Russia working on oil industry support after tax hikes, says deputy PM Novak - Metro US

Russia working on oil industry support after tax hikes, says deputy PM Novak

Press conference by Saudi Energy Minister, Prince Abdulaziz bin Salman al-Saud and Russian Energy Minister Alexander Novak

MOSCOW (Reuters) – Russian Deputy Prime Minister Alexander Novak said on Friday the government has been working on some support measures for the oil producing industry, including changes in taxation, following last year’s decision to hike taxes.

The government has been increasing oil producers’ taxes to raise money to cushion the economy from fallout from the COVID-19 pandemic. This year, a tax hike is expected to result in the industry paying an additional 227 billion roubles ($3 billion), 361 billion roubles in 2022 and 242 billion roubles in 2023.

Novak told the energy ministry’s in-house magazine that the government has tried to find ways to support the industry.

He said the potential measures include extension of profit-based tax to depleted oilfields, which contain viscose and highly viscose oil.

Separately, Interfax news agency quoted Deputy Finance Minister Alexei Sazanov as saying on Friday that the ministry plans to work out profit-based tax parameters for highly viscose oil by year-end with a view to implementing it from 2024.

It also cited a senior manager from Russia’s second-largest oil producer Lukoil as saying that the tax hike for highly viscose oil production for the company will total around 40 billion roubles per year.

Taxes on the oil industry are mostly based on production – via a mineral extraction tax – and exports. Companies have long lobbied for profit-based taxation, saying it will spur production and better reflect exploration costs and risks.

Currently, the tax is applied to a restricted number of oilfields in Russia, and the finance ministry has been sceptical about its impact.

Sazanov said last week that the government did not plan to extend the profit-based tax to more oilfields until 2024.

(Reporting by Vladimir Soldatkin; editing by Emelia Sithole-Matarise)

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