Page 9 - FSU OGM Week 11 2021

FSUOGM POLICY FSUOGM

Putin orders review of oil taxation

RUSSIA RUSSIAN President Vladimir Putin has 24 television channel on March 11, Alekperov
ordered a review of the taxation system for warned of a “significant decrease in investment
Lukoil said in February fields containing highly viscous oil, after Lukoil activity” in 2021 because of the lack of support.
it had revised its CEO Vagit Alekperov complained that the “The greatest negative impact fell on the
investment plans loss of support for these projects had stymied super-viscous and viscous oils, where the tax
because of the changes. development. burden increased almost 25 times,” the CEO
Russian lawmakers approved a major over- explained, requesting that Putin resolve the issue
haul of oil industry taxation late last year, aimed with the finance ministry, which drafted the bill
at extracting more budget revenues from the sec- that removed the support last year. He added that
tor and simplifying the fiscal landscape. Among reduced investment in viscous projects would
other things, the changes stripped producers of harm local economies in places like the Komi
tax breaks at highly viscous fields. Projects tar- region.
geting these hard-to-recover resources until the VTB Capital (VTBC) estimates that Lukoil
start of this year paid much lower rates of min- and Tatneft, the biggest producers of highly vis-
eral extraction tax (MET). cous oil in Russia, stand to gain $1bn and $0.7bn
Lukoil said in February it had revised its of EBITDA respectively in 2021 if the previous
investment plans because of the changes. Instead tax relief were reintroduced.
of expanding output at the highly viscous Yareg- The government is encouraging producers
skoye field in Russia’s Komi region to 75,000 bar- that lost support to switch affected projects to a
rels per day as planned, the company will instead new excess profit tax (EPT) system, although this
focus on maintaining production at the current will not give them such great concessions as they
level of just above 48,000 bpd. previously enjoyed. Lukoil is yet to decide which
In a conversation with Putin on the Russia projects to move to EPT. ™

Small-scale LNG needed to boost Far

East gas access: Russian PM

RUSSIA SMALL-SCALE LNG is needed to increase modern reliable fuel and energy base we cannot
access to gas supply in the Russian Far East and talk about accelerating economic growth in the
support economic growth, Russian Prime Min- Far East.”
ister Mikhail Mishustin said on March 15. The PM said it was therefore necessary to
The level of gasification in the Far East is very study the delivery of LNG in containers to gas
low and this needs to be addressed, Mishustin users as an alternative to conventional gasifica-
said at a meeting on the region’s development, tion involving the construction of new pipelines.
the government reported in a statement. Russia is about to embark on a RUB1.9 tril-
“Despite its large reserves of this natural raw lion ($25bn) ten-year gasification programme,
material, the level of gasification [in the Far East] aimed at expanding the share of the population
is three times lower than the national average,” with access to gas from the current 70% to 83% Russian Prime Minister
the PM said, estimating that only 18% of the by 2030. ™ Mikhail Mishustin.
population had access to gas supply.
The Far East is sparsely populated, which
can make establishing pipeline infrastructure
to many settlements unfeasible. At the same
time the region has significant gas resources,
but development has been impeded because of a
lack of a market and constraints on exports. The
Power of Siberia pipe to China runs through
the Far East, but only state-owned Gazprom is
allowed to use its capacity.
“The reasons are known and understanda-
ble, you don’t need to list them,” Mishustin said.
“The main question today is not who is to blame
but what to do. It is quite obvious that without a

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