Photo: Yegor Aleev / TASS
The energy Ministry suggested not to choose between the new exemptions for “Rosneft”, LUKOIL, “Surgutneftegaz” and “Gazprom oil” and the new tax system and implement all initiatives in parallel. The Ministry of Finance categorically against: it will cost the budget RUB 100 billion, according to the Ministry
The energy Ministry has supported the proposal of the four largest oil producers — Rosneft, LUKOIL, “Gazprom oil” and “Surgutneftegaz” — to give them tax breaks on mineral extraction (met) for fields in West Siberia, told RBC Federal official four and told journalists the Director of Department for tax and customs policy of the Ministry of Finance Alexey Sazanov. Such a letter the Ministry sent to the Ministry on March 22.
Offer benefits for very wet (the water in the produced fluid is greater than 85-90%), depleted fields with remaining reserves of 5-150 million tons of oil. The government decided to reduce the severance tax for such deposits by 50%. Total production volume of such oil will be about 40 million tons per year (7% of production in Russia), of which about 20 million t is necessary on “Rosneft”. According to two officials, these assessments have provided.
In the current fiscal environment and with the price of Brent crude oil at $50 per barrel, the budget will lose about $2.5 billion (142 billion rubles at the current exchange rate) in taxes per year, calculated senior analyst “Aton” Alexander Kornilov effect from introduction of benefits. Artem Konchin from OTKRITIE estimates the effect of 154 billion rubles per year. If “Rosneft” will receive benefits, the company’s EBITDA in 2017 will increase by 5% for the other companies it will also lead to significant growth in financial performance, said Kornilov. The shares of the oil is more affected by fluctuations in oil prices, but the benefits will be good news, concludes Kornilov.
Or benefit, or reform
The first benefits for their flooded fields (in particular, Samotlor) asked for “Rosneft”: it was a condition of the sale of 19.5% stake in the company in January 2017, the consortium of Glencore and the Qatar investment Fund (QHG Shares Pte. Ltd), wrote “Kommersant” with reference to sources. At the meetings of Rosneft hinted that the benefits of “privatization” promised President Vladimir Putin, told RBC two sources in the government, but direct orders on this account they have not seen. The initiative of Rosneft gradually joined by other oil companies: on 31 January, Prime Minister Dmitry Medvedev wrote co-owner of LUKOIL Vagit Alekperov (a copy of the letter is at RBC), February 8, Deputy Prime Minister Arkady Dvorkovich has written to the Chairman of the Board of “Gazprom oil” Alexander Dyukov, told “Vedomosti”. Incentives for met recently asked and Surgutneftegaz, told RBC three official and a source in the company.
The energy Ministry supports the benefits of flooded fields of “Rosneft” offers from other companies analyzed, said RBC representative of the Ministry.
But the initiative of the oil companies entered into conflict with large-scale tax reform in the oil industry. Ministry of energy and Ministry of Finance were arguing about reform for over two years and at the beginning of 2017 finally agreed on all parameters. The reform provides for partial replacement of the taxes levied revenue for the new added tax revenue, which is closer to income tax (PDM, see incision). TAR takes into account the specific features of the project and will allow companies to develop sophisticated unprofitable stocks without the use of point benefits.
At the end of January the Ministry of Finance proposed to include Samotlor in the list of pilot fields for PDM, but Rosneft refused. On January 19 meeting with Prime Minister Dmitry Medvedev revealed that “Rosneft” will not support the PDM, if you do not receive benefits. Medvedev sent the Ministers and the company to decide they still need the old system with the benefits or PDM, remember two officials. There was no such opposition, the Prime Minister simply instructed to find a compromise, said another official.
Photo: Andrey Rudakov / Bloomberg
Tax incentives for today and the future
Now the energy Ministry offers the Ministry of Finance to pass a bill PDM, and give companies incentives, he told reporters carps and confirmed RBC representative of the Ministry of energy. There is no contradiction here: the new tax will need to test three to five years, this is an experiment that will work in the future, and the benefits you can provide to companies now, to stimulate oil production, I’m sure one of the interlocutors RBC. In the second year production growth will cover the shortfall in budget revenues, and on the third budget work, he adds.
On March 24, the offer of energy was supported by the presidential aide Andrei Belousov at the workshop, told RBC two officials close to the meeting, a source at one of the companies concerned. But the minutes of the meeting will not, and it remains unclear what exactly will report Belousov, cautious one of the interlocutors RBC. The Ministry of Finance was upset after the meeting, said a familiar participant in the meeting, but supported Belousov proposal of the energy Ministry, he does not know. To review the Belousov RBC failed.
The Ministry of Finance the idea of energy absolutely not satisfied with. “In our opinion, the Bolivar can not carry double, we need to concentrate on a single path. Moreover, it is significant falling budget revenues: if the give and PDM, and the benefits of flooding is of the order of 100 billion rubles”, — has told carps reporters. The Ministry of Finance calls for a systemic solution and to “move exclusively via PDM”. “Or let’s stop mislead others in, let’s put aside all this rhetoric on PDM and just keep the address and haphazardly through the met to distribute benefits, as it did last many years,” said the official.
Perhaps, the Finance Ministry proposes to use only NDM, because until now it was planned to compensate for lost revenues from the experiment via the growth of the severance tax, says Advisor one of the ministries. And if you just give privileges, to offset a shortfall in revenues has not come out, he concludes. “Rosneft” has promised to increase production at Samotlor, if you receive benefits, but the Finance Ministry is not able to calculate exactly the impact of this exemption on the budget in the first year and will offset the potential loss, says Exitus from the “Open”.
Representatives of “Rosneft”, “Gazprom oil” and LUKOIL declined to comment, the representative of “Surgutneftegaz” has not responded to requests to RBC.
What is PDM
Now the oil companies pay mineral extraction tax and export duties, the taxes levied on revenues. The reform provides for partial replacement of mineral extraction tax by a new tax — PDM. The tax rate will be 50%, it will be levied on income from oil sales less export duties and reduced mineral extraction tax, the cost of production and transportation. PDM must earn in 2018 of the experiment for three groups of deposits of up to 15 million tonnes: this is a new and Mature areas in Western Siberia and new fields in Eastern Siberia. The energy Ministry believes that the bill should be primarily to stimulate oil production from Mature fields in Western Siberia, where production is declining. Meanwhile in Russia production grew for the second consecutive year and in 2017, according to forecasts of the Ministry, will grow by 0.5 million to 548 million tons and in 2018 — to 553 million tons Growth in oil production in Russia in recent years is a direct result of the tax administration of the state, said Artem Konchin. The company received benefits for specific projects, completed a three-year tax maneuver, which increased the margin of oil production through processing. The transition to PDM is needed in order to get away from manually managing multiple projects, it also reduces corruption risks, concludes the analyst.