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New Tax Treatment of Oil and Gas Industry

The decline in oil prices has led Russian oil companies to say that production and export have become unprofitable.

The industry has formulated a clear request to the executive: taxes need to be lowered. And, Vladimir Putin has proved that the oil and gas industry remains his priority.

A plan has been developed to seriously diminish the fiscal burden on the sector. Yet, there remain many questions.

Who will benefit most from the new tax treatment? Will this lead to a rise in investment or primarily a rise in dividend payments to shareholders? What will be the economic and political implications of the innovations?

The answer to these and other questions you will find in the new report.

The report offers an in-depth discussion of the following subjects:

Overview of the current tax system implemented during Vladimir Putin’s first term as president
- The reasons for its appearance, the key lobbyists for it to be implemented
- Its pros and cons for the industry, the federal budget, and individual corporations
Fight for tax reductions: the key players and the disposition of the combat
- The industry versus the Finance Ministry
- Putin as an arbiter
- The role of President Medvedev in tax disputes
- The struggle between elite clans for tax treatment of the oil and gas sector
- Pull-down prospects for the “Kudrin scissors” (the mechanism whereby the Finance Ministry expropriates most of oil companies’ profits)
New Putin package. Analysis of the most recent tax cut initiatives
- Reform of the export duty levying system
- Differentiation of mineral resources extraction tax
- Tax benefits for eastern and offshore projects
- Attempts to stimulate the beginning of the development of greenfield sites and the reanimation of brownfield ones
- Amortisation benefits for oil and gas equipment
- Key beneficiaries and potential losers
The problem of taxation in the market for petroleum products. Struggle for raising gas extraction tax
Forecast of developments

The contents of the report:

Introduction	2
Chapter 1. Oil & Gas Sector Taxation System Developed under Vladimir Putin as President	4
Chapter 2. Key Groups of Interests in Fight for Change of Oil & Gas Sector Tax Treatment	11
Chapter 3. Mineral Extraction Tax: new approaches	30
Chapter 4. Export Duties: Putin’s Main Present to Industry	49
Chapter 5. Changes in Tax Treatment of Petroleum Products	60
Conclusion. No Full Stop. Forecast of Developments	68

Date of issue	April 30, 2009

If you are interested to obtain please contact » Elena Kim

Other issues:

Special report:

Liquefied Natural Gas Outlook: Expectations and Reality

World market has shown interest to liquefied gas. Russia has so far been aside of it. However, producers have announced several large LNG projects. The new study will help investigate this delicate subject and understand what is in store for LNG production and export in the nearest years.

Analytical series “The Fuel and Energy Complex of Russia”:

State regulation in the oil and gas sector in 2011 and prospects for 2012

The year 2011 turned out to be rather contradictory for the oil and gas industry. On one side, preliminary results of basic parameters seem quite satisfactory. On the other side, the depletion of oil production growth potential is becoming more obvious. Prime Minister Vladimir Putin several times mentioned that the oil industry reached its peak. This was described as an ordinary event, although in reality it reflects recognition of strategic mistakes once made.

The Present and Future of Gazprom

Gazprom’s 2010-2011 financial results were phenomenal. An employment contract of Gazprom CEO Alexey Miller, who has been managing the gas giant for 10 years, was prolonged ahead of time for another five years. However, the country’s main company found itself under powerful pressure both on the domestic and external markets.

State management in the oil and gas sector: Last autumn of current political cycle

The main political intrigue of the upcoming election cycle would seem to be over. Vladimir Putin is set to return to the president’s office, while Dmitry Medvedev is to chair the Cabinet. But in reality, everything is just about to begin. Some scenarios of reformatting Russian state authorities are indeed ruled out. Yet, there are many unclear things, including the question of the oil and gas sector management. Changes in the system are unavoidable. There is temptation to fix the rules of the game for the next six years, which adds a special connotation to the upcoming transformation.

Central Asia and Caspian Region: Problems of Development and Transportation of Hydrocarbons

Despite problems related to signing contracts on purchasing gas from the Caspian region countries, the European Commission is fully determined to implement Southern Corridor projects to reduce dependence on Russia. In its turn, Moscow keeps steadily promoting its alternative South Stream project. But the price of the question puts both sides into a difficult position.

Export Strategy of Russia’s Oil and Gas Sector

In 2010 the Russian oil industry set an absolute record in terms of production. An oil pipeline to China has been launched this year expanding our potential of oil supplies to Asia. Diversification of export routes seemed to be quite a reasonable strategy on the background of growing production. However, there are certain factors that should be taken into account.

All reports for: 2011 , 2010 , 2009 , 2008 , 2007

Consulting services, political risks assessment on the Fuel & Energy Industry, concern of pilitical and economic Elite within the Oil-and-Gas sector.
National Energy Security Fund © 2007

New Tax Treatment of Oil and Gas Industry

Overview of the current tax system implemented during Vladimir Putin’s first term as president

Fight for tax reductions: the key players and the disposition of the combat

New Putin package. Analysis of the most recent tax cut initiatives

The problem of taxation in the market for petroleum products. Struggle for raising gas extraction tax

Forecast of developments