Black Sea Oil & Gas (BSOG) will start extracting gas from its Romanian offshore project in the second quarter, later than planned, its chief executive said, warning that continued efforts to amend regulations for producers were undermining investment - Reuters

Gas producers have spent more than a decade and billions of dollars preparing to tap Romania's estimated 200 billion cubic metres in the Black Sea, only to put their projects on hold four years ago when an additional offshore tax was introduced.

The European Union state's estimated gas reserves pale compared with Russia's, but analysts said they could still make a difference in central and eastern Europe, particularly after Russia's invasion of Ukraine, helping the region to diversify gas supplies and bringing the Romanian government billions of dollars in revenue.

BSOG, controlled by private equity firm Carlyle Group LP (CG.O) has moved forward with its project to extract an estimated 10 billion cubic metres of gas on government reassurances the offshore tax will be cut.

It had initially planned to begin production in November.

The coalition government has repeatedly pledged to amend the tax by the first half of this year, but a draft of the legislation has yet to be presented.

"With the constructive cooperation of all the stakeholders…, first gas will be achieved in the second quarter of 2022," BSOG Chief Executive Mark Beacom told Reuters.

Our view is that continuously undermining domestic producers by constantly introducing yet again new detrimental measures is the reason that Romania has significantly failed to reach its significant production capacity and will only prolong this issue

Mark Beacom, Chief Executive of Black Sea Oil & Gas

Moreover, the government in March extended by a year a support scheme for rising energy bills, with one of the provisions forcing gas producers to sell part of their output at capped prices in exchange for tax reductions and exemptions.

Beacom said the new measures would discourage producers.

There is significant underinvestment in bringing already discovered resources that are sitting at Romania's doorstep … and further discouraging any producer, including BSOG, from looking for more resources through exploration

Mark Beacom, Chief Executive of Black Sea Oil & Gas

Romania had the highest effective tax rate on offshore gas production among relevant European states, at 23%, more than four times higher than average, according to a study by consultancy PwC Romania for the oil and gas employers' association.

Parliament's failure to cut the offshore gas tax last year drove OMV Petrom (ROSNP.BX), majority-controlled by Austria's OMV (OMVV.VI), to postpone until 2023 a final decision on its Neptun Deep deepwater project, where it discovered 1.5-3 trillion cubic feet of gas, the biggest Black Sea project by far. The company could develop the project with state gas producer Romgaz .