Crude / Refining / Petrochemicals Sector in Romania (Update - July 2008)

EFG EUROBANK SECURITIES

• Romania is a mature oil processing country, with multiple refining facilities and intensive transportation infrastructure. Of the total number of 10 refineries, 5 are owned by three players which succeeded to improve operations (Petrom-OMV, Rompetrol Rafinare and Petrotel-Lukoil), while all others are in a poor financial situation or even in liquidation.
• The retail distribution is in a consolidation stage, with retail units of refineries and of foreign distributors with no production facilities in Romania increasing weight, and small private filling stations loosing ground.
• The sector also includes services providers (one public oil terminal and three private oil products transportation and services companies, of which one is in liquidation status).
• The major change in the sector was Petrom’s privatization with OMV at the end of 2004 that resulted in a price increase of the oil refined and petrochemical products in 2005, to a level close to the CEE one. Rompetrol Rafinare has also changed hands to KazMunaiGaz in 2007 (the latter acquired 75% of The Rompetrol Group).
• Requirement for Romania to comply with EURO 5 standards starting with January 1, 2009 (2 years later than the EU countries) has forced the players to accelerate investments in technology; important to mention that EURO 4 standards have been enforced on January 1, 2007, when Romania joined EU.

 

Industry structure

Crude production and imports

Total crude supply absorbed by Romania’s refining system recorded an upward trend during 2004-2005, and was slightly downward during 2006-2007 most likely due to milder winters. Over the first 4 months of 2008 it reached 4.20 mn tons (from 4.34 mn over the same period of 2007).

Imported crude quantities recorded the same pattern (growth during 2004-2005, and decrease during 2006-2007. Over the first 4 months of 2008, crude imports decreased 8.9% y/y to 2.7 mn tons.  

The weight of imports has increased over the past years, to 64% over 2006-2007 and 4 mn in 2008 (from 48% in 2003). The balance is domestically produced.

Romania’s crude reserves stood at 70.5 mn tons and we computed around 760 mn boe reserves of natural gas at December 2007 (based on Petrom reporting and considering gas reserves equally split between Petrom and Romgaz), with a life of around 15 and 10 years respectively.

Important to mention that Petrom’s reserves replacement rate stood at 38% at December 2007, and management estimates it to reach 70% in 2010, so that reserves life might be in fact higher than stated before.

The domestic crude mostly is sweet heavy crude, Petrom being the major Romanian producer.

Refining facilities

Romania has a total refining capacity of 23.5 MMT, in 9 facilities, the most important being Arpechim and Petrobrazi (Petrom OMV’s plants), Petromidia (owned by Rompetrol) and Petrotel-Lukoil. All other ones are in a poor financial situation, with unclear shareholding structure or in liquidation.

In 2007 Romania’s refineries processed a total of 13.6 MMT of crude, resulting a 58% utilisation rate of Romania’s total nameplate capacity.

Petrom processes both imported and domestic crude, and Rompetrol and Lukoil – only imported crude.

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Legal updates

25 Februarie 2010 Legislative Summary - January 2010 19 Februarie 2010 Certification of annual profits tax returns 5 Februarie 2010 State Budget and State Social Security Budget for 2010 Laws 5 Februarie 2010 Changes brought to certain VAT statements 5 Februarie 2010 Draft amendments to the Fiscal Procedure Code 29 Ianuarie 2010 Certification of the annual tax returns by a tax consultant 29 Ianuarie 2010 Fiscal regime for micro-enterprises

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