Page 9 - FSUOGM Week 09 2021

FSUOGM POLICY FSUOGM

Russia's finance ministry prepares law

relieving oil tax burden

RUSSIA RUSSIA’S finance ministry announced in Feb- to grant an investment-linked tax deduction to
ruary it had prepared a draft law addressing oil HVO, even under high oil prices.”
Highly viscous oil industry taxation, after increasing the upstream VTBC estimates that, were HVO to be moved
will be included in tax burden for most producers last year. to the EPT system, companies would enjoy $5.20
the excess profit tax The bill confirms the potential inclusion of per barrel of tax relief when Urals trades at $46.80
system. highly viscous oil (HVO) in the excess profit per barrel. This would result in a $96mn gain for
tax (EPT) system. Projects targeting this hard- Tatneft and a $87mn gain for Lukoil. However,
to-recover resource until this year paid much VTBC notes it is likely the ministry will create
lower rates of mineral extraction tax (MET). new EPT conditions for HVO, making it hard to
But they were stripped of these breaks by the predict the ultimate impact.
finance ministry following a reform law passed The ministry’s tax reforms last year are
late last year. expected to bring in an extra RUB227bn ($3bn)
The inclusion of HVO in the EPT system in government revenue this year, rising to
should improve profitability at fields containing RUB361bn in 2022 and RUB242bn in 2023. The
the oil, many of which are operated by Tatneft ministry wants to avoid reversing this gain, while
and Lukoil. The finance ministry has proposed offering some support to ensure investment in
transferring HVO to the EPT system from 2024, challenging projects does not collapse.
meaning the current tax burden will remain for Russian state oil major Rosneft asked for tax
another three years. Lukoil has already warned breaks last year at the Berezovskaya gas forma-
it will cut investment in HVO in response to last tion in Western Siberia and that request has been
year's tax reforms, including at its Yaregskoye oil- granted. Gas produced from the formation will
field in Russia’s Komi region. be subject to a lower MET rate under the minis-
“The government would like to avoid stop- try’s new bill. The main beneficiary of this change
ping the development of HVO deposits,” analysts will be the 157bn cubic metre Kharampurskoye
at VTB Capital (VTBC) wrote in a notice. “At the gas field in Yamalo-Nenets, where Rosneft is
same time, the finance ministry does not intend partnered with BP. ™

Week 09 03•March•2021 www. NEWSBASE .com P9