Russia Upstream Fiscal and Regulatory Report - MET to Stabilize Tax Burden as Export Duties Phase Out

GlobalData
45 Pages - GLDATA64871
$1,500.00

Summary

The vast majority of upstream oil and gas operations in Russia are governed by subsoil licenses under a concession-type regime. Currently, the upstream tax burden is made up of two main elements, Mineral Extraction Tax (MET) and export duties. Oil export duty will be phased out from 2019-2024, but the overall tax burden will remain relatively stable as an element equivalent to the export duty will be added to MET rates. A new profit-based tax (NDM) regime will also come into force in 2019 for selected fields included in a pilot phase, with the regime applying a reduced rate of MET in favor of a 50% tax on field profits.

“Russia Upstream Fiscal and Regulatory Report - MET to Stabilize Tax Burden as Export Duties Phase Out”, presents the essential information relating to the terms which govern investment into Russia’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Russia’s upstream oil and gas investment climate.

Scope

- Overview of current fiscal terms governing upstream oil and gas operations in Russia
- Assessment of the current fiscal regime’s state take and attractiveness to investors
- Charts illustrating the regime structure, and legal and institutional frameworks
- Detail on legal framework and governing bodies administering the industry
- Levels of upfront payments and taxation applicable to oil and gas production
- Information on application of fiscal and regulatory terms to specific licenses
- Outlook on future of fiscal and regulatory terms in Russia.

Reasons to buy

- Understand the complex regulations and contractual requirements applicable to Russia’s upstream oil and gas sector
- Evaluate factors determining profit levels in the industry
- Identify potential regulatory issues facing investors in the country’s upstream sector
- Utilize considered insight on future trends to inform decision-making.

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1 Table of Contents
1 Table of Contents 1
1.1. List of Tables 3
1.2. List of Figures 4
2. Regime Overview 5
3. State Take Assessment 9
4. Key Fiscal Terms- Concession 10
4.1. Royalties, Bonuses and Fees 10
4.1.1. Signature Bonus 10
4.1.2. Annual Rental Fee 10
4.2. Mineral Extraction Tax 10
4.2.1. Crude Oil 11
4.2.2. Condensate 14
4.2.3. Natural Gas 16
4.2.4. New Offshore Field Incentives 17
4.2.5. Mineral Extraction Tax Holidays 17
4.2.6. Special Deduction for Crude Oil 18
4.2.7. Tax deduction for NGLs Stripped from Condensate 19
4.2.8. Special Black Sea Deduction for Gas 19
4.3. Export Duty 19
4.3.1. Crude Oil 19
4.3.2. Natural Gas and LNG 22
4.3.3. Liquefied Petroleum Gas 22
4.3.4. Export Duty Exemptions 23
4.4. Additional Income Tax on Hydrocarbon Production (Pilot for Selected Fields) 24
4.5. Direct Taxation 25
4.5.1. Corporate Income Tax 25
4.5.2. Deductions and Depreciation 26
4.5.3. Investment Tax Deduction 27
4.5.4. Withholding Tax 27
4.6. Indirect Taxation 28
4.6.1. Value Added Tax 28
4.6.2. Import Duties 28
4.6.3. Property Tax 28
4.6.4. Land Tax 29
4.6.5. Excessive Flaring Fee 29
5. Key Fiscal Terms - Production Sharing Agreement 30
5.1. Royalties, Bonuses and Fees 30
5.1.1. Royalty 30
5.1.2. Bonuses and Other Fees 30
5.2. Cost Recovery 32
5.3. Profit Sharing 32
5.4. Taxation 34
5.4.1. Corporate Income Tax 34
5.4.2. Deductions and Depreciation 34
5.4.3. Value Added Tax 34
5.4.4. Tax Exemptions 34
5.5. Fiscal Stability 34
6. Regulation and Licensing 35
6.1. Legal Framework 35
6.1.1. Governing Law 35
6.1.2. Contract Type 36
6.1.3. Title to Hydrocarbons 36
6.2. Institutional Framework 36
6.2.1. Licensing Authority 37
6.2.2. Regulatory Agency 37
6.2.3. National Oil Company 37
6.3. Licensing Process 37
6.3.1. Auction Notice 37
6.3.2. Application Requirements 37
6.3.3. Auction Process 38
6.4. License Terms 38
6.4.1. Duration and Relinquishments 38
6.4.2. Work Obligation 38
6.4.3. Environmental Regulation 38
6.4.4. Local Content 38
6.5. Restrictions on Foreign Investment 39
7. Outlook 40
8. Appendix 42
8.1. References 42
8.2. Contact Us 44
8.3. Disclaimer 44

1.1 List of Tables
Table 1: Regime Overview 5
Table 2: Russia, Annual Rental Fees (RUB/km2) 10
Table 3: Russia, MET Base Rates - Crude Oil (RUB/tonne) 11
Table 4: Russia, Complexity Coefficient Values 12
Table 5: Russia, Oil MET - Periods in which KH = 0 for Specified Regions (Previously Regional Tax Holiday Periods) 13
Table 6: Russia, MET Rates - Condensate (RUB/tonne), 2011-June 30, 2014 14
Table 7: Russia, Notional Export Duty - Condensate (US$/tonne) 14
Table 8: Russia, Export Profitability Coefficient Values 16
Table 9: Russia, MET Rates - Non-Associated Gas, 2004-June 30, 2014 16
Table 10: Russia, New Offshore Field Incentives 17
Table 11: Russia, Export Duty - Crude Oil (US$/tonne) 20
Table 12: Russia, Marginal Export Duty Rates - Crude oil (%) 20
Table 13: Russia, Reduced Oil Export Duty (US$/tonne) 21
Table 14: Russia, Fields Eligible for Export Duty Reduction, 2019 onwards 22
Table 15: Russia, Export Duty - LPG (US$/tonne) 23
Table 16: Russia, Export Duty Exemptions 23
Table 17: Russia, Corporate Income Tax Rate (%) 25
Table 18: Russia, Depreciable Asset Classes 26
Table 19: Russia, Withholding Tax Rates (%) 27
Table 20: Russia, Maximum Property Tax Rates (%) 28
Table 21: Russia,Kharyaga Royalty Rates (%) 30
Table 22: Russia, Sakhalin I Bonuses and Fees (US$) 31
Table 23: Russia, Sakhalin II Bonuses and Fees (US$) 31
Table 24: Russia, Kharyaga Bonuses and Fees (US$) 32
Table 25: Russia, Profit-Sharing - Sakhalin I (%) 32
Table 26: Russia, Profit-Sharing, Sakhalin II (%) 33
Table 27: Russia, Profit-Sharing - Kharyaga (%) 33
Table 28: References 42

1.2 List of Figures
Figure 1: Regime Flow Chart - Concession 7
Figure 2: Regime Flow Chart - Production Sharing Agreement 8
Figure 3: Russia, Indicative NPV10/boe, IRR and State Take Comparison, Regional 9
Figure 4: Russia, Legal Framework 35
Figure 5: Russia, Institutional Framework 36

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