Oil and Gas Law: UK Petroleum Concession and Fiscal Regime. Comparative Analysis of UK and Russia Petroleum Taxation Included. Oil and Gas for Beginners ... Oil and Gas Upstream, Energy Market Book 2) by Johnathan Borg

Author:Johnathan Borg [Borg, Johnathan]
Language: eng
Format: azw3
Published: 2016-02-20T05:00:00+00:00

2.2.1. Tax/Royalty Regulatory Regime

Concluding oil and gas projects in the Russian Federation two regulatory system introduced by law. The first is the widely used Tax/Royalty or Licensing System introduced by the Subsoil Law 1992[78], and the second is The Law on Production Sharing Agreements