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Draft fiscal overhaul threatens security of Romania's energy supply - OMV Petrom

Draft fiscal overhaul threatens security of Romania's energy supply - OMV Petrom OMV Petrom's Brazi power plant in Romania

BUCHAREST (Romania), December 20 (SeeNews) - Romania's oil and gas group OMV Petrom [BSE:SNP] said that the massive fiscal overhaul being prepared by the government will have a strong negative impact on the country's energy sector.

Finance minister Eugen Teodorovici announced on Tuesday evening the government plans to pass an emergency decree introducing major fiscal changes that include a 'greed tax' for banks, capping gas prices, as well as new rules for the operation of private pension funds.

"We are deeply concerned about measures being imposed without impact studies and without any prior consultation. Such measures negatively impact Romania’s attractiveness for investors, discourage investment projects and have a negative impact on the economy and on employment," OMV Petrom said in a press release on Wednesday evening.

If implemented, the measures will throw the Romanian gas market back at least 10 years in time, to a regulated market and away from liberalization.

"One of the proposed measures is capping the natural gas price at 68 lei/MWh, ($17/15 euro). We draw attention to the fact that artificially setting the price at which producers are forced to sell gas is against European Union free market rules, it distorts competition, discriminates Romanian producers against importers and can have serious consequences for gas supply," the company stressed.

Consequently, gas production in Romania would decrease in the next years due to reduction of investments as the artificially established price threatens important investment projects in the sector.

Moreover, gas imports would increase, severely impacting the security of energy supply in Romania and increasing gas prices in the future. Without investments, domestic gas production is expected to decrease abruptly with the difference covered by additional gas imports, which are significantly more expensive.  According to OMV Petrom's estimates, without any investments, the share of imports in consumption could increase to 40-50% by 2030, compared to 10% currently, due to lower domestic gas production.

Lower investments would impact the job market, OMV Petrom, which is among Romania’s largest private employers, said. OMV is also the largest contributor to the state budget and the largest private investor. In addition to its own 13,000 employees, OMV Petrom works with a large number of Romanian companies, who employ more than 40,000 people.  
On Wednesday, investment fund Fondul Proprietatea [BSE:FP] said that the draft emergency decree is a ticking bomb for the country's economy and should be withdrawn.

On Wednesday, Romania's president Klaus Iohannis too slammed the Social Democrat government for the planned fiscal overhaul.

"This emergency decree was not discussed with partners from the economic environment, not even with actors from the institutional environment of the state. This project is not based on a serious analysis. This project comes with ideas unheard-of so far. This project will provoke chaos in the economy!," Iohannis said during a televised news conference.

(1 euro=4.6478 lei)