Duty breaks down to zero could go to deposits in 5 regions, in Caspian, on shelf
MOSCOW. Aug 30 (Interfax) - A draft of amendments to Russia's customs tariff law drawn up by the Energy Ministry would have breaks on oil export duties, right down to nullification, that could be applied to deposits located in Yakutia, Irkutsk Region, Krasnoyarsk Territory, Nenets Autonomous District, Yamal, Yamal-Nenets Autonomous District, in the Caspian Sea, and on Russia's continental shelf.
These amendments, a copy of which Interfax has obtained, were prepared in the context of putting together the rules for extending breaks on export duties for new deposits.
"The government has the right to establish special formulas for calculating the rates of export customs duties on oil, and also to extend tariff incentives in the form of the freedom from paying the export duty on oil in relation to : 1) oil with viscosity in stratum conditions of not less than 10,000 mPa x s 2) oil special physical-chemical characteristics produced at deposits located in resource sections sited fully or partially within the borders of Yakutia, Irkutsk Region, Krasnodar Territory, Nenets Autonomous District, the Yamal peninsula, north of 65 degrees latitude fully or partially within the boundaries of Yamal-Nenets Autonomous District, on the Russian section of the Caspian Sea floor, within the boundaries of internal sea waters and of the territorial sea, on the continental shelf of the Russian Federation," the draft says.
The ministry notes that a zero duty rate for deposits in the second group will be set without additional stipulations, when the average Urals price on world markets is less than $365 per tonne. If that price is over $365, the incentive duty rate is to be calculated in an amount not exceeding 75% of the difference between the upper duty rate on oil and $138.7. The explanatory message attached to the document says the calculation method for the incentive duty rate changes, but the ratio of the incentive and upper rates will correspond to the current level.
At the same time, the amendments legislatively confirm the upper sizes of the duty for viscous oil at 10% of the upper rate.
The amendments presuppose that the government will establish rules for preparing proposals on the application of special formulas for calculating duties, determine a list of deposits and amount of oil produced at each of these, establish rules for confirming the fact of oil extraction from these deposits, and control over the amount of oil, in relation to which special formulas for calculating rates can be applied.
The Federal Customs Services is to calculate the easy rates, according to the amendments. But, an Interfax source in the agency said that the decision has been made that this function will likely be charged to the Finance Ministry.
"So, at the level of a normative government legal act the will be fixed formulas for calculating the rates on export customs duties on oil and other categories of goods worked from oil, which will allow organizations to effect exports, plan more precisely, and forecast the amount of customs payments for future periods," the message says.
The document does not contain any other details of the new rules for extending breaks. In particular, nothing is said about how the government will be deciding on extended "tariff breaks in the form of freedom from paying duties, how the list of deposits to be covered by the breaks is to be compiled, and so on.
Interfax's Energy Ministry source said that in the future the agency will be updating and detailing the new rules for extending breaks. Furthermore, the agency will also be preparing new draft legislative acts for incentivising deposits containing hard-to-recover oil.
The source said the new rules will allow the consideration of virtually all new oil projects as regards the extension of breaks. "The main criterion will be project income-generation, does it reach a level of 16.3%. If not, then a company could claim a break," the source said. "Also changing is the approach to extending breaks if breaks were earlier given for some time periods, then everything will depend on the production of oil and financial indicators," the source said.
The new rules will make it possible to reduce the impact on a project's implementation of geological risks and will stimulate a restraint on project expenses. In other words, agencies will be ready to maintain breaks for projects that for objective geological reasons lower production figures from those announced before, and could raise the question of eliminating the breaks, if a company permits a sharp growth in project costs.