• Legal background

The main enactment governing the oil field is the Oil Law no. 134/1995, as further amended by the Government Emergency Ordinance no. 47/2002 (the "Oil Law"). Taking into consideration the strategic significance of this sector oil resources are, as provided by the relevant legislation, as well as by the Romanian Constitution, within the property of the Romanian State constituting therefore the exclusive object of public property.

An important step in the reform process undertaken by the oil sector was achieved through the reorganization in 1997 of the State-owned company "Petrom" Bucharest and the establishment of the National Oil Company "Petrom" S.A.

• NATIONAL AGENCY FOR MINERAL RESOURCES("NAMR")

The NAMR has been established under the provisions of the Oil Law as competent authority in the oil field, in coordination with the Ministry or Industries and Resources and represents the Romanian State's interest. It issues mandatory regulations and technical instruction concerning the application of the relevant laws in its field of authority.

Among its main duties, pursuant to the Oil Law, NAMR is authorized:

• OPERATIONS IN THE OIL FIELD

According to the provisions of the Oil Law, the operations in the oil field may be carried out by Romanian or foreign legal entities only within the perimeters set out for such purposes by NAMR such operations are deemed as works of public utility, whilst the necessary lands and buildings for such purposes may be subject of expropriation for the public interest.

The national system of for oil transportation is part of the public domain of national interest and is of strategic significance.

The development of the oil resources is undertaken by NAMR through oil operations by either the granting into administration of the autonomous regies or the concession for a maximum 30 years period. Either the granting into administration or the concession is achieved pursuant to an oil agreement entered between the NAMR and a Romanian or foreign legal entity. Such agreement is subject to the Romanian Government approval before its coming into force. Further to the conclusion and approval of such oil agreement the Romanian or foreign legal entity becomes an authorized person as required by the law.

• TAXES. TARIFFS. ROYALTIES

The holders of the administration or concession right are subject to:

- The payment of a tax on the mineral resources exploitation activity the payment of a royalty both established pursuant the relevant legislation and the oil agreement.

- The tax on the mineral resources exploitation activity is established by the law as a 3 percentage quota out of the total value of the gross production achieved and is owed yearly.

- The royalty is established as a percentage quota out of the gross production achieved and is agreed on by NAMR and the titleholder upon the conclusion of the oil agreement.

• FISCAL INCENTIVES

According to the provisions of the Oil Law the titleholders benefit from a series of fiscal incentives related to customs duties, as follows:

The following are exempted from the custom duties:

- Imports made by the titleholders or their subcontractors required for the performance of the oil operations;

- Imports of assets for domestic and personal use, necessary for the foreign staff of the titleholder, its affiliated companies and foreign subcontractors. The assets subject to the exemption of the payment of the custom duties.

- Exports of titleholder's oil quotas to which they are entitled to pursuant to the concluded oil agreements, also of the assets imported by the titleholder and its foreign staff under the conditions above-mentioned.