Russian Natural Resources Ministry proposes introducing profit tax multiplier for geological exploration in Arctic, Far East onshore areas

MOSCOW. May 21 (Interfax) - The Natural Resources Ministry plans to propose introducing a 1.5 multiplier for calculating profit tax for geological exploration in onshore Arctic and Far East territories, Natural Resources Minister Alexander Kozlov said during a government hour in the State Duma dedicated to the socioeconomic and infrastructure development of the Arctic.

Commenting on hydrocarbon deposits in the Arctic, Kozlov said that the region contains 31 billion tonnes of reserves and 95 billion tonnes of resources. "Resources still need to be prepared through geological exploration by both the state and companies to convert them into reserves. Of the 31 billion tonnes of reserves, 13 billion are commercially viable. At current production rates, these will last 26 years. A significant portion of these reserves are hard-to-recover, for which tax incentives were timely introduced, making their extraction profitable," he said.

"Today, geological exploration has shifted to hard-to-access Arctic and Far Eastern regions due to geological factors. The Tax Code currently has only one direct measure supporting geological exploration - a 1.5 profit tax multiplier for drilling at new offshore fields. This measure is in demand, and has proven to be effective. For example, the major Triton and Neptune fields were discovered in the Sea of Okhotsk. We will consider introducing a similar measure for onshore Arctic and Far Eastern territories to stimulate geological exploration," he said.

The Arctic contains significant mineral reserves, including 95% of platinum group metals, 76% of rare earth metals, 74% of gas, 73% of nickel, 55% of cobalt and 29% of oil, he said.

"For regions like the Nenets, Yamal-Nenets and Khanty-Mansi Autonomous Districts, subsoil use is the primary source of gross regional product. The Arctic has several single-industry towns where extraction enterprises are everything they have. No extraction means no town. Take Vorkuta as an example. Annually, we allocate budget funding for Arctic geological exploration. Subsoil users themselves also invest in geological studies. Combined, nearly 175 billion rubles were invested last year," he said.