MOSCOW, July 25 (Reuters) - Russia is planning to overhaul its oil industry tax, introducing a profit-based system designed to boost government revenue and lift output from 2018, according to documents seen by Reuters and industry sources.
The current tax is currently based on production and exports. Companies have long been lobbying for profit-based taxation, saying it will spur production and it better reflects exploration costs and risks.
The proposed tax system could be applied first to pilot projects with total production of between 10 million tonnes and 15 million tonnes per year (between 200,000 barrels per day and 300,000 barrels per day).
Low oil prices and western sanctions have left holes in the state budget. Under the new scheme, the budget may still lose up to $771 million (50 billion roubles) if it is introduced under an oil price of $50 per barrel. But the loses could be eliminated if production increases by a third.
According to a document obtained by Reuters, the energy ministry and the finance ministry have worked out the new system for both mature and new fields. An industry source confirmed the authenticity of the document, which was dated June 30.
The energy ministry told Reuters "the issue is still under discussion."
A source close to the finance ministry said all the proposals are subject to change, and the industry source said there are several unresolved issues.
"Debates are still raging about whether to hike the export fee for fuel oil or not," the industry source said, requesting anonymity as he is not authorised to speak publicly on the issue.
A rise in fuel oil fees will hit companies that have lagged behind a massive modernisation of refineries that was launched in 2011 to improve the quality of oil products.
The industry source said next year's rate of mineral extraction tax for gas giant Gazprom was also still being discussed.
Russian Energy Minister Alexander Novak has said the finance and energy ministries have overcome disagreements over a new tax system for the sector.
The finance ministry, the custodian of the state budget, had opposed the idea of profit-based tax, claiming that will allow producers to conceal income in order to minimise tax payouts.
The new system for brownfields may cut tax by between 16 and 20 percent depending on the oil price, while the internal rate of return for greenfields in Eastern Siberia is seen rising to 19.3 percent, up from 16.9 percent under the current tax system.
According to the draft proposal, several greenfields which are currently benefiting from lower taxes will increase their payment into the budget by 6 percent.
View Full Article
Copyright 2017 Thomson Reuters. Click for Restrictions.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you