Unconventional Oil Has Been Switched to AIT From 2024
From January 1, 2024, production of viscous and extra-viscous oil in the Russian Federation will be transferred to the added income tax (AIT). The main producers of viscous oils and natural bitumen in Russia are LUKOIL, Tatneft and Rosneft (to a lesser extent). Interfax writes about this.
Areas where at least 70% of the oil produced per year has a viscosity from 200 to 10 thousand mPa*s, as well as from 10 thousand mPa*s or more (in reservoir conditions), are included in the third group of ADD.
The third group of AIT is also expanding to include three subsoil areas located in the Khanty-Mansiysk Autonomous Okrug-Ugra. These are the Petelinskoye and Fainskoye oil fields of Rosneft, as well as the Kirsko-Kottinskoye oil field of Bashneft. As a result, the number of plots of the third group (brownfields) of the added income tax will expand from 69 to 72.
Information from the Devon Information Agency:
In 2023, the State Duma adopted a law on transferring the production of viscous and extra-viscous oil to AIT. Among other things, for the third group the start date of the tax deduction is postponed from 2024 to 2027. Also, until the end of 2026, restrictions on reducing the tax base as a result of recognizing losses are extended.
This group includes areas in the Tyumen region, Khanty-Mansi Autonomous Okrug, the Komi Republic, the Caucasus, as well as Sakhalin and Yamal. The degree of depletion of oil reserves can range from 10% to 80% as of January 1, 2017.
In December, the Ministry of Finance of the Russian Federation did not support the proposals of oil companies to transfer a number of sites in Western Siberia from the mineral extraction tax (MET) to AIT. We are talking about new fields with a depletion rate of less than 5% and total reserves of no more than 50 million tons per year.
The ministry believes that this could lead to a shortfall in budget revenues. There they are afraid of a “flow” of production to preferential areas instead of maintaining it at fields with the full mineral extraction tax rate.
Under the mineral extraction tax, subsoil users pay a tax depending on the volume of production. With added income tax, the tax base is revenue reduced by costs incurred. This facilitates the development of new fields as well as mature assets with high costs.