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Oil Tax Policy: Squeezing Last or Chance to Restart Industry?

Oil Tax Policy: Squeezing Last or Chance to Restart Industry?

The government has historically viewed the oil industry as a donor to the federal budget. So a whole series of repressive decisions about oil companies were passed in autumn 2020 that were motivated by the need to collect additional revenue to the state budget. The scale of the changes was very large; in fact, a new tax regime was launched.

At the same time, the budget-drafting campaign in autumn 2021 became a stark contrast to 2020. The Finance Ministry’s focus of attention shifted to the metals and mining industry, while oil companies got a certain respite.

The question is what will be next. Now a serious discussion is under way over the idea that tax preferences must result in a rise in investment. Simultaneously, though, demand for oil is expected to decline soon, which calls into question the advisability of new capital investment. So the oil industry again finds itself at a serious crossroads.

However, the government’s next steps will to a great extent depend on an evaluation of how the newly rebuilt oil industry taxation system works now. This is actually what our report deals with, too.

The report covers in detail the following aspects:

Dynamics of the tax burden on mineral resources production

Detailed analysis of the most recent significant changes in the oil industry taxation

  • First of all the transformation of the MET relief regime and export duty benefits, including oil from new fields with special physical and technical properties

EPT as the Finance Ministry’s new favourite

  • Why the Cabinet has got to like EPT?
  • New classification of EPT groups
  • Comparison of the MET relief regime and EPT

OPEC+ deal compliance and fiscal decisions

  • New taxes and changes in the profile of oil production by companies

Adjustments to the floating excise mechanism

  • Introduction of an investment factor to the formula

Situation with heavy and extra heavy oil production

  • Fight to regain incentives and its prospects

Analysis of fields eligible for special MET deductions

  • Who has kept benefits and even got new ones
  • Why not all benefits wangled work

Medium-term tax trends and risks

  • Possibility of the introduction of carbon payments as a new tax

Contents of the report:

INTRODUCTION 3
TAX BURDEN ON AND FISCAL REGIMES FOR OIL INDUSTRY 4
Dynamics of Tax Burden on Mineral Resources Production 4
Changes in Oil Industry Taxation in 2021 and 2022 5
Adjustments to Floating Excise Mechanism 12
PRODUCTION DYNAMICS DEPENDING ON TAX REGIMES AND BENEFITSIN CONNECTION WITH LEGISLATION CHANGES. OIL COMPANIES’ PLANS 18
Changes in Oil Production Profile by Tax Regimes and Benefits 18
Cancellation of MET benefits for Depleted Fields: Losses and New Opportunities 22
North Caucasus and Sakhalin Region: Rosneft’s ‘Leftover’ Assets 25
‘Bogged Down’ in Benefits: Victims of Cancellation of Extra Heavy and Heavy Oil Incentives 25
Cancellation of Incentives and Deductions for Fields with Special Physical and Technical Properties. Will Migration to EPT Give a New Chance? 32
‘Custom’ Deductions: ‘Manual Control’ Taxation 35
MEDIUM-TERM FORECAST 39
Date of release: January 21, 2022

If you are interested to obtain please contact » Elena Kim

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

State regulation of the oil and gas sector in 2021, 2022 outlook
Gazprom on Pricing Crest. Current Situation in European Gas Market
Oil Tax Policy: Squeezing Last or Chance to Restart Industry?
Europe’s Carbon Border Adjustment Mechanism: Prospects for Russian Suppliers, Russia’s Potential Response
The Arctic: Breakthrough Territory or White Hole?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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