Many oil & gas experts have been predicting a significant decrease in Russian oil production in 2015–2020, which will almost certainly lead to a fall in government revenues: budget losses after 2020 might comprise USD20 billion per annum. The reasons for this are not only external (a decrease in oil exchange prices, a lack of external financing options for Russian petroleum companies due to the sanctions), but also internal, conditioned by the current taxation system. The tax on natural resource production is collected from the overall production volume and is not linked to financial results, which impairs the economy of projects and makes them unprofitable.

To maintain at least the same oil production volume level, the oil & gas sector is in need of a more reasonable approach to taxation, which will suit both government and business. “With the new tax on financial results, oil & gas companies will be incentivised – and enabled – to develop new deposits that will become taxation objects. Furthermore, the expected increase in petroleum production by companies that have switched to profit tax on oil realisation will allow not only the taxation base for profit tax to be increased, but also the oil export customs duty base whenever petroleum is exported,” says Sergei.

You can read the full article by Sergei here.