Petrom Sets Positive Trend in Privatisation Governance

The fall of communism continues to revolutionise economies in South East Europe, with the privatisation of energy giant Petrom set to change how energy is administered in the region as a major example of new corporate governance. An objective of the Ministry of Economy and Commerce, the Petrom sell off was Romania’s largest ever privatisation deal with Austrian oil company OMV buying a majority shareholding of 51% in the company.

Completed in December last year the cost to OMV is expected to reach over 800 million Euros in buying out the shares of which 93% were previously owned by the Romanian state with 7% being traded on the Bucharest Stock Exchange.The Romanian government still retains 32% of the shares with company employees taking up 8%, a figure which provoked contention amongst union figures who wanted to control up to 10% of the stockholding. In return for outstanding debts of $73million on pre privatisation loan in 2002, the European Bank of Reconstruction and Development own 2% of the shareholdings, the bank’s involvement there to promote EU objective’s of wider private ownership and quality and transparency of the privatisation process.

How will the deal effect the market? Many alterations have taken place, OMV have increased their market share in Romania from 6% to 30 %, have tripled their oil and gas reserves and now own 500 more petrol stations globally taking their total to 2380.With the inclusion of Petrom in the accounts the profits of OMV rose to 256 million Euros for the first quarter well ahead in comparison to last year’s profit margin. “Petrom, starting from January of this year will benefit from pricing polices based upon European Oil practices our prices did not reflect international quotations, we also have a leadership position in marketing and refining and plan to expand our business beyond Romania,” said the spokesperson for Gabriel Nabustane, Petrom’s corporate communication director. He added: “ As part of our seismic exploration work programme we intend to drill through several hundred square kilometres, we also put a special focus on the exploring and production licence for hydrocarbons in Kazakhstan,”

Despite the increase in production techniques Petrom is a company still in need of management restructuring to increase profit margins, in particular a more centralised accounting department and oil wells are connected by decaying pipelines which will need further investment. A challenge still remains in clearing the cobwebs of communism and past autocratic regimes.

source