Energy Ministry proposing Ze Brugge prices be factored into Gazprom gas tax
MOSCOW. June 21 (Interfax) - The Russian Energy Ministry is proposing that domestic prices and average prices on the Ze Brugge gas exchange be factored into the formula for calculating natural resource extraction tax (NRET) for Gazprom , the ministry said in materials that were drafted for a cabinet meeting on gas industry taxation on June 13.
The tax would be based on domestic prices for independent producers.
The ministry also suggests building producer price inflation for the pervious year into the formula.
It also thinks the formula should factor in a coefficient for the difficulty of projects. The coefficient would be 1 for Cenomanian deposits, and 2 for Achimovsky and Valanginian deposits.
The formula for calculating the NRET on gas will also include a transport component. The ministry said that in order to calculate this coefficient it is necessary to select on point in Russia according to which the remoteness of projects would be measured. For an easier method of calculating remoteness, there are plans to introduce a scale depending on the region of production.
The ministry reckons the formula for Gazprom could be as follows: NRET on gas = (price on domestic market * (1+Ze Brugge price * 0.5 * ruble/$1 exchange rate)/2 - 500 * inflation * difficulty coefficient - 67 * inflation * transport distance * 1/100) * 0.5.
The formula for independent producers would be: NRET on gas = (price on domestic market - 500 * inflation * difficulty coefficient - 67 * inflation * transport distance * 1/100) * 0.5.
The ministry materials state that when calculating the NRET rate the revenues earned by the industry will be adjusted taking to account the growth of expenditures on gas transportation due to increases in transport rates, as well as additional expenses related to the elimination of property tax breaks for Gazprom.
The government on June 13 decided to gradually shift to a formula calculation of NRET on gas. Deputy Prime Minister Arkady Dvorkovich said that as of July 1, 2013 a balanced NRET rate should be in place for independent producers, "that would take into account changes in domestic gas prices, as well as the profitability of projects that are being implemented by Gazprom and independent producers." Starting in 2014, the Russian Tax Code will include a formula "that will take into account the particulars of the market, the difficulty of field development, will be based on domestic and world gas prices, and will take into account transportation."
The actual formula has not been approved yet. Dvorkovich said work on the formula should be wrapped up this fall. Several other possible formulas for NRET on gas have been considered earlier.
