Tax on excess profits from extraction of hydrocarbon feed as a completion tax maneuver in the oil and gas sector

Semenova Galina,A Zheltenkov,A Mottaeva

doi:10.1051/e3sconf/202016411046

Abstract

The relevance of the paper is caused by the peculiarity of introducing a tax on excess profits from the extraction of hydrocarbon feed (hereinafter referred to as EPT), the calculation of tax taking into account the economics of developing hydrocarbon deposits for the entire investment period. The level of tax penalty depends on the profitability of each subsoil plot separately, which will allow the introduction of low-profitable hydrocarbon deposits containing hard-to-recover reserves into development. Nowadays, a differentiated approach is being applied to setting the mineral extraction tax (hereinafter - MET) for oil depending on geographic and climatic conditions, complexity of field development, physical and chemical properties of oil (arctic conditions, offshore projects, new and developed deposits, high viscosity oils, hard-to-recover reserves and others). The introduction of EPT is caused by the need to engage oil reserves, which are currently unprofitable under the existing tax system, in commercial development. The introduction of EPT will allow for an increase in tax revenues both from an increase in the total volume of oil production and through more equitable taxation of ultra-efficient projects.

Highlights

A tax on excess profits from the extraction of hydrocarbon feed (EPT) was introduced in Russia from January 1, 2019 for new fields
The excess profits from the extraction of hydrocarbon feed in the subsoil area is the estimated revenue from the sale of raw materials extracted in a particular subsoil area, successively reduced by the amount of actual production costs and the estimated costs
The following activities are involved in the development of a subsoil area for the extraction of such raw materials: the search and assessment of hydrocarbon deposits, exploration, production of hydrocarbon feed; transportation of hydrocarbons; preparation of hydrocarbon feed - the separation of any mixture in a gaseous and liquid state containing hydrocarbon feed into derivative mixtures containing certain types of hydrocarbon feed; bringing hydrocarbon feed to a quality at which such raw material is recognized as a commodity; the storage of hydrocarbons; the creation of associated gas utilization facilities; leasing to a person providing services to a taxpayer, related to the implementation of one or more of the above types of activities

Summary

Introduction

A tax on excess profits from the extraction of hydrocarbon feed (EPT) was introduced in Russia from January 1, 2019 for new fields. It is aimed at removing additional income (excess profits) of oil companies from the sale of oil from new fields. The excess profits from the extraction of hydrocarbon feed in the subsoil area is the estimated revenue from the sale of raw materials extracted in a particular subsoil area, successively reduced by the amount of actual production costs and the estimated costs. The following activities are involved in the development of a subsoil area for the extraction of such raw materials: the search and assessment of hydrocarbon deposits, exploration, production (extraction from the subsoil) of hydrocarbon feed; transportation of hydrocarbons; preparation of hydrocarbon feed - the separation of any mixture in a gaseous and (or) liquid state containing hydrocarbon feed into derivative mixtures containing certain types of hydrocarbon feed; bringing hydrocarbon feed (including at third party facilities) to a quality at which such raw material is recognized as a commodity; the storage of hydrocarbons; the creation of associated gas utilization (processing) facilities; leasing to a person providing services (performing work) to a taxpayer, related to the implementation of one or more of the above types of activities

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Conclusion