Russian MinFin seeking happy medium between state revenues and subsoil users' earnings for efficient oil production as part of OPEC+ agreement
MOSCOW. Nov 25 (Interfax) - Subsoil users need to ensure sufficient "economic feasibility" to maintain oil production at the current level under the existing restrictions of the OPEC+ agreement, Director of the Russian Finance Ministry's Department for Analyzing the Effectiveness of Preferential Tax Regimes Denis Borisov said.
The ministry is also seeking a happy medium between the revenues of subsoil users and the government by providing incentives to support oil production, Borisov said at the Russia's Energy Strategy: New Growth Points and Responses to Challenges energy industry experts' conference. "Of the approximately 10 trillion rubles in tax expenditures in the budget, which also include socially oriented spending, about 3 trillion rubles are allocated to investment tax benefits across all sectors of the economy. Of this amount, about 2 trillion rubles are directed towards the oil industry," he said.
The diverse conditions of the country's geology and geography render it impossible to find a single, perfect solution to ensure a given level of production. However, the Finance Ministry and the Energy Ministry jointly other government agencies and parliamentarians are working on the matter, and it is important to resolve this in order to prioritize incentives to develop the sector amid a deficit in the budget and within the OPEC+ deal, Borisov said.
"It is important for us, as the Finance Ministry, to listen to the most interesting proposals from the sector's participants, both in terms of increasing the oil recovery factor and the dynamics of the extraction rates that could be interesting for subsoil users, while also ensuring budget efficiency under the OPEC+ deal," he said.
The Finance Ministry is also closely monitoring the experiment on hard-to-recover reserves that is operating under a government resolution, and the ministry hopes to find technological solutions in the matter.
"If we consider the same Bazhen, for example, then the mineral extraction tax for it is close to zero. Meantime, we do not yet see any rapid growth in production there. It is obvious that the technology lags the economics in this case," Borisov said.
It is necessary to develop the economic and technological components in order to involve reserves that are currently not being developed for one reason or another, Borisov said.
"These are two sides of the same coin. Only developing both components would resolve the matter of consistently replacing reserves currently being developed. Meantime, it is obvious that the tax system in the oil sector is a carbon copy of the state of the resource base," he said.
