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Bargain over gas production tax

The bargain between gas producers and the finance ministry over the future gas production tax continues. Kudrin’s ministry seems to be ready to make concessions but they are insignificant. The gas production tax on Gazprom is to be 480 rubles per 1,000 cu m in 2012, 600 rubles in 2013, 635 rubles in 2014. Previously the finance ministry planned to raise the tax to 536 rubles per 1,000 cu m as of 2012.

Although government officials call this decision “almost final”, in reality this is just another stage in the non-stop struggle between pros and cons of the tax rate advance. Gazprom still hopes to persuade the government to offset growth in the gas production tax by some measures it suggests.

One of the variants is to accelerate advance in domestic gas prices (however, there are plans to slow down the pace of their growth before the elections). Another variant has been recently put forward by Gazprom deputy CEO Alexander Ananenkov; he suggested replacing increase in the gas production tax rate by its differentiation. The concern would agree to a higher gas production tax on new deposits located close to the infrastructure. However, Gazprom wants preferences for old deposits containing low pressure gas. Finally, the gas giant may deliberately decrease expenses on investment programs making state authorities choose between decline in taxes and delaying development of new deposits. It seems we will face long-lasting uncertainty within the triangle of the gas production tax, growth in domestic gas prices and investment expenses.

By Stanislav Mitrakhovich, NESF leading expert

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