Potential oil production in the Montenegrin subsea in a perfect scenario cannot be expected in the next four years, and the first revenues, which would be the funds of the fund into which that money would be poured, will not be realized for a few years after that.
This was officially told to the "News" in the Ministry of Finance.
Based on the fees paid for concessions for oil and gas exploration in the Montenegrin seabed, since 2016, when the state signed the first contract for this work with the Italian-Russian consortium Eni-Novatek, about one million euros have flowed into the state budget.
The Ministry of Finance, headed by Darko Radunović, announced that a law will be finalized next year that will regulate the functioning of a special fund into which part of the tax revenue will flow based on the realized profits of companies that get work in oil and gas exploration in Montenegrin submarine.
Of the total income, 85 percent will belong to the fund, and 15 percent to the state budget.
The draft law on the hydrocarbon fund was supposed to be in the Parliament by December 31, 2014, which did not happen. After that, in mid-2016, the Government established amendments to the law on hydrocarbon tax and proposed that instead of a special law on the Hydrocarbon Fund, a decree would be passed according to which it would be formed by December 31, 2017 at the latest.
That intention of the executive power to regulate an important issue with a decree, as a lower act, which it could change later, did not get the green light in the parliament.
"Taking into account the dynamics of exploration activities, potential production in a perfect scenario cannot be expected in the next four years, and the first revenues, which would be the funds of this fund, will not be realized for a few years after that. So, we are not late, it is a complex matter and we believe that we made a good assessment when we decided to prepare a high-quality law on the oil fund at the expense of a deadline that is not of essential importance", was the answer from the Ministry of Finance to the question of why there is a delay by passing the law on the fund.
From that department, they said that since it is a new industry in Montenegro, special attention has been paid to the regulatory framework for the area of oil and gas exploration and production with the aim of establishing the highest quality system that will, in the best possible way, and in accordance with positive world practice, to protect the interests of Montenegro if the production of that resource occurs.
"As it is already known, the hydrocarbon tax law regulates income from tax on profit from potential production and this law defines the establishment of an oil fund in which most of the potential income from taxes on oil and gas production (85 percent of income ). The law on the oil fund will define the way to manage that fund, which is conceived as a national investment-savings fund," said the Ministry of Finance.
They are looking for a consultant to draft the law
As they explained, since it is a very specific area and the establishment of a system that will be primarily oriented towards the world financial market, the Government decided to approach this topic in such a way that the focus was placed on the quality of the obtained result in relation to the previously set deadlines.
"Preparation of the project task for hiring a consultant who will help in the drafting of this law, who should be credible and experienced in the establishment and functioning of these types of funds, is underway. At this moment, we have a defined public policy that should be transferred into this law, the so-called "policy paper" which specifies the guidelines, principles and goals that should be defined by this law. The task before us is to give this idea a legal outline and define the way in which the fund will perform its basic function, which is to achieve additional value on the financial market as a savings and investment fund. Our goal is to ensure that through the existence of an oil fund, funds from the potential production of limited resources such as oil and gas will be available to future generations as well. It is planned to establish control mechanisms for this fund in the form of a supervisory board and an ethics committee, modeled after the Norwegian oil fund. The law on the oil fund will be completed during 2019 and, in accordance with existing procedures, it will be the subject of a public debate," the Ministry said.
The Ministry of Economy announced last week that the tender documentation for a new tender for oil and gas exploration in the Montenegrin sea has been prepared and it is expected that this tender will be published by the end of this year. The goal of that research tender is the collection of seismic data, their processing and interpretation of the obtained results, all with the aim of increasing the level of knowledge about the potential of finding commercial oil and gas deposits in our seabed. This tender does not include hydrocarbon production rights.
Revenue is collected on the basis of two concession fees
Montenegro has so far concluded two concession contracts for exploration and production of oil and gas - the first with the Eni/Novatek consortium in 2016, and the second with the Greek company Energean last year.
"When we talk about the revenues that Montenegro will have from the eventual production of hydrocarbons from the sea, it is important to point out that the state's share in these revenues is defined by the law on exploration and production of hydrocarbons and the law on tax on hydrocarbons. The state will collect all income from oil and gas production through two fees defined by law. These are compensation for the area, compensation for produced oil and gas and through the tax on hydrocarbons, which amounts to 54 percent of the net profit from hydrocarbon production activities realized on the territory of Montenegro", said the Ministry of Finance. The Ministry adds that from the moment both concession contracts were signed, all three concessionaires regularly pay the fee for the area.
Bonus video:
