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New Tax Treatment of Oil and Gas Industry

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:
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After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

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