Black Sea Blocks Exploitation Rights Granted In 1992 - Sterling Resources

"The original 1992 petroleum agreement that was made public yesterday makes it very clear that the 11th Amendment was necessary and has not given Sterling any additional rights," Sterling’s representative in Romania Stephen Birrell said in a press release.

In 1992, Rompetrol oil company, representing at that time the Romanian authorities, and a consortium made up of Enterprise and Canadian Oxy companies sealed an exploration deal.

Subject to the contract, the crude oil was distributed in a 45% share to Rompetrol and a 55% share to the consortium. The article on the distribution of crude oil production was strictly classified.

The deal was taken over afterwards by Paladin company and transferred in 1997 to Sterling Resources. In 1993, Rompetrol was privatized and its place in the Sterling deal has been taken by Romania’s Mineral Resources Agency ANRM.

The former government was accused of having granted Sterling the right to exploit the two blocks although the initial contract only stipulated drilling and dividing production.

"As the original agreement indicates, since 1992 the titleholder has had the rights of exploitation and production. (…) Articles 1.1.33, 3.1.1, 7.3 and 9.1.1 of the original agreement are just four references indicating that the “Right of Production” has existed since 1992. This was a pre-existent right and was not granted by the 11th Amendment first signed in 2007 and approved by the Government in 2008, as previously stated by those who launch the accusations, " Birrell stated.

The former government was also accused that it transferred to Sterling the oil and gas resources in the blocks XIII Pelican and XV Midia even before the decision on the Black Sea maritime border between Romania and Ukraine. The International Court of Justice at The Hague drew on February 3 a new maritime border between Romania and Ukraine.

Birrell added that crude oil and natural gas state share is different, thus, state should get 45% of crude oil production, while for natural gas, it should negotiate with the company.

"Article 13.1.3 of the 1992 agreement states clearly that the terms for gas will be negotiated separately. The gas terms were set out in the 1st amendment to the contract, approved in 1997 and in article 13.1.6 of the 1st Amendment it states that the share of gas will be calculated using an “R factor.” The R factor refers to “Royalty” factor and shows that the concept of gas sharing was going to be based on a Royalty structure," Birrell added.

Sterling will pay the Romanian state quarterly oil dues between 3.5% and 13.5% of the value of gross production of crude oil and gas, depending on the volume of production, computed based on reference prices set up by Romania’s Mineral Resources Agency ANRM, according to Oil Law.

"If one sums up all the state budget expenses if the State would have retained a presence in the agreement, it is very clear that the State would have benefited less than it does today," Birrell said.

He added that the State would be entitled to between 50 to 65% of the profit, while the titleholder is only retaining around 35-40% of the project value.

"The original agreement also clarifies the need for the 11th amendment. We hope that all interested parties will look into this very carefully and, as the original agreement is now public, they will no longer make false accusations. We are committed to making all the necessary investments in our on shore and off shore Romanian projects and we want to fulfill our contractual obligations as soon as possible,” concluded Sterling’s representative in Romania.