Offshore Oil & Gas Decommissioning - Romania

• ANRMPSG - National Regulatory Authority for Mining, Petroleum and Geological Storage of Carbon Dioxide

Decommissioning of wells is subject to ANRMPSG approval and obtaining the necessary authorisations and permits for the abandonment works. The works are carried out in accordance with technical proposals submitted to the ANRMPSG by the titleholders of the petroleum concession rights and are monitored by independent specialists or experts certified by the ANRMPSG for such technical competencies. In addition, approval of decommissioning is granted based on a tariff which varies depending on the degree of complexity. For example, a medium complexity permit tariff (for depths between 1,000 m and 3,000 m) is 5,275 RON + 0.4% of the value of the works, while a high-complexity permit tariff (for depths greater than 3,000 m) is 7,048 RON + 0.2% of the value of the works. For decommissioning of offshore works and deep onshore works up to and including coastal terminals, the concession holder must obtain a decommissioning authorisation from the Ministry of Energy.

In Romania, decommissioning of oil and gas is governed by a comprehensive legal framework that covers petroleum operations both onshore and offshore. The principal laws and regulations include:

• the Petroleum Law no. 238/2004 (the Petroleum Law); and
• Law no. 256/2018 on necessary measures for the implementation of petroleum operations by holders of petroleum agreements related to offshore and deep onshore oil blocks (greater than or equal to 3,000 m depth) (the Offshore Law).

There is also secondary legislation issued by the ANRMPSG, which represents the interests of the Romanian State in the field of oil resources, regulating specific matters such as technical instructions for decommissioning and applicable tariffs. In technical terms, the abandonment of wells is defined by ANRMPSG Order 8/2011 as “all activities executed within the well in order to protect all impacted geological strata as well as the surface works carried out for the recovery and rehabilitation of the environment”.

As a rule, petroleum operations are performed by the titleholder at its own cost and risk. Under Romanian legislation, the titleholder is held liable for damage caused to third parties, so that typically insurance is put in place to cover claims for damage to third parties, for risks in relation to health and safety, and technical failures related to operations. Liability under the concession agreement follows the principles of Romanian contract law, while under environmental laws the principle of “polluter pays” applies. The holder of the petroleum agreement may relinquish a petroleum concession subject to providing the ANRMPSG with an abandonment plan, and funds in respect of the abandonment for operations performed up to the date of relinquishment and for the related post-closing environmental monitoring. The ANRMPSG’s approval of the relinquishment is conditional on fulfilment of the environmental restoration plan endorsed by the environmental authority.

From the regulatory perspective, decommissioning and abandonment requires two steps –

• approval of the abandonment plan by the regulatory body; and
• approval by it, confirming the decommissioning and abandonment has been completed.

Decommissioning of oil wells without the approval of ANRMPSG is sanctionable by fine varying from 30.000 lei to 70.000 lei. The same fine applies if the manner in which the oil decommissioning operations are carried out by the concession holder puts the possibility of future exploitation of the well at risk. Execution of offshore decommissioning works in breach of the authorisation is sanctionable by a fine ranging from 1,000 lei to 100,000 lei.

Execution of offshore decommissioning work and deep onshore work in breach of the authorisation is sanctionable by fine varying from 1,000 lei to 100,000 lei.

The holder of the petroleum agreement is required to record in its accounts and deduct the provision (provizion) for decommissioning and environmental restoration.

This will depend on the provisions of the concession agreement. Typically, co-titleholders of the concession are held jointly and severally liable for the overall obligations under the concession agreement.

No upfront security is required. The abandonment of the well requires proof regarding the execution of the environmental restoration works, approved by the environmental authority.

As per the fiscal regulations, during the asset operational life, the titleholder creates a “provision” for the decommissioning costs (by adjustments to the depreciation and reserves), which accumulates during the operational lifetime of the asset.

Environmental liabilities sit with the former concession holder, unless otherwise agreed by the parties.

One of the most renowned cases in the oil and gas industry in Romania is the claim between Chevron and the Romanian State, at the ICC, from 2018, whereby Chevron Petroleum Company was required to pay damages of USD 73,450,000 to the National Agency for Mineral Resources (ANRM) following the termination of three oil concession agreements due to failure to comply with the works and related financial obligations under the Petroleum Law.

Decommissioning must be performed in a manner that does not endanger the possibility of future exploitation of the well. Failure to respect this obligation is punishable by fine.