Romania’s Econ Min: Sterling Deal Annullment Is The Right Decision

Iulian Iancu, the president of the Commission for Industries and Services within Romania’s Chamber of Deputies, said the Government’s suspicions on this natural gas and crude oil exploitation deal were confirmed, as the Canadian neither has the financial power nor the permits to unroll such deal.

"The contract with Sterling was illegally changed by Government Ordinance 11/ 2007," Iancu said.

The commission headed by Iancu will meet again with Sterling’s representatives on April 28.

According to Iancu, Romania cannot end the deal with Sterling unilaterally because of the Government Ordinance 11/ 2007, but the Parliament may annul this emergency ordinance and switch the National Mineral Resources Agency ANRM with Romgaz in the contract, so that the state would benefit from 45% of the hydrocarbons production, according to the clauses of the initial oil deal inked in 1992.

In the case of the country’s dominant oil company Petrom, that also owns exploitation rights in the Black Sea, Romania receives 41% of the production, through the Economy Ministry’s and investment fund Fondul Proprietatea’s participations in the oil firm, Iancu added.

“ANRM started an investigation to establish the possibilities to annul the deal signed with Sterling. The checks are doubled by a checkup of the Prime Minister’s Control Body. So far, the conclusions indicate the possibility to terminate the contract, so that we might resort to the provisions of the initial deal inked in 1992," ANRM’s head Gelu Maracineanu told MEDIAFAX on Wednesday.

Romania has, according to the Law on crude oil, the capability to unilaterally terminate the contract with the Canadian company, he added.

Sterling extracts crude oil and natural gas from perimeters Pelican and Midia in the Black Sea.

In 1992, Rompetrol, representing at that time the Romanian authorities, and a consortium made up of Enterprise and Canadian Oxy companies sealed an exploration deal by which Romania received 45% of the crude oil production obtained out of two oil perimeters.

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 ANRM.

The lease in the Black Sea, granted by the Government in 1992, was extended, successively, by all Romania’s Governments, the decision of the latest Tariceanu Government of November 2008 not changing the content of the agreement.

An appendix of the oil-drilling contract closed between ANRM and Sterling Resources refers explicitly to the dispute between Romania and Ukraine, specifying that the exploration right will become an exploitation one after The Hague Court’s decision.

The International Court of Justice at The Hague drew on February 3 a new maritime border between Romania and Ukraine, settling a 40 year-old dispute. The ruling gives Romania 9,700 square kilometers of exclusive economic zone, accounting for 79.34% of the 12,000 sq km disputed surface, an area said to include about 70 billion cubic meters of natural gas and 12 million tons of oil.

Thus, the Court’s decision and an appendix to the exploration contract give Sterling exploration rights in blocks XIII Pelican and XV Midia in the Black Sea.

By the contract signed between ANRM and Sterling Resources, the Romanian state has allegedly transferred to Sterling the oil and gas resources in the two blocks stipulated in the contract before the decision of the International Court of Justice on the maritime border between Romania and Ukraine.

Romania’s President Traian Basescu asked the Government in February to clarify the dispute with Sterling.

Romanian Chamber of Deputies voted early-April the decision draft on allowing the Industries Commission to carry out an investigation regarding the oil agreement of Sterling Resources in the context of the amendments brought to the Oil Law.

According to ANRM, Sterling Resources sold Melrose Resources 32.5% of its shares in bocks XIII Pelican and XV Midia in the Black Sea for $90 million.

The principle agreement between Sterling Resources and Melrose was announced to be signed on December 5, 2008.

The commission would also verify the economic impact of the current agreement of oil company Sterling on the business environment, environment and state budget, the closing and the changes brought to oil agreements and concession or administration licenses based on Emergency Ordinance 101/2007 and their consequences.