EPT regime should factor in expenditures on prospecting works - Lukoil

MOSCOW. April 4 (Interfax) - The special excess profits tax (EPT) regime should take into account the costs of prospecting works, Alexander Semyanov, Head of the Exploration Department of Lukoil , said at a recent Rosnedra board meeting.

"One of the forms of stimulating geological exploration is, of course, accounting for the costs incurred by a subsoil user at the prospecting stage. What is happening now? Having drilled a well, done a seismic survey, obtained a license at an auction, often without any special assessments, except for regional ones, having spent a lot of money, when calculating the mineral extraction tax we cannot include the costs of prospecting works. This is simply nonsense, which requires, in my opinion, an urgent solution. We propose to amend the Tax Code accordingly. Any prospecting work is an investment risk, it is serious money. But we cannot include serious investments in the EPT, especially in hard-to-reach regions," he said.

Referring to the topic of tight reserves (TRIZ), Semyanov emphasized that the current preferential regime with the calculation of mineral extraction tax has a favorable impact on the possibility of developing such reserves. "The established privileges successfully stimulate the development of new technologies for tight reserves development. We propose to extend it for 60 tax periods (meaning months) to the current 180," he said.

Semyanov also drew attention to tax problems in the development of extra-viscous oil. According to him, in 2022-2023, Lukoil participated in a pilot project for justification of tax incentives within the framework of the interdepartmental working group on improvement of regulatory and legal regulation established by Rosnedra together with the Finance Ministry.

"According to the results, potential growth in profitable reserves were obtained and fiscal regime options were found that meet the requirements of the Finance Ministry and allow for increasing both the net discounted income of the subsoil user and state revenues, which is reflected in the protocols. We would like to intensify the work of this body. And in connection with the search for ways to include unprofitable reserves in development, we are proposing that the results of the work done be discussed in the interdepartmental working group," he said.