Journal issues: 2/2017
5 May, 2017
THE FUNDAMENTAL CHALLENGES FACING OIL AND GAS INVESTMENT PROJECTS
FSBEI HE SamSTU, Samara, Russian Federation
FSBEI HE SamSTU, Samara, the Russian Federation
This study paper is focusing on current performance of Russia’s oil and gas industry in terms of the industry’s oil and gas company onshore operations. The Russian Federation is a member of the club of world’s major oil and gas producers working hard to meet both the needs of its own national economy in oil and gas supplies and exporting huge volumes of energy resources and petroleum products required to meet the needs of the international customers. Therefore, this review is intended to highlight the outcomes of the largest investment projects implemented in Russia over 2015-2016 periods and that includes the profile analysis of the oil production performance in Russia based on the strength of the approved General Development Plan for Russian Oil Sector.
Subsequently, this paper identifies problems facing the oil and gas industry projects inclusive of their solution prospects such as the issue of declining oil prices resulting in project freezes and high tax burdens significantly hamstringing the industry while killing the profitability of the project with the industry development derailed as a result. The oil and gas transportation cost overruns are also brought into the limelight in terms of the ineffective logistics system operation management by the oil producing companies.
To bridge certain gaps to that effect, an incentive mechanism is proposed to include the following:
Offering tax holidays to companies using innovative practices during early stages of their production operations;
Providing for Russia’s transition to a new taxation system applicable to the development of the hydrocarbon resources based on the financial performance;
Crating built environment for expansion of the system of refineries and transportation infrastructure, accordingly.
Offering tax holidays to oil and gas companies during early phases of their production operations will encourage the subsurface users to explore and further develop subsurface formations that are still unexplored. The State will surely have to incur considerable losses in the early phases of such operations; however, the state revenues will be recouped in the future due to profit taxes.
Currently, Article 424 of the Tax Code defines the subsurface areas where zero rate taxation is applied. The Bazhenov pay zone qualifies for such treatment, in particular.
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effectiveness; investment projects; management; oil and gas industry; problems; prospects; инвестиции; инвестиционные проекты; нефтегазовая отрасль; перспективы; проблемы; управление; эффективность DOI 10.17122/ogbus-2017-2-196-207 References to this article (GOST) Savkin S.O., Maslova O.P. THE FUNDAMENTAL CHALLENGES FACING OIL AND GAS INVESTMENT PROJECTS // Oil and Gas Business: electronic scientific journal/USPTU. 2017. №2. P.196-207. URL: http://ogbus.ru/issues/2_2017/ogbus_2_2017_p196-207_MaslovaOP_ru.pdf