Russia approves tax breaks for gas extraction in Yamal for ammonia, hydrogen production

MOSCOW. April 24 (Interfax) - The Russian government has approved a bill to provide tax breaks for new production facilities for ammonia and/or hydrogen on the Yamal and/or Gydan peninsulas in the Yamalo-Nenets Autonomous District, the government press service told Interfax.

The bill would provide a zero mineral extraction tax (MET) rate for production of gas and condensate at fields completely or partly located on these peninsulas, as well as a reduce profit tax rate for taxpayers who produce ammonia and/or hydrogen at new production facilities exclusively from gas or condensate extracted at these fields.

The current return on projects to produce ammonia and/or hydrogen from gas extracted on the Yamal and Gydan peninsulas "is estimated at less than industry values, which does not make it possible to fully begin production of these commodities," a memo attached to the bill said.

The bill would amend articles 284 and 342 of the second section of the Russian Tax Code.

At present, there is only one known project to produce hydrogen and ammonia in the Yamalo-Nenets Autonomous District: Novatek's project based on the Obsky Gas Chemical Complex, which holds the licenses to develop the Verkhnetiuteiskoye and Zapadno-Seyakhinskoye fields on the Yamal peninsula. Two other fields, Neitinskoye and Arkticheskoye, were merged with Obskye GCC in 2021 after Novatek CEO Leonid Mikhelson requested they be auctioned with special terms for his company so it could expand the resource base for its liquefied natural gas plants.