Grigory Vygon gave talk at the Association of European Businesses Energy Committee session

Oct 4, 2016

Vygon Consulting managing director Grigory Vygon reported September 30 on the upcoming changes in the Russian tax system at the Association of European Businesses (AEB) Energy Committee session.

Due to a large number of exemptions, the tax system has become hard to manage and to modify, the expert noted. About 30% of current production gets tax benefits, total incentives are estimated at 355 bn RUB annually. Thus, MET exemptions might increase oil production, but their overall efficiency is questionable. The benefits perform differently for each tax subject – some of them face lack of benefits, for some cases they are redundant. Therefore, G.Vygon stressed the importance of introduction new hydrocarbon reserves classification in 2016, which will provide state expertise of stocks to analyze tax incentives efficiency.

He reminded, that from 2018 Russia would introduce the new oil tax system, while the current tax system is adjusted towards both the overall tax burden increase and incentivizing specific field types.
G.Vygon also noted that the current profit-based tax scheme has balanced properties for greenfields. To scale this tax for the whole industry, instead of just pilot projects, profit-based tax system requires substantial revision.  

The following representatives from the companies, having membership in AEB, attended the session: BP Russia, Chevron Neftegaz Inc., EDF, Enel Russia, ENGIE, Eni S.p.A., Uniper, Unipro, Fortum OYJ, Gasunie, MOL Plc, Repsol Exploracion S.A., Statoil ASA Russia, Shell E & P Services (RF) B.V., Total E&P Russie, VNG – Verbundnetz Gas AG, Wintershall Holding GmbH.

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Managing Director