Wednesday, 2 January 2013
Russia to grant unprecedented tax cuts on Arctic exploration
Under the new legislation operators of shelf projects will be granted tax relief from 5 to 15 years, including tax breaks on export duties as well as import duty and VAT for purchased equipment. The Ministry of Energy proposed to classify shelf projects in four levels from basic to Arctic so as to implement proper tax breaks. The same tax policy will be applied to oil projects, launched from 2016.
In October 2012, the Ministry of Finance provided a report on proposed tax breaks for Arctic oil exploration, citing 13 points of disagreement with the Ministry of Energy which concerned spending on coastal infrastructure and tax breaks on company losses.
Experts consider the tax breaks unprecedented, but are reasonable as it would be the only way to boost Arctic oil exploration from 6% to 10%. Traditional oil fields discovered in the Soviet era are expected to run dry in the coming decades, reducing the country’s oil output to 400mn tonnes from 500mn tonnes by 2030, according to the Ministry of Energy.
The Russian Arctic shelf is believed to hold about 100 billion tonnes of natural resources including 13 billion tons of oil. Though there are 257 oil wells in the region, the major part of the fields are not explored, according to the Ministry of Natural Resources.