BREAKING: OMV Petrom sues Romania at the International Court of Arbitration in Paris and demands new regulations in the offshore law. At stake: natural gas in the Black Sea

OMV Petrom filed a complaint this year at the International Court of Arbitration in Paris against the Romanian state – through the National Agency for Mineral Resources (ANRM) – related to the regime for the sale of gas from the Black Sea, government sources told G4Media.

The opening of the dispute comes amid OMV Petrom’s final decision to start gas production in the Black Sea. The official announcement on the start of production in the Neptun field in the Black Sea was made on Wednesday morning by OMV Petrom.

OMV Petrom, however, did not announce publicly or on the Bucharest Stock Exchange the dispute against the Romanian state.

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The complaint filed at the International Court of Arbitration in Paris is also directed against Romgaz Black Sea Limited, the Romgaz subsidiary bought from ExxonMobil and operating the Black Sea field together with OMV Petrom.

OMV Petrom’s complaint is aimed at changing the offshore law on how the company can dispose of gas produced from the Black Sea.

Christina Verchere, CEO of OMV Petrom, told a press conference as early as July 2022 that she had asked for further clarification from the authorities on the offshore law. She said that the law promoted at the time by the PSD-PNL0UDMR coalition brings improvements, but more clarification is needed on the free market principles on the transfer of operation market which happens in 9-12 months before the final investment decision is taken.

„In order to increase Romania’s natural gas production, it is essential to develop gas resources in the Neptun Deep perimeter. We welcome the changes to the Offshore Law, but a number of clarifications from the authorities are needed. If all preconditions are met, the final investment decision is estimated for mid-2023,” Christina Verchere said, according to Economedia.ro.

Here is the article in the Offshore Law that is the subject of OMV Petrom’s discontent:

Article 20
(1) Throughout the duration of oil agreements relating to deep offshore and onshore oil perimeters, agreement holders, including their affiliated economic operators:
(a) have the right to freely market the hydrocarbons produced from the respective oil perimeters, at the prices and in the quantities determined by them, under the conditions of the national and European legislation in force;
(b) may not be subject to restrictions on the price, marketing, offer and/or sale of hydrocarbons after 31 December 2022, except as provided for in national and European legislation.
(2) By way of exception to the provisions of paragraph 1, the following shall apply (1), the Government, by decision, on the proposal of the Ministry of Energy, may introduce temporary restrictions on price and sale for the quantities necessary to ensure the consumption of domestic customers and producers of heat energy intended for the population, as well as those necessary to meet the obligations under the European solidarity mechanisms provided for by European regulations. These measures will be limited in time and scope and will apply proportionally to the total quantities of domestically produced natural gas.
(3) In order to protect Romania’s energy security, bilateral contracts for the trading of quantities of gas exploited from the perimeters regulated by this Law shall be notified to the National Energy Regulatory Authority for monitoring no later than the date of their entry into force.
(4) The quantities marketed under the contracts referred to in paragraph 1 shall be notified to the Commission. (3) shall be offered for sale in advance, with priority, to the Romanian State, through the National Administration of State Reserves and Special Issues, hereinafter referred to as N.A.R.S.P.S. A.N.R.S.P.S. will accept or refuse the offer within 7 days of receipt of the offer, the absence of a reply being equivalent to a refusal of the offer. In case of refusal, the holders of the agreements have the right to continue with the sale of these quantities to third parties. If the quantities offered to A.N.R.S.P.S. as a priority are sold to third parties, the sale price of the natural gas shall not be lower than the price offered to A.N.R.S.P.S..

UPDATE: The Ministry of Energy has sent G4Media a point of view stating that OMV’s decision „was not encouraged by the Romanian state”.

The full press release from the Ministry of Energy:

OMV is a private company and the decision to go to an arbitration tribunal belongs to it and was not encouraged by the Romanian state. The Ministry of Energy has no involvement in this case. We are sure that Romania through ANRM will defend its interests at the International Court of Arbitration in Paris.

The Ministry of Energy awaits with great interest the final investment decision for the Neptun Deep project, which is one of the largest projects since the Revolution. We are convinced that OMV’s decision will not delay the project.

We remind you that the Offshore Law was adopted at the request of investors. We reiterate that we will encourage fair partnerships with all investors who believe in the potential of our country and we are convinced that the Romanian state will use all the instruments at its disposal to protect its interests in supporting the energy sector and the economic development of the country.