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New oil and gas fields, full exemption from royalties

Aug 27th 2015 at 12:01 AM

New oil and gas deposits would be fully exempted from royalties, for a number of years until they will be depreciated oil companies with exploration spending that led to these discoveries, says the latest report of the Academic Society of Romania (SAR), released in late February. SAR representatives proposed a tiered system of royalty oil, one for fields already producing, and other resources that will be discovered in the future.

We propose to adopt a differentiated royalty model, with two pillars - for existing operations or for new ones, "said the report by the company.

"For the resources already in operation, charging at a level close to the EU average by means of a fixed amount recognized costs, the difference is so-called" super-profits "to become public budget income. Such a policy would have the effect, on the one hand, increased revenues compared to the now ridiculous and, on the other hand, natural sizing on the fly, the volume extracted.

Thus, in terms of high oil prices on the international market, the probes would operate near maximum potential, providing some autonomy to external shocks. As the price falls, wells weaker and potentially higher costs and unprofitable automatically enter conservation so that resources are protected until the reopening becomes opportune. As a result, higher volatility is predictable economic activity generated by businesses OMV Petrom, but this could be offset through increased exploration activity, where we propose the introduction of additional tax incentives, "the report said.

”For future use where needed prospecting and exploration with high costs and high risk, is preferably a flexible structure to offer potential investors a better perspective of how depreciation expenses. Of the many existing accounting scheme, the simplest is complete exemption from royalties for a specified number of years until full recovery of the initial investment, following the expiry of that period only to apply the taxation system resources available for operation "is reads the document.

In the context in which all discuss increasing oil royalties, remain unchanged from 2004, when the privatization of Petrom, the oil companies have applied for one of the four largest consulting companies in the world, Deloitte, a comparative study of the tax system producing countries hydrocarbons in Europe.

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