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Russia Upstream Fiscal and Regulatory Report - MET to Stabilize Tax Burden as Export Duties Phase Out

  • ID: 4650519
  • Report
  • August 2018
  • Region: Russia
  • 45 pages
  • GlobalData
1h Free Analyst Time

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Russia Upstream Fiscal and Regulatory Report - MET to Stabilize Tax Burden as Export Duties Phase Out


The vast majority of upstream oil and gas operations in Russia are governed by subsoil licenses under a concession-type regime. Currently, the upstream tax burden is made up of two main elements, Mineral Extraction Tax (MET) and export duties. Oil export duty will be phased out from 2019-2024, but the overall tax burden will remain relatively stable as an element equivalent to the export duty will be added to MET rates. A new profit-based tax (NDM) regime will also come into force in 2019 for selected fields included in a pilot phase, with the regime applying a reduced rate of MET in favor of a 50% tax on field profits.

“Russia Upstream Fiscal and Regulatory Report - MET to Stabilize Tax Burden as Export Duties Phase Out”, presents the essential information relating to the terms which govern investment into Russia’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Russia’s upstream oil and gas investment climate.

  • Overview of current fiscal terms governing upstream oil and gas operations in Russia
  • Assessment of the current fiscal regime’s state take and attractiveness to investors
  • Charts illustrating the regime structure, and legal and institutional frameworks
  • Detail on legal framework and governing bodies administering the industry
  • Levels of upfront payments and taxation applicable to oil and gas production
  • Information on application of fiscal and regulatory terms to specific licenses
  • Outlook on future of fiscal and regulatory terms in Russia.
Reasons to buy
  • Understand the complex regulations and contractual requirements applicable to Russia’s upstream oil and gas sector
  • Evaluate factors determining profit levels in the industry
  • Identify potential regulatory issues facing investors in the country’s upstream sector
  • Utilize considered insight on future trends to inform decision-making.
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1 Table of Contents

1.1. List of Tables
1.2. List of Figures

2. Regime Overview

3. State Take Assessment

4. Key Fiscal Terms- Concession

4.1. Royalties, Bonuses and Fees
4.1.1. Signature Bonus
4.1.2. Annual Rental Fee
4.2. Mineral Extraction Tax
4.2.1. Crude Oil
4.2.2. Condensate
4.2.3. Natural Gas
4.2.4. New Offshore Field Incentives
4.2.5. Mineral Extraction Tax Holidays
4.2.6. Special Deduction for Crude Oil
4.2.7. Tax deduction for NGLs Stripped from Condensate
4.2.8. Special Black Sea Deduction for Gas
4.3. Export Duty
4.3.1. Crude Oil
4.3.2. Natural Gas and LNG
4.3.3. Liquefied Petroleum Gas
4.3.4. Export Duty Exemptions
4.4. Additional Income Tax on Hydrocarbon Production (Pilot for Selected Fields)
4.5. Direct Taxation
4.5.1. Corporate Income Tax
4.5.2. Deductions and Depreciation
4.5.3. Investment Tax Deduction
4.5.4. Withholding Tax
4.6. Indirect Taxation
4.6.1. Value Added Tax
4.6.2. Import Duties
4.6.3. Property Tax
4.6.4. Land Tax
4.6.5. Excessive Flaring Fee

5. Key Fiscal Terms - Production Sharing Agreement

5.1. Royalties, Bonuses and Fees
5.1.1. Royalty
5.1.2. Bonuses and Other Fees
5.2. Cost Recovery
5.3. Profit Sharing
5.4. Taxation
5.4.1. Corporate Income Tax
5.4.2. Deductions and Depreciation
5.4.3. Value Added Tax
5.4.4. Tax Exemptions
5.5. Fiscal Stability

6. Regulation and Licensing

6.1. Legal Framework
6.1.1. Governing Law
6.1.2. Contract Type
6.1.3. Title to Hydrocarbons
6.2. Institutional Framework
6.2.1. Licensing Authority
6.2.2. Regulatory Agency
6.2.3. National Oil Company
6.3. Licensing Process
6.3.1. Auction Notice
6.3.2. Application Requirements
6.3.3. Auction Process
6.4. License Terms
6.4.1. Duration and Relinquishments
6.4.2. Work Obligation
6.4.3. Environmental Regulation
6.4.4. Local Content
6.5. Restrictions on Foreign Investment

7. Outlook

8. Appendix

8.1. References
8.2. Contact Us
8.3. Disclaimer

1.1 List of Tables

Table 1: Regime Overview
Table 2: Russia, Annual Rental Fees (RUB/km2)
Table 3: Russia, MET Base Rates - Crude Oil (RUB/tonne)
Table 4: Russia, Complexity Coefficient Values
Table 5: Russia, Oil MET - Periods in which KH = 0 for Specified Regions (Previously Regional Tax Holiday Periods)
Table 6: Russia, MET Rates - Condensate (RUB/tonne), 2011-June 30, 2014
Table 7: Russia, Notional Export Duty - Condensate (US$/tonne)
Table 8: Russia, Export Profitability Coefficient Values
Table 9: Russia, MET Rates - Non-Associated Gas, 2004-June 30, 2014
Table 10: Russia, New Offshore Field Incentives
Table 11: Russia, Export Duty - Crude Oil (US$/tonne)
Table 12: Russia, Marginal Export Duty Rates - Crude oil (%)
Table 13: Russia, Reduced Oil Export Duty (US$/tonne)
Table 14: Russia, Fields Eligible for Export Duty Reduction, 2019 onwards
Table 15: Russia, Export Duty - LPG (US$/tonne)
Table 16: Russia, Export Duty Exemptions
Table 17: Russia, Corporate Income Tax Rate (%)
Table 18: Russia, Depreciable Asset Classes
Table 19: Russia, Withholding Tax Rates (%)
Table 20: Russia, Maximum Property Tax Rates (%)
Table 21: Russia,Kharyaga Royalty Rates (%)
Table 22: Russia, Sakhalin I Bonuses and Fees (US$)
Table 23: Russia, Sakhalin II Bonuses and Fees (US$)
Table 24: Russia, Kharyaga Bonuses and Fees (US$)
Table 25: Russia, Profit-Sharing - Sakhalin I (%)
Table 26: Russia, Profit-Sharing, Sakhalin II (%)
Table 27: Russia, Profit-Sharing - Kharyaga (%)
Table 28: References

1.2 List of Figures

Figure 1: Regime Flow Chart - Concession
Figure 2: Regime Flow Chart - Production Sharing Agreement
Figure 3: Russia, Indicative NPV10/boe, IRR and State Take Comparison, Regional
Figure 4: Russia, Legal Framework
Figure 5: Russia, Institutional Framework 36
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