Economics. Finances. Management
PRICES: PROBLEMS OF INTERACTION OF MARKET AND STATE. THE BASIC METHODS OF STATE REGULATION OF PRICES. P. II.
The process of price formation and the role therein of the free market and the state – one of the problems, which still, in principle, has not developed a consensus, since it affects the interests of all social strata, States, which do not always coincide. In fact, the universal and complete freedom of pricing in the history never was. For various stages of economic history are peculiar only to certain differences in the degree and forms of restriction of liberty game prices.
World economic history shows that one of the most important methods of state influence on prices is the antitrust regulation, both at national and supranational levels. Among other methods of state regulation of prices is characterized by: a policy of “accelerated depreciation”, “leadership in prices,” the state monopoly on the production of certain goods, the establishment of the maximum level of quotation prices, administrative price fixing, granting the right to establish and control prices of certain goods to a supranational authority. An important instrument of state influence on prices is foreign trade policy.
The global objectives of state influence on prices: increased competitiveness of the economy on the global market, restructuring of the economy, fighting inflation, smoothing of social tension in society. It should be noted that in the article when describing the methods of state regulation of prices focuses on the oil and gas sector.
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.
This study is focused on the current system of project management practices by the oil and gas industry companies; the key project management principles are being reviewed from the standpoint of finding effective solutions to the issues facing operating companies of the industry. The classification of the projects is presented in terms of the investment volumes that are required to implement the projects and therefore these projects are classified as low-budget, mid-budget and big-budget projects, accordingly. The paper shows oil & gas operating company’s project risk assessment methodology using qualitative and quantitative analysis methods. The specifics of risk assessment methods are presented on the basis of simulation modeling which is the most reliable and widely used process in the oil and gas industry. To factor in the risks of potential oil pipeline failures and incidents, a methodological tool has been proposed for the model that incorporates an incident response procedure which is included into the costs incurred or mitigates the integral effect by a discounted amount of expenses associated with the incident response operations throughout the life cycle of a facility. The above-named approaches are based on a step-by-step determination of the effectiveness by using the model in order to conduct the risk assessment of the projects. The principal advantages of the model include transparency of evaluations, simplicity of their understanding and assessment of the project performance by all participants. The process of project implementation incorporates multiple phases and that requires careful assessment of the economic efficiency of the projects. The effective project management system is therefore one of the factors contributing to successful implementation of the project and providing for further development of the industry as well. This study paper fully proves that it is expedient to apply these project management principles so to enable investments by the oil and gas operating companies and that includes the need in conducting project risk management.
The article reveals the effect of new oil and natural gas classification establishment, which came into force on January 1st, 2016, as well as its positive and negative aspects. The classification is adjusted to the international standards of Society of Petroleum Engineers (SPE) and the USA Security and Exchange Commission (SEC). Its basic feature is the priority of economic efficiency. The practical value lies in the provision of state interests at reserves cost evaluation, which builds the major part of national wealth, as well as in the consideration of tax incentives eligibility. Introduction of such classification should result in the increase of Russian deposits investment potential as well as in the economic efficiency of hydrocarbon reserves production under the conditions of qualitative and quantitative mineral-resource base characteristics deterioration. However, the geological (reservoir type, reserve calculation algorithm, degree of reservoir structure complexity, reserves division), technological (well spacing, oil recovery factor), organizational (computer modeling) and administrative (schedule reduction and special technical and economic features of project approval) aspects could negatively reflect on small subsurface users developing one or several small and middle-sized deposits. Considering the reviewed issues, the author suggests the additional correction of legal and regulatory framework with the aim to eliminate the abovementioned consequences and to support the financial position of small subsurface users.
The purpose of the article – state analysis, trends and prospects of development of the global hydrocarbon market. In particular, detailed analysis of the market categories such as supply and demand was made. Factors of demand for oil and natural gas, the major regions of consumption of hydrocarbons, the market structure of oil and natural gas consumption of the countries are represented. It was revealed that the growth in demand for energy resources was caused by increased motorization of individual countries (especially India and China). The major share of oil and natural gas demand at the regional level provide the Asia-Pacific region and North America, at the country level – United States (US) and China. The largest oil producer at the regional level is the Middle East, at the country level – Saudi Arabia, the United States and the Russian Federation. Saudi Arabia and the Russian Federation provide the maximum export oil supplies. The main flows of oil imports are sending to the United States, China, India and Japan. The Russian Federation leads the global natural gas market the largest proven natural gas reserves belong to Russia. The country provides the maximum export pipeline natural gas. The largest import purchases of natural gas occur in Germany, USA, Italy and Turkey. The authors calculated the figure availability of natural gas reserves of countries. Security of the Russian Federation in 2015 was 56 years. To actively growing market for liquefied natural gas is analyzed. LNG shipments rose by almost half over the past decade. The factors for expansion of markets for LNG sales are shown.