Gazprom Neft might get 'tax credit' of 80 bln rubles to develop two large Yamal fields - source

MOSCOW. Oct 13 (Interfax) - Russia's Finance Ministry has drafted a bill under which Gazprom Neft could receive a tax deduction on the mineral extraction tax (MET) in 2023-2028 for the development of two fields on the Yamal Peninsula in the amount of 1.1 billion rubles per month, or 79.9 billion rubles over the whole period, a source familiar with the ministry's proposals told Interfax.

However, the deduction will be repayable and the oil company will have to pay it back in 2029-2034 with an indexation of 9%, the source said.

This would be financing for Gazprom Neft to build additional infrastructure to transport liquid hydrocarbons produced at the Bovanenskoye and Kharasaveiskoye gas and oil condensate fields on Yamal, the source said.

The ministry's bill would give the company an MET deduction on oil produced on Yamal in the period from January 1, 2023 to December 31, 2028 in the amount of 1.111 billion rubles per month. However, the deduction would have to be used to acquire, build, manufacture and deliver capital assets that are part of road, transport, utility and energy infrastructure needed to implement the project at the Bovanenskoye and Kharasaveiskoye fields.

The bill also sets out a mechanism for repaying the "tax credit" to the government in the period from January 1, 2029 through December 31, 2034 in an amount equal to the received tax deduction indexed by 9%.

The bill also sets restrictions on the application of the tax deduction, the source said. It will not be provided if the oil price is lower than or equal to the cut-off price set in the Budget Code, which is $44.20 per barrel in 2022, or higher than the cut-off price plus $27.55, meaning $71.75 in the case of this year.

The oil cut-off price is stipulated in Article 96.6, Point 4 of the Budget Code. The provision of a range of tax deductions in the oil industry is linked to the cut-off price. However, amendments to the Budget Code submitted to the State Duma in late September propose to replace the cut-off price in 2023 with the following wording: "Basic oil and gas revenues of the federal budget are understood to be an estimated amount equal to 8,000 billion rubles annually in 2023-2025, subject to annual indexation by 4% beginning in 2026."

The source said that the change in this wording will not affect the provision of tax deductions.