The government is preparing incentives for hard-to-recover oil fields

The Ministry of Energy, the Ministry of Finance and Rosnedra have prepared a model for stimulating the development of hard-to-recover oil fields. It is planned to introduce a differentiated reduced mineral extraction tax rate depending on the complexity of the field and receive more than $62 billion in the budget by 2032. According to experts, as a result, the oil tax will soon be levied not on revenue, but on profit, as is the case in a number of Western countries.

Today, at the government commission on the fuel and energy sector, Deputy Prime Minister Arkady Dvorkovich will present a draft model for stimulating the development of hard-to-recover oil reserves (Kommersant has the presentation), prepared by the Ministry of Energy together with the Ministry of Finance and Rosnedra. While still Prime Minister, Vladimir Putin ordered the development of measures to stimulate the production of unconventional oil on May 3. The Ministry of Finance and the Ministry of Energy have prepared amendments to Chapters 25 and 26 of the Tax Code, the Ministry of Energy has prepared proposals for specific mineral extraction tax rates, and Rosnedra has agreed on a draft methodology for determining the permeability of deposits. Kommersant's sources familiar with the preparation of the document believe that it will be approved by the commission, and then by the Prime Minister and will be submitted to the State Duma for consideration.

Deposits of hard-to-recover oil in Russia have not yet been developed. This possibility was first discussed in 2007 by Tatneft, which was planning to develop bitumen oil fields in Tatarstan with Shell and Chevron. The company managed to achieve a zero mineral extraction tax rate, but this did not help retain Western partners. In February 2012, the government commission on the fuel and energy sector considered the issue of providing export duty benefits for ultra-viscous oil. As a result, the reduced rate began to apply on July 1; This tax system began to be called “10-10-10” in departments and among oil workers. Rosneft is currently discussing projects for the production of hard-to-recover oil with its foreign partners - ExxonMobil and Statoil.

The final document should stimulate new projects to develop deposits formed in formations with “extremely low permeability.” Depending on the level of reservoir permeability, projects within the model are divided into two groups (up to 1 mD and 1-2 mD). The reduced mineral extraction tax rate will be 5% and 30%, respectively, and the investor’s NPV per barrel with the proposed benefit will be $0.4 and $1.1 (indicators were calculated taking into account the oil price of $85 per barrel and the exchange rate of 31 rubles per US dollar). Reduced rates are fixed for seven years for projects from the first group and for ten years for the second. A reserve will also be created for the abandonment of wells. Thus, a model is created similar to that already used for the shelf: fields are divided into different categories of complexity, depending on the permeability of the rocks.

All fields that will become profitable to develop after the introduction of new measures must be unprofitable now, and their level of depletion as of January 1, 2013 should not exceed 1%. At the same time, the presentation emphasizes that without benefits the deposits will remain undeveloped. The project also talks about the development of reserves in non-localized objects - in the Abalak, Khadum and Bazhenov formations; The reserves of the latter alone are estimated at 22 billion tons of oil. At the same time, officials expect that the development of problematic deposits will bring the budget up to $2 billion in taxes by 2015, and more than $62 billion by 2032.

Oil workers regularly receive tax breaks. In 2009-2010, the first preferences were given to deposits in Eastern Siberia. A little later, the government provided benefits for the Black and Okhotsk Seas, freeing oil workers from having to pay the mineral extraction tax until 20-30 million tons are produced from the fields. In Norway, the USA and Great Britain, oil workers are taxed on profits, not on revenues (Russian version). At the same time, in the UK and Norway the rate is quite high - 50% with benefits for high-viscosity oil and 78% without them, however, income tax allows you to take into account the different costs of developing reserves: the more expensive the development of reserves, the lower the company's profit and the less taxes paid in budget, as noted in the materials of Russian officials.

Denis Borisov from Nomos Bank believes that this is the first serious project on taxation of hard-to-recover oil, since it evaluates the profitability not of the segment as a whole, but of each group of projects. In his opinion, such measures lead to the introduction of personal income tax, that is, the tax will be levied depending on profit, and not on revenue, and can be effective. Thus, the governments of the United States and Canada became interested in hard-to-recover oil several years ago, the analyst explains, and the result was a 10% increase in production from unconventional oil reserves in these countries.

Anna Solodovnikova, Kirill Melnikov

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