Tax burden on oil industry is high; expanding scope of excess-profit tax and incentives in refining under discussion - Gazprom Neft CEO Dyukov

VLADIVOSTOK. Sept 5 (Interfax) - Gazprom Neft shares the opinion regarding the high tax burden on the oil industry, and there are currently discussions underway on expanding the scope of the excess-profit tax, as well as further incentives in oil refining, in order to alleviate the burden, Gazprom Neft CEO Alexander Dyukov told reporters on the sidelines of the Eastern Economic Forum 2024.

Rosneft CEO Igor Sechin had earlier expressed his opinion about the high tax burden on the oil industry, which was 75% in 2019-2023, based on the company's calculations using data from the Federal Tax Service and the Finance Ministry.

"The share of taxation in the Russian oil industry is one of the highest in the world. Igor Ivanovich [Sechin] believes this, and I agree with him. This creates additional complications for us, of course, specifically when developing hard-to-recover reserves," Dyukov said.

Dyukov also noted that discussions are currently underway on potential measures that could reduce the level of taxation in the oil industry.

"In terms of oil refining, the matter of approaching its taxation is currently under discussion. The government must decide how to support oil refining going forward. There is currently the fuel damper subsidy, though the government must decide whether to extend it," Dyukov said.

Dyukov believes that it is necessary to expand the use of the excess-profit tax mechanism in order to support oil production.

"We still have a fairly large number of fields that could be classified as third or fourth groups for excess-profit tax. This would certainly improve the economics of field-development projects, and would assist in maintaining production volumes and, if necessary, boosting production," Dyukov said.

Dyukov emphasized that the quality of oil reserves in Russia is declining, and companies must increasingly develop and produce fields with hard-to-recover oil.

"We are entering new provinces with harsh climate conditions and a lack of infrastructure. Therefore, a specific reconfiguration of the tax system is required that would be flexible and incentivize companies to invest funds to develop complex reserves and to develop new production regions," he said.

Dyukov also said that oil companies are investing in creating specific domestic technologies that have already produced results and are less expensive than imported analogues in order to cut costs to extract hard-to-recover reserves. "However, government assistance and flexibility from the budget are needed of course to continue actively developing and producing hard-to-recover reserves," he said.

Dyukov emphasized that he had not heard any discussions about returning the export duty on oil, saying that, "It seems to me that this page has already been turned."