Page 4 - FSUOGM Week 43

FSUOGM COMMENTARY FSUOGM

Lukoil, Tatneft react to

loss of tax breaks

The two private producers were hit hard by Russia's major overhaul of oil taxation

RUSSIA TWO of Russia's largest independent oil produc- Tatneft has invested some RUB105bn
ers are pondering their next steps after the gov- ($1.4bn) in Ashalchinskoye and other hard-to-
WHAT: ernment's recent overhaul of oil taxation, which recover fields since 2006, Khalimov said, as well
Lukoil and Tatneft have has deprived them of billions of dollars of fiscal as in infrastructure to produce steam and trans-
lost billions of dollars of support. port the extracted oil. Its current hard-to-recover
tax breaks as part of new Russian lawmakers have approved a new taz projects employ around 4,000 people, and execu-
reforms. bill, aimed at extracting more budget revenues tives have warned before that the removal of tax
from the sector and simplifying the fiscal land- breaks could spark social unrest.
WHY: scape. The changes have hit Lukoil, Gazprom “We have to continue pumping steam and
Russia wants to extract Neft and Tatneft hardest, while the country’s continue producing” at these sites, Khalimov
more revenue from the top oil producer Rosneft has fared relatively explained.
sector and create a more well, even securing new tax breaks as part of the Heavy oil is highly viscous and cannot easily
uniform fiscal landscape. reforms. flow to production wells under normal reser-
voir conditions. Because of the higher extrac-
WHAT NEXT: Tatneft tion costs involved, Tatneft previously received
Tatneft is revising its Tatarstan-based oil producer Tatneft will not a break on mineral extraction tax (MET) at
investment plans in invest in new heavy oil-containing fields until it these projects. Developing heavy viscous oil in
response to the changes, has decided on a new development programme, shallow reservoirs is central to Tatneft’s growth
while Lukoil has warned a company has official has said, after the new tax strategy.
its recovery will be bill stripped the producer of concessions for such The new bill passed by the State Duma has
stunted. projects. removed this support along with concessions
In the oil firm’s corporate magazine, deputy granted to other hard-to-recover projects.
executive director Rustam Khalimov said Tatneft Tatneft was hit hardest out of Russia’s leading
would continue with its current, hard-to-recover producers by the changes. Around 60% of its
heavy oil projects. As the company uses steam-as- output last year received breaks either because
sisted gravity drainage (SAGD) to warm forma- the oil was highly viscous or found in fields
tions and pump heavy oil to the surface, it will not nearing depletion. This amounted to a saving
be able to halt production until after the target of RUB89bn ($1.4bn) in 2019, or 27% of its core
hydrocarbons are recovered, he said. earnings that year.

P4 www. NEWSBASE .com Week 43 28•October•2020