Romanian Defense Council meets on energy & Petrom sale

Energy Trade

Romanian President Traian Basescu summoned a council in charge of safety and defense to debate energy security, power sales and the state's energy assets and companies, including oil and gas company Petrom.

The meeting yesterday of the Supreme Defense Council included discussion of the sale in 2004 of Petrom SA to Austria's OMV AG, as well as previous sales of other energy-distribution companies to international buyers. „The council decided that contracts be made public immediately regardless of whether we're discussing about Petrom or power, or gas distribution companies,” Basescu said after the meeting. „The Petrom contract must be analyzed by the state's institutions, including the General Prosecutor's office, and that's already happening as you found out.”
Parts of the Petrom sale that weren't so far entirely made public refer to low tax allowances and constant oil-extraction royalties granted by the former government to OMV regardless of fluctuations in the international price of oil, for a 10-year period, Economy Minister Codrut Seres said November 20.
Romanian prosecutors specialized in combating organized crime and terrorism started a probe against eight men, including four government employees in charge of asset-sales, including Petrom, on grounds of threatening national safety. The council also decided that all contracts by trading companies that resell power and gas in Romania will also have to be made public, Basescu said.

„There are enough contracts that contain errors and aren't guaranteeing the energy security for the population,” Basescu said. „Such errors cannot happen again.” Basescu's statements today follow those he made November 11, when he said Romania, which is set to join the European Union on January 1, will build more nuclear reactors and may reopen coal mines to cut its reliance on natural gas, amid concern Russia is using its dominance in the gas market for political ends. The council's meeting today was sparked by statements from Seres, who said two days ago politicians have put pressure on him and the heads of the country's main energy producers to sell power at preferential prices.
A decision by Petrom to raise gas prices by as much as 20% was also among the topics. Basescu and Prime Minister Calin Tariceanu said yesterday they proposed OMV, which owns 51% of Petrom, to contribute from the company's profit to a special fund that would subsidize the price of gas to households until the end of 2008. Tariceanu and Basescu met with this week OMV's chief executive officer, Wolfgang Ruttenstorfer, who traveled to Bucharest to discuss Petrom's pricing policies and find ways to set up the fund, their press offices said.

Speaking at an energy seminar in Bucharest yesterday, Basescu said OMV's Petrom had been asked to help Romanian households, using part of the „very high profit” it made in Romania this year from rising gas prices. „The company can come and say it wants to contribute to a social fund because it can't sell below market prices, although it knows it has made giant profits,” Basescu said. „If the company doesn't make the offer, the state can make it mandatory for the company to return part of that high profit into a social fund.”
Petrom said in an e-mail it was ready to cooperate with the Romanian government and is analyzing options how to contribute to alleviate the social effects of this market alignment for the Romanian population,” after Ruttenstorfer met with Basescu on Tuesday. It didn't give details. Romania is opening its markets to competition as it joins the European Union. The country was granted a one-year delay to 2008 by European authorities to bring gas prices in line with the international market, the government said in March.
Romania imports about a half the gas it uses, mainly from Russia's OAO Gazprom, the world's biggest gas producer and exporter, for international-market prices. Petrom and Romgaz SA, the state gas producer, supply the other half. Bills for gas have increased over the past three years to more than 300 lei (€86.2) a month for two- or three-room apartments that use their own heating plants during the winter. That's about half the average net monthly salary in Romania. (Bloomberg)

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