Comparative Legal Guide: Oil & Gas 2022 For Moldova - Oil, Gas & Electricity

1. SUMMARY

The legislation of the Republic of Moldova on natural gas and petroleum products is quite stable, as it is a relatively new one, which transposes the European legislation in this regard.

However, Moldova is in an energy crisis from the end of 2021 until now. The crisis is caused by the fact that the Russian company Gazprom, which is the main source of natural gas that supplies Moldova, has reduced its natural gas supplies. This situation arose as a result of the expiration of the contract concluded between Gazprom and S.A. Moldovagaz, in September 2021, and, on the other hand, as a result of the energy crisis at a European level and, respectively, of the increase in gas prices on international stock exchanges. Moldova also has debts for natural gas supplied by Gazprom, and the offer to negotiate a new contract with Gazprom involves a significantly higher gas price than in previous contractual relations and the payment of debts.

This situation has led the authorities to declare a state of emergency in the energy sector. The report on the need to declare a state of emergency states that "natural gas shortages directly and immediately affect the security of the state and its citizens."

One of the effects felt was that the National Energy Regulatory Agency (ANRE) as the regulatory authority in the field of natural gas and petroleum products increased the tariffs for natural gas. Likewise, the price of petroleum products has increased significantly and this trend continues.

As a result of this situation, the Moldovan authorities are intensely looking for alternative ways of supplying gas. Alternative gas supply means, in the short term, a greater number of alternative suppliers, and in the long term includes the improvement of transport interconnections to provide alternative supply routes and a better assessment/exploitation of existing reserves in Moldova.

2. OVERVIEW OF THE COUNTRY'S OIL & GAS SECTOR

2.1. Legal framework – a brief outline of your jurisdiction's oil & gas sector

The legislation of the Republic of Moldova regarding oil and natural gas largely transposes the legislation of the European Union. This is due to Moldova's commitment to harmonize its legislation with the acquis communautaire in the context of the Association Agreement between the Republic of Moldova, of the one part, and the European Union and the European Atomic Energy Community, and their member states, of the other part.

The most important principles enshrined in the legislation in this sector are the principle of equality, which presupposes that all participants in the market for natural gas and petroleum products enjoy equal rights, regardless of the type of ownership and legal form of organization and the principle of free access to the natural gas market.

As a result of the gas crisis, one of the country's main objectives is to ensure the security of natural gas supply to the Republic of Moldova, especially through the diversification of supply sources and routes

This issue is of increasing importance especially in the context of the announced cease of gas by the Russian Federation, Moldova's debts to Russia, and the increase in gas prices. This all happened at the beginning of the cold season.

The total dependence on natural gas imports from only one source, as well as the lack of natural gas storage capacities and supply from other sources (e.g. with liquefied natural gas), create a higher risk of gas supply to the country.

.2. Domestic oil & gas production and imports/exports

Natural gas production is regulated by Law no. 108 of May 27, 2016, regarding natural gas (the Natural Gas Law). The activity of natural gas production is carried out by the producers on the basis of the license for the production of natural gas. The number of licenses issued for the natural gas production activity is not limited. The license is issued by the National Agency for Energy Regulation (ANRE or Agency). There are currently no valid gas production licenses.

The resources of the Republic of Moldova are very low in natural gas, they are not explored and they are not even produced. Moldova is supplied with imported natural gas. Moldova's main natural gas supplier is the Russian company Gazprom.

Moldova does not export natural gas.

The import of natural gas takes place exclusively through pipelines. The natural gas supplied by Russia is delivered through the pipeline network with Ukraine. At the end of 2020, the construction of the Iasi-Ungheni-Chisinau gas pipeline was completed. This pipeline is able to cover a large part of Moldova's natural gas consumption and is thus an alternative to Russian gas. The pipeline is not yet in use, but the government has announced that certain quantities of gas have been delivered to maintain the necessary pressure in the system.

The petroleum products market is regulated by Law no. 461 of July 30, 2001, on the petroleum products market. The activity of producing petroleum products is not regulated by law, but only the activities of:

import and wholesale and/or retail sale of petrol and diesel at refueling stations;
import and wholesale and/or retail sale of liquefied gas at refueling stations.

The Republic of Moldova supplies only imported petroleum products. Romania is the main supplier of petroleum products with a total of 99.89% of gasoline and 75.28% of diesel. Other oil-supplying countries are Russia with 17.04%, Bulgaria with 4.92%, Serbia with 1.64%, and Belarus with 1.11% on diesel.

