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Tax Treatment of Oil and Gas Sector: Choosing Priorities

  • ID: 5237698
  • Report
  • January 2021
  • Region: Global
  • 51 Pages
  • National Energy Security Fund

After the Cabinent finalised the terms of the tax manoeuvre that suggested gradual replacement of the export duty with a higher rate of mineral resources extraction tax (MRET); agreed to use additional income tax (AIT) as a pilot regime, and established a damper mechanism; it seemed that the tax rules of the game for the oil industry became relatively stabilised. And, crucially, that the government realised the importance of stimulating investment in production.

But prices collapsed - and the government needed money again. Alas, its source is seen as always in the oil industry. This means that the government is returning quickly to its accustomed priority: patching up urgently current holes in the state budget.

Amendments to the Tax Code have been drawn up as a matter of special urgency and secrecy that will cost the industry more than 300 billion roubles in 2021 alone.

A number of companies have been able to get a tax “cashback”, though, certain tax refunds. Yet all the same, even with all the “discounts”, the Finance Ministry will have a surplus of more than 200 billion roubles in 2021.

In 2022, the Finance Ministry’s “tax premium” rises to 240 billion roubles. The Finance Ministry has got the AIT parameters to be altered, converted fields with depletion incentives to the AIT regime, and cancelled tax incentives for highly-viscous oil and a number of MRET and export duty incentives. At the same time, the Finance Ministry claims that it does not, after all, sticks exclusively to “fiscal man-eating”. Producers of high value added commodities have been given some breaks: the Ministry is ready to subsidise production growth in petrochemistry.

From the report you will learn:

  • How dependence of the Russian budget on oil and gas revenue changed in 2020
  • What the preliminary tax results of the year are for the companies
  • How the “fiscal autumn” ended up for the oil sector
  • What is in store for investment in the upstream segment
  • Which integrated oil companies were able to wring at least some concessions out of the Finance Ministry and which suffered a defeat
  • What awaits the damper mechanism
  • Who of the bureaucrats showed their effectiveness in departmental battles and who on the contrary
  • Whether the changes will help at least the refining and petrochemical segments
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Chapter 1. Russia’S Oil and Gas Budget in New Economic Conditions of 2020     

Chapter 2. Transformation of AIT: Fighting Against Excess Benefits Instead of Stimulating Investment     
2.1 Results of First Year With AIT  
2.2 Ait Transformation: Carrot Turned Stick     
2.3 Benefits for Benefits     

Chapter 3. Tax Status Quo for Oil Refining, Triumph for Petrochemistry     

Chapter 4. Gazprom Losing to Private Lngã     
Possible Developments

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All materials and sources used for issuing each report are thoroughly verified and analyzed by experts. The information is based on industry statistics, data of oil and gas companies, information of federal and regional mass-media, materials of conferences and round tables.

The analyst has pored on the following goals:

  • Analyses of oil & gas and power industries, political risks within the energy sector, geopolitical problems in connection with the production of hydrocarbons and their supply to the global market, strategic development of companies, new production and transportation projects
  • Consulting on the influence of political factors on the oil & gas business, decision-making within Russian energy companies and government bodies dealing with the energy industry
  • Development of energy business concepts in Russia
  • PR services for oil & gas corporations
  • Analysis of images and reputations of energy corporations