How to make more money with the same taxes. Romanian government plans to take more money from oil wells by changing crude benchmark

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How to make more money with the same taxes. Romanian government plans to take more money from oil wells by changing crude benchmark

The Romanian government plans through its mineral resources agency (ANRM) to take more money from the local crude oil producers by changing the crude benchmark from Egypt’s Suez Blend to international Brent.

ANRM has posted a draft bill on its website that proposes to change de crude benchmark for the first time since 1998.

Currently, according to regulations in force issued by the ANRM, for calculating the amounts due as royalties by Romanian oil companies, the Suez-Blend crude is considered, which is Egypt’s benchmark oil blend, with physical and chemical characteristics and quality and market conditions considered similar to the types of crude oil from domestic production.

Royalty rates apply to the average value of spot prices of Suez blend crude oil, determined as the average of the minimum and maximum prices of the 12 weeks prior to the moment when royalty is due.

Not only the royalty rate is important, but also the benchmark price set by ANRM quarterly, to which the royalty percentage shares apply.

ANRM has ordered two studies from the Oil & Gas University in Ploiesti, through which it will determine which international benchmark will be used for treating the average quality of Romanian crude – Brent or Urals.

The experts from the university decided to propose Brent as new crude benchmark – and this new benchmark could bring additional money to the government.

Brent is the reference for about two-thirds of the oil traded around the world, with WTI the dominant benchmark in the U.S. and Dubai/Oman influential in the Asian market.

But Brent is also historically more expensive than Suez Blend. In fact, Suez is usually sold at a discount to the Brent contract because of its relatively high sulfur content.

In Romania, royalties for oil amount to 3.5 percent for fields producing less than 10,000 tons/quarter, 5 percent for fields producing between 10,000 and 20,000 tons/quarter, 7 percent for fields producing between 20,000 and 100,000 tons/quarter, and 13.5 percent for fields producing over 100,000 tons/quarter.

Romania’s largest oil & gas group, OMV Petrom, controlled by Austria’s OMV, is the dominant crude oil producer.

The post How to make more money with the same taxes. Romanian government plans to take more money from oil wells by changing crude benchmark appeared first on Business Review.

How to make more money with the same taxes. Romanian government plans to take more money from oil wells by changing crude benchmark

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