Bloomberg News

Romania Shale-Gas, Mine Projects on Hold in 2012, Ponta Says

June 08, 2012

Romania wants to put shale-gas exploration and gold-mining projects on hold until after a general election this year as it balances improving environmental rules with energy needs, Prime Minister Victor Ponta said.

Ponta’s government, backed by a coalition of Social Democrats and Liberals, will attempt to assess environmental conditions and would look over Chevron Corp. (CVX:US)’s plan to explore for shale gas in the country should it win elections, said Ponta. He became premier on May 7 in a political shakeup and will try to win his first four-year team in October or November.

“I want to seriously discuss this issue next year, while keeping environment protection in mind, on the one hand, and Romania’s interest in ensuring additional energy resources, on the other hand,” Ponta said in a June 6 interview in Bucharest. “Legitimate environment and business development interests unfortunately got caught up in political campaigning.”

Romania is trying to find new energy resources to cut its reliance on Russian gas imports and compensate for a natural decline in domestic production as the nation has been extracting gas and oil for more than a century. Its Black Sea territory may also hold additional resources after OMV Petrom SA (SNP) and Exxon Mobil Corp. (XOM:US) have announced a potential discovery in a deep-water well.

Romania’s month-old government called for an immediate moratorium on shale-gas extraction in its governing program until European studies show the impact of hydraulic fracturing on the environment.

European Bans

The process, which uses a mixture of water, sand and chemicals to open fissures in shale rocks to release gas and oil, has already been banned in France and Bulgaria on environmental grounds. It’s also been suspended in the U.K. and the German state of North Rhine-Westphalia.

Chevron, the second-largest U.S. energy company by market value, received the licenses to explore for unconventional oil and gas in Romania from the previous government of Prime Minister Emil Boc. A few thousand people protested in March in the northeastern town of Barlad against Chevron’s plans to extract shale gas through hydraulic fracturing.

Greenpeace and four other non-government organizations filed a complaint and threatened to sue the Romanian government if it didn’t cancel Chevron’s licenses, saying the shale gas production may harm the environment and local residents.

Gold Mine Decision

The Bucharest-based government is also expected to make a decision regarding a gold-mining project in the town of Rosia Montana, in the center of the country. Gabriel Resources Ltd. (GBU)’s, the majority owner of the stalled project, needs an environmental permit to start work at the mine.

Ponta said his government’s stance on the project remains unchanged. The company needs to meet the highest environmental standards and guarantees, allow the state to hold a higher share in the project and disengage itself from political lobbying before going ahead with gold extraction, he said.

“When these conditions are met, we can go ahead without a problem,” Ponta said. “I want investments and jobs in Romania but these three conditions are mandatory.”

Romania pledged to the International Monetary Fund and the European Union under a precautionary agreement to sell 15 percent stakes in natural-gas grid operator Transgaz SA (TGN) and natural-gas company Romgaz SA and 10 percent stakes in hydro- power generator Hidroelectrica SA and nuclear-power operator Nuclearelectrica SA this year.

Free Prices, Taxes

“I am convinced that we will keep to the schedule,” Ponta said. “Of course it’s a bad period, but we will try to adapt to current market conditions. The only problem is finding a reasonable price, otherwise we will enter into electoral debates over this subject, which is in no one’s interest.”

Romania undertook to free regulated natural gas and electricity prices starting from this year and is committed to tax the “exceptional part of the profits” coming from price increases after the liberalization, Finance Minister Florin Georgescu said in an interview on June 5. The nation’s biggest oil company OMV Petrom, majority-owned by Austria’s OMV AG (OMV), and state-owned Romgaz are the two biggest gas producers in Romania.

“The Romanian authorities have to negotiate with OMV in order to conclude when it’s better to implement this law: at the beginning of 2013 or in the second half of next year,” Georgescu said.

OMV’s investments in its Romanian unit Petrom will depend on the country’s “fiscal stability and regulation,” Chief Executive Officer Gerhard Roiss said in an interview for Ziarul Financiar on June 5. Roiss said that any change in the Romanian taxing system will affect the investment plan of Petrom, the country’s biggest oil company, according to the newspaper.

To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net; Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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