Changes in the Taxation System Had a Positive Effect on the Oil Sector

In 2012, production of oil in Russia will amount to 515m tons. In January-August 2012, it increased by 1.0% on the same period of 2011.

At the same time, there are still higher growth rates of oil refining as compared to those of oil production which situation can be mainly explained by growth in the export of petroleum products. In January-June, the export grew by 8.5% as compared to the respective period of 2011. It is to be noted that in January-August 2012 the depth of oil refining amounted to 71.6% which is much below the level of developed countries where that index amounts to 90% -95%.

A positive impact on the dynamics of oil production was generated by high global prices on oil, placing into operation of a few large new deposits in the north of the European part of the country and Eastern Siberia, as well as changes in taxation aimed at reduction of the tax burden on the oil sector, motivation of deeper development of deposits in service and development of new regions of production.

For the purpose of motivation of development of new oil and gas provinces situated in undeveloped regions with no infrastructure, in the past few years tax holidays as regards payment of the severance tax were introduced. From the beginning of 2012, the regime of tax holidays as regards the severance tax has been extended to new oil deposits situated to the north from the 65th degree of the north latitude in the Yamalo-Nenetsk Autonomous Region, as well as in the Black Sea and the Sea of Okhotsk.  To motivate development of small oil deposits with the initial oil productive capacity of up to five million tons a special reduction factor which defines the value of the specific deposit’s reserves is introduced to the rate of the severance tax.

In the near future, it is expected to take the following additional measures of tax motivation of oil production: extend the period of application of the severance tax holidays to deposits in Eastern Siberia from 2017 to 2022; reduce the rate of the export duty on oil for new deposits in Eastern Siberia, the Yamalo-Nenetsk Autonomous Region and the Nenetsk Autonomous Region and introduce reduced rates of the severance tax in development of oil reserves which are hard to recover.

At the same time, it is expected to increase a tax burden on the gas sector by way of raising the severance tax rate in production of gas. In a situation of the anticipated growth in domestic prices on gas, a higher rate of that tax is to ensure both full collection of gas royalties and more revenues to the state budget.

Yu. N. Bobylev, PhD (Economics), Head of the Mineral Sector Economics Department