The government of the Russian Federation approved at a meeting on November 23 a package of bills to introduce a tax on additional income from oil production (NDM). The Energy Ministry expects that the new tax regime will be approved by the State Duma in the first quarter of next year and will come into force already from the beginning of 2019.
Currently, oil companies pay mineral extraction tax (MET) and export duties, both levies are levied on revenue. The new tax reform provides for a reduction in the severance tax and the launching of a tax on added income (NDA), the rate of which will be 50% of the revenue from oil sales, net of export duty, MET, actual extraction, transportation,
As noted in the Ministry of Energy, the NDM will be distributed to four groups of fields: new fields of Eastern Siberia with a depletion of less than 5%, fields that enjoy export tariff relief, operating fields in Western Siberia with depletion from 10% to 80% (not more than 15 million tonnes ); New deposits in Western Siberia with a depletion of less than 5% with aggregate reserves of not more than 50 million tons per year.
Energy Minister Alexander Novak at a meeting on the development of the industry on November 21 noted that a list of pilot projects for NDM in Western Siberia has already been formed, which includes 35 licensed sites being developed by Rosneft, Lukoil, Gazprom Neft, Surgutneftegaz and independent oil companies. The total oil production in these areas in 2016 was 14.7 million tons, recoverable oil reserves are estimated at 900 million tons.
According to him, the transition of these sites to NDM “will allow in 2019-2035. carry out more than 0.5 trillion rubles of additional investment and increase oil production by more than 100 million tons relative to the current production profile. ”
It is expected that the falling budget revenues will only take place for several years. At the same time, they will be completely compensated for the fourth year, and for 18 years of receipt to the budget, according to the minister, will increase by almost 1 trillion rubles.
“For the industry this is an important step that will solve the problem of maintaining the production level in accordance with strategic documents in the face of the constantly deteriorating quality of the mineral resource base, including with emphasis on mature fields in Western Siberia. The new tax regime takes into account both the interests of the industry and the budget, “said Alexei Texler, the first deputy energy minister, following the Cabinet meeting.
Previously it was assumed that the NDM for several pilot projects had to be earned in 2018 as an experiment.
In late October, the chairman of the State Duma Committee on Energy Pavel Zavalny said that the document has not yet been submitted to the parliament and MPs may not have time to receive it in all three readings this year. On November 20, Texler confirmed to journalists that the launch of the NDM was postponed.
“We have all taxes, this is part of the tax code, must be accepted and published before December 1 in order to enter into force (from the beginning of next year -” Gazeta.Ru “),” he said.
Postponement of the launch of NDM will increase the net profit of companies that are developing the most profitable fields in 2018 by about 10-20 billion rubles and at the same time increase their competitiveness in terms of financial indicators by 30% -35%, the director of the analytical department Golden Hills – Kapital AM »Mikhail Krylov.
Enterprises of the Russian oil and gas sector have been under pressure on financial indicators recently despite rising oil prices, and the postponement of the introduction of NDMs will focus the industry on more readily available resources, the expert explained. Bad it can be for those who have fewer available projects, he believes.
Deputy Energy Minister Kirill Molodtsov earlier noted that the introduction of NDM would increase the oil recovery factor (CIN) up to 35% and would increase production by 10-12 million tons per year.
The positive effect of the introduction of NDM at the first stage will be rather modest, the director of the group on natural resources and commodities Fitch Ratings Dmitry Marinchenko.
This is due to the relatively small list of fields that fall under the experiment (they now produce less than 3% of the oil produced in Russia), as well as the fact that its parameters were originally formulated in such a way that tax revenues at a stable production level did not significantly decrease.
“The introduction of NDMs, albeit for the time being, is an important step, which in the future should make the Russian tax system more flexible, which should stimulate production, including at the most developed fields in Western Siberia. The transition to the NDM should make the tax system more transparent, and in the long term it may allow Russia to keep production at the record levels it is today, “the expert believes.
The chief economist of VYGON Consulting, Sergei Yezhov, believes that they will benefit from both the state and the company from pilot projects. Reducing the tax burden on each ton of oil produced will be offset by increased production. If it is possible to increase oil production by 20% on pilot projects in the first year of the NDM, then there will be no drop-off budget revenues at all.
It is important that government agencies set up a system for monitoring the results of the use of NDM at pilot facilities, Yezhov stresses. Only in this case it will be possible to ascertain the success of the experiment and in the long term to scale the application of NDM to the entire industry.
Author: Ekaterina Katkova
Article in Russian: Gazeta.ru