Romanian prosecutors announced on May 9 that they had seized some €680mn worth of assets owned by four people involved in the privatisation of the country’s largest refinery, Petromidia, in 2000. Prosecutors also seized assets of KazMunaiGas (KMG) International, Oilfield Explorations Business Solutions (formerly Rompetrol) and Rompetrol Rafinare, the company that operates the Petromidia refinery.

KMG International is now in the process of selling the majority stake in the refinery to China Energy Company Limited (CEFC) in a $680mn deal.

The Directorate for Investigating Organised Crime and Terrorism (DIICOT) said it was taking action to recover alleged losses incurred by the state budget. The losses are estimated at RON1.74bn, $290mn and €35mn - some €680mn altogether.

DIICOT is investigating the activities of a group made up of 14 individuals suspected of tax evasion, money laundering, market manipulation and other illegal activities. The group was allegedly formed in 1998 and is suspected of involvement in the privatisation of the Petromidia refinery as well as the conversion of the refinery’s historic debt.

Rompetrol, the former state company dealing with oil and gas exploration, was owned by local investor Dinu Patriciu when it took over the majority stake in the Petromidia refinery in 2000 and registered it as Rompetrol Rafinare. Petromidia's debts to the state, dating from before the privatisation, were converted into $660mn, 10-year convertible bonds under an emergency ordinance in 2003.

Rompetrol is now owned by the Dutch-registered Rompetrol Group, which was re-named KMG International after Patriciu sold it to Kazakh state company KazMunaiGas (KMG) in 2007. The Kazakh company acquired 75% of the Rompetrol Group NV in 2007 and later took over the remaining 25%.

In the meantime, Patriciu - supposedly the mastermind of the actions investigated by DIICOT - died.

KMG was not directly involved in the actions being investigated by prosecutors. However, KMG International, Oilfield Explorations Business Solutions and Rompetrol Rafinare confirmed that they had been summoned as civil liability parties in a case currently under investigation by DIICOT.

Neither KMG nor KMG International had been officially informed of any investigations such as those mentioned in the DIICOT press release at the time of the Rompetrol Group acquisition in 2007, KMG International stressed.

“These are new developments which may have a significant negative impact on KMG’s strategic objectives and development plans in Romania,” KMG International said in an official statement.

“KMG International will use all legal mechanisms, both locally and internationally, to protect their investments made since the acquisition,” the company added.

Under an agreement signed on April 7, CEFC will purchase 51% of KMG International's equity shares for $680mn, after which the two sides will integrate their resources for joint exploration of international oil and gas markets. The deal is expected to be completed by October this year.

The issue of the $660mn bonds was tackled in 2014 by KMG and the Romanian government recently after a long dispute between the two parties, though the settlement has not yet been completed.

In the first stage, prior to 2014, the state was assigned a 44.7% stake in Rompetrol Rafinare under the conversion of the refinery’s bonds – a deal opposed by the government but approved by a court.

In January 2014, Romania’s government endorsed a bill under which KMG International agreed to buy 26.7% of Rompetrol Rafinare from the Romanian government for $200mn and set up a $150mn investment fund, of which 20% would be handed over for free to the Romanian state. The government kept an 18% stake in Rompetrol Rafinare after the transaction. The sale of the 26.7% stake in Rompetrol Rafinare has not yet been completed and the government says an auction has to be organised.