6 Sep 2022 12:38

Russian ministry proposes to lower tax for strategic resources, difficult hydrocarbon reserves at initial project stage

VLADIVOSTOK. Sept 6 (Interfax) - Russia's Natural Resources Ministry has proposed to consider introducing a reduced mineral extraction tax (MET) rate at the initial stages of projects for strategic types of resources and hard-to-recover hydrocarbon reserves.

This would increase the investment appeal of such projects, Natural Resources Minister Alexander Kozlov said at a session on mineral resource mining and processing at the Eastern Economic Forum.

Russia has sufficient reserves of mineral resources, but it is important to understand which resources and how much are needed for the economy in the medium- and long-term future, he said. With this in mind, the Natural Resources Ministry and Industry and Trade Ministry have updated the list of key types of strategic resources for the first time in 26 years. The new list includes 61 items, 55 of which are mined in Russia, including 27 in the Far East.

"In order to increase the investment appeal of projects, we propose, or rather the industry is raising this issue, to consider the possibility of introducing a reduction coefficient for the MET rate at the initial stages of the launch of a project. This is approximately the first ten years. We believe that the MET rate I mentioned will make it possible to lower both the initial payment and the subsequent tax burden in the course of the development of deposits," Kozlov said.

"We're exploring a similar measure in regard to hard-to-recover hydrocarbon reserves. We formed a working group after my visit to Surgut that worked on developing a classification of hard-to-recover reserves and their financial and business models. Tax incentives will make it possible to preserve businesses that work at depleted deposits. For these deposits sustain whole cities, for example, cities like Surgut, Norilsk, Noyabrsk, Urengoi and Kirovsk," Kozlov said.

He also recalled that in the year since the last Eastern Economic Forum, at which President Vladimir Putin supported a number of the Natural Resources Ministry's initiatives, the country has developed a unified digital platform for obtaining geological information.

The process of resource licensing has also been digitized, both for tenders and obtaining licenses under the so-called declarative principle, he said.

"It is no longer necessary to come to the Federal Subsurface Resources Agency with kilograms of documents. You just have to register on the special site and apply through your personal account. Almost 2,000 applications have already been submitted this way in nine months. And if you take all licensing procedures, resource users have submitted about 5,000 electronic applications," Kozlov said.

"And we have been working on another two objectives since last year. A unified bill on them has been submitted to the government. This is the introduction of 'circulation' of licenses and private companies' access to the regional stage of exploration. Businesses are prepared to invest money in this," Kozlov said.

"Although federal financing for geological exploration increased by several billion rubles this year, this is insufficient. We believe that the financing that the government invests in the regional stage is about 4.5 billion rubles and companies are prepared to invest another 5 billion rubles, so work will double. The number of prospective sites could jump to 100 annually," Kozlov said.

It was reported earlier that the updated list of key strategic mineral resources includes oil, natural gas, helium, uranium, manganese, chromium, titanium, bauxite, copper, lead, antimony, tin, zinc, nickel, molybdenum, tungsten, cobalt, rare elements (lithium, rubidium, cesium, beryllium, scandium, etc.) and rare-earth elements (yttrium, lanthanum, cerium, praseodymium, neodymium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium), gold, silver, platinum group metals (ruthenium, rhodium, palladium, osmium, iridium and platinum), diamonds, graphite, phosphate, potassium salts, spar, pure quartz and groundwater.