacent petrochemical plants.

TOUGH REPUTATION

Despite its political and economic progress, Romania still has a leftist government and a reputation of being a tough place for foreign oil companies to do business.

In a recent rating of 144 countries' oil and gas exploration and production fiscal systems, Romania ranked just below Indonesia (OGJ, Apr. 24, p. 78).

Amoco Corp. is one of the foreign oil companies that think the potential outweighs the problems.

In July it plans to spud a wildcat on its 290 sq mile onshore block in the Carpathian Mountains of northeastern Romania. Cost is expected to be about $25 million.

Also in July, the government Will begin accepting offers for exploration and production rights on 14 onshore and offshore concessions.

The bidding on those tracts is likely to reflect not only foreign oil companies' interpretations of geologic potential, but also of Romania's potential to complete the transformation of its oil industry.