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New Tax Treatment of Oil and Gas Industry

New Tax Treatment of Oil and Gas Industry

The decline in oil prices has led Russian oil companies to say that production and export have become unprofitable.

The industry has formulated a clear request to the executive: taxes need to be lowered. And, Vladimir Putin has proved that the oil and gas industry remains his priority.

A plan has been developed to seriously diminish the fiscal burden on the sector. Yet, there remain many questions.

Who will benefit most from the new tax treatment? Will this lead to a rise in investment or primarily a rise in dividend payments to shareholders? What will be the economic and political implications of the innovations?

The answer to these and other questions you will find in the new report.

The report offers an in-depth discussion of the following subjects:

  • Overview of the current tax system implemented during Vladimir Putin’s first term as president

    • The reasons for its appearance, the key lobbyists for it to be implemented
    • Its pros and cons for the industry, the federal budget, and individual corporations
  • Fight for tax reductions: the key players and the disposition of the combat

    • The industry versus the Finance Ministry
    • Putin as an arbiter
    • The role of President Medvedev in tax disputes
    • The struggle between elite clans for tax treatment of the oil and gas sector
    • Pull-down prospects for the “Kudrin scissors” (the mechanism whereby the Finance Ministry expropriates most of oil companies’ profits)
  • New Putin package. Analysis of the most recent tax cut initiatives

    • Reform of the export duty levying system
    • Differentiation of mineral resources extraction tax
    • Tax benefits for eastern and offshore projects
    • Attempts to stimulate the beginning of the development of greenfield sites and the reanimation of brownfield ones
    • Amortisation benefits for oil and gas equipment
    • Key beneficiaries and potential losers
  • The problem of taxation in the market for petroleum products. Struggle for raising gas extraction tax

  • Forecast of developments


The contents of the report:

Introduction 2
Chapter 1. Oil & Gas Sector Taxation System Developed under Vladimir Putin as President 4
Chapter 2. Key Groups of Interests in Fight for Change of Oil & Gas Sector Tax Treatment 11
Chapter 3. Mineral Extraction Tax: new approaches 30
Chapter 4. Export Duties: Putin’s Main Present to Industry 49
Chapter 5. Changes in Tax Treatment of Petroleum Products 60
Conclusion. No Full Stop. Forecast of Developments 68
Date of issue April 30, 2009

If you are interested to obtain please contact » Elena Kim

Other issues:
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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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