What Romania stands to gain from its 45bn-euro petroleum reserves

The tripling of crude oil prices over the last few years to 130 dollars a barrel has brought Romania’s reserves to around 550 million barrels of petroleum, all of them operated by Petrom to a value of over 45 billion euros. This means around 30% of the GDP, which is equivalent to Romania’s overall imports in 2007. The state collected 85 million euros in petroleum royalties last year, while Petrom extracted 32.6 million barrels. The value of the extraction at last year’s petroleum price, of 63 dollars/barrel, amounts to 2 billion dollars (1.44 billion euros), but the extraction cost of 32.6 million barrels stood at 550 million dollars (396 million euros). The extraction of one barrel of petroleum in Romania cost around 16.83 dollars last year, according to Petrom data. This year, Petrom’s production value could double if the barrel reaches an average price of 120 dollars. If billions of euros’ worth of reserves generate earnings in the range of millions of euros for the state, what is Romania’s main advantage as a petroleum producing country? “Romania only benefits via this royalty, which we know is below the level operated in other countries. This in fact lies at the origin of all contestations of Petrom’s privatisation contract,” says Adriana Marin, head of the research department of CA IB Securities.