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KMG International, a large contributor to Romania’s economy

rompetrol.com
petromidia

KMG International is a foreign direct investor of major relevance for Romania, supporting budgetary revenue of 3%, placing 1,6 billion $ during 2007-2015, ensuring 44.6% of the country’s refining capacity and contributing to its energy security, according to a study conducted by the Academy of Economic Studies, Bucharest, in July- September 2016.

„KazMunayGas – the national company of Kazakhstan – took the strategic decision of entering the European markets through Romania in 2007, through the aquisition of formerly known Rompetrol Group. Besides the foreign direct investments meant to increase the refining capacity of Petromidia and the overall business competitiveness in order to deliver quality products to clients aligned to international norms, the shareholder of KMGI provided Romania a secure source of Kazakh oil from Tengiz offshore oilfield as an alternative to Russian crude, thus contributing to national and regional energy security. This is of major importance if we think that currently Romania has only 3 refineries producing fuels, compared to 1990 when 11 were functional and the refining capacity at that time was of 32 million tones, compared to 2016 – 11 million tons of crude/year.” – declares Azamat Zhangulov, Senior VP - KMG International.

“Financial and operational figures are of relevance for specialists, but the input-output analysis of Leontief shows the value added at the level of society. For instance – the taxes paid to the state budget in 2013 - 2015 (5,1 billion $) by KMG International may have accounted for the construction of 16,466 kindergartens, 10,466 schools or 48 hospitals, while for each job created within the Group, an additional 2.25 workplaces are created within the economy. This study is also unique since it’s for the first time when an academic institution embarks on this type of research, to assess the direct, indirect and induced impact of a large economic player upon our country’s growth and profitability.” – declares Dr. Bogdan Negrea, full Professor and Researcher within ASE.

The research shows the contribution of KMG International to Romania’s energy security in the context of European energy and oil markets, the capability to cover 70% of the domestic demand for fuel products through Petromidia and Vega refineries, supporting oil supply diversification of Europe (Kazakhstan having an estimated 30 billion barrels of oil reserves) and emergency stocks – mandatory for the national security of Romania, as well as producing sustainable energy and respecting EU and national environmental legislation (Petromidia being the first refinery to ensure the transition and exclusive production from Euro 4 to Euro 5, with a Sulphur content of 10 PPM).

The economic impact is assessed by considering the contribution to government revenues through paid taxes, controlled collection of excises (KMGI being authorized to operate 4 production tax warehouses through Rompetrol Rafinare and Rompetrol Gas), and contribution to national GDP (a gross value added, in 2015 only, of 0.6 billion $). The Group has a major impact on Romanian commercial balance by exporting finite goods (refined petroleum and petrochemical products), mostly in the Black Sea countries. The value of exports accounts for more than 4% of the total value generated by the manufacturing industry, being the largest exporter of oil products (Rompetrol Rafinare in 2015 exported an amount of ~2 million tons of fuel with a value of over 2 billion $).

Nevertheless – the Group’s impact is given by its contribution to employment (5000 employees in Romania) and developing of specialists in manufacturing of petroleum and petrochemicals products, as well as young workforce (considering that Romania is facing high unemployment rates for the “below 34 years” group, both at national level and especially in the SE and S regions). Through its national programs, sponsorship projects and employee-driven initiatives, KMGI invested in the past 7 years over 10 million $ in projects in the areas of healthcare, environmental protection, culture, education and leadership, proving its responsible citizenship.

The study proves the high competitiveness level of KMG International due to its shareholder – the state of Kazakhstan through the integrated company KazMunayGas, ensuring funding and working capital, direct access to sources of crude (Tengiz and Kashagan), a trading and supply chain system, as well as the investments in developing the retail network in 6 European countries. Additionally, the Group controls companies of industrial services, petrochemical production (Vega being the sole producer of modified road-use bitumen, n-hexane and niche products – solvents, heating fuels etc.).

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