In general, Moldova manages to meet its own energy needs through imported natural gas and petroleum products. However, 2021 was a year of crisis in the energy sector, both in the gas sector and in the oil products sector.

2.3. Foreign investment and participation

There are not any special requirements or limitations on the acquisition of interests in the oil & gas sector by foreign companies. All investors are granted fair and equal conditions of activity. Moldovan legislation grants free access to the natural gas market to all investors irrespectively of citizenship, domicile, residence, place of registration or activity, origin state of the investor, or the investment (Article 6 Law no. 81 of March 18, 2004, on investments in entrepreneurial activities).

2.4. Protection of investment

The Republic of Moldova ratified the Energy Charter Treaty of December 17, 1994, on May 3, 1996, and acceded to the Treaty Establishing the Energy Community of October 25, 2005, (the EC Treaty) through the Law no. 117 of December 23, 2009.

The regulatory policy in respect of the oil and natural gas of the Republic of Moldova is especially influenced by the provisions of the Treaty Establishing the Energy Community. By adopting the EC Treaty, the Republic of Moldova made legally binding commitments to implement the acquis communautaire. In this sense, were adopted Laws no. 108 of May 27, 2016, on natural gas and Law no. 174 of September 21, 2017, on energy, which transpose the commitments of our country in accordance with the provisions of the energy package III.

3. EXPLORATION OF OIL & GAS

3.1. Granting of oil & gas exploration rights

The main Moldovan normative acts in the domain of exploration and extraction of oil & gas reserves are

The Subsoil Code no. 3 of February 2, 2009;
Law no. 108 of May 27, 2016, regarding natural gas.

According to the Subsoil Code, the riches of any kind of subsoil of the Republic of Moldova, including the useful mineral substances it contains, as well as its underground spaces are the exclusive object of the public property of the state, are inalienable, imperceptible, and imprescriptible. Subsoil sectors cannot be alienated, they can only be transferred for use.

The grounds for the emergence of the right of use over the subsoil sectors are the Government decision adopted as a result of the competition for the right to explore or extract useful mineral substances of national importance on the basis of concession and, respectively, the concession contract

The concession agreement is concluded between the user (investor) and the Ministry of Agriculture, Regional Development and Environment and contains the conditions of use of the conceded subsoil sectors

It is the competence of the Government to adopt the decisions regarding the transmission for industrial capitalization of the deposits of useful mineral substances of national importance.

In order to carry out the activity of natural gas production, the producer is obliged to obtain from the Agency a license for natural gas production. The construction and operation of the production facilities are carried out only on the condition that the Government assigns the right to use the subsoil sectors for the extraction of natural gas. Subsequently, the beneficiary is obliged to obtain from the local public administration authorities the building permit in accordance with the law on the authorization of the execution of construction works.

There are not any current major initiatives or policies of the Government in relation to oil & gas development.

3.2. Foreign exploration

Foreign legal and natural persons have the same rights and carry the same obligations for the use of the subsoil as legal and natural persons from the Republic of Moldova, according to the legislation. See Section 3.1.

3.3. Stages of the exploration process

For the conclusion of the concession agreement, the potential investor has to obtain a list of permits, issuable by Moldovan authorities. A general (non-exhaustive) list:

license for natural gas production (issued by the ANRE; validity term: 25 years; state fee: MDL 3,250 Moldovan lei (approximately EUR 165);
act on confirmation of geological limits (issued by Agency for Geology and Natural Resources; validity term: five years; free of charge);
state ecology expertise (issued by the Environmental Agency; validity term: the period of project implementation; free of charge);
environment permit, under certain conditions (resulting from the environmental impact assessment, issued by the Environmental Agency; validity term: four years; free of charge);
gas emissions authorization (issued by the Environmental Agency; validity term: one to five years; state fee: from MDL 500 to MDL 4,000 (approximately EUR 25 to EUR 200);
positive confirmation of expertise in the domain of industrial security (issued by an authorized expertise entity; validity term: five years; state fee: depends on the complexity of the activity, the equipment, etc.);
construction authorizations for works of public utility of national interest (issued by the Ministry of Economy and Infrastructure of the Republic of Moldova; validity term: for the period of construction works; free of charge);
certificate on the protection of works of public utility and national interests (issued by the Ministry of Economy and Infrastructure of the Republic of Moldova; validity term: the period of construction works withholding; state fee: based on the activity and equipment complexity); and
sanitary authorization for the functioning of the facility (issued by the National Public Health Agency; validity term: five years; free of charge)

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Originally Published by CEE Legal Matters

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Moldova: Comparative Legal Guide: Oil & Gas 2022 For Moldova