Petrom Privatization Sale Delayed Again

The privatization of state-owned oil company SNP Petrom could take longer than expected as interested bidders must first negotiate a series of "extremely difficult" issues, Romanian Economy Minister Dan Ioan Popescu said Wednesday.

A decision on the winning bidder for a majority stake in Petrom was initially expected at the end of March. Popescu said closing the deal could now be pushed towards the end of the first half.

"It is better to have a privatization with all issues clarified," Popescu told journalists.

Petrom is the country's largest oil firm, with a market value estimated at $ 1.6 billion. Its sale is seen by analysts as an indication of the government's commitment to energy sector reforms.

The government is currently negotiating with seven foreign companies that have made preliminary bids, which don't contain financial offers. They are Poland's PKN Orlen SA; Hungary's MOL Rt.; Austria's OMV AG; Occidental Oil & Gas Corp. of the U.S.; Russia's OAO Gazprom; Hellenic Petroleum SA and Switzerland's Glencore .

Popescu said the main dragging points in negotiations include a clarification of the ownership over the land where Petrom has production units. Romania is in the process of returning the land confiscated by the communist regime half a century ago to its previous owners.

Popescu said Petrom has property titles on just half of the 90,000 hectares of land upon which it has operations.

Potential bidders and the government must also agree on environmental issues, including the settlement of potential damages that could be caused by Petrom's outdated installations.

Popescu said settling some of the issues might require the law to be modified.

Petrom produces 44 million barrels of crude oil and 6.1 billion cubic meters of natural gas a year. Its two refineries have a combined annual capacity of about 58 million barrels of crude, and its retail network comprises nearly 700 filling stations.

The government is offering a 33.34% stake in Petrom, where 93% of shares are state-owned and 7% are traded publicly. The winning bidder would be obliged to raise its interest to 51% by taking up a share capital increase.