Oil and gas industry to receive new benefits in the Arctic
Amendments to the Tax Code which take effect from 1 April are set to further incentivise the extraction of hydrocarbons on the shelf, the production of liquefied natural gas (LNG), the development of gas chemistry, as well as the development of new oil and gas provinces in the Arctic zone.31 March 2020
In order to promote the production of LNG and gas chemistry products, respective deposits located north of the Arctic Circle, in the Arkhangelsk region, the Komi Republic, Yakutia, Yamal and Chukotka are exempted from mineral tax.
Zero tax rate will be applied either until the cumulative gas production reaches 250 billion cubic metres, or over the course of 12 years from the first sale of raw materials.
This benefit applies exclusively to new production facilities. Such projects will also be able to receive regional benefits. Regional governments have the right to establish a reduced rate on income tax which goes to regional budgets, for such companies.
The amendments will grant preference terms to projects dedicated to the extraction of hydrocarbons from the shelf. The biggest incentives are offered for the development of new offshore deposits in the northern part of the Sea of Okhotsk, the southern part of the Barents Sea, the Pechora Sea, the Sea of Japan and the White Sea. Those regions will have the mineral tax rate at 5% for oil and 1% for gas, for the first 15 years from the start of industrial development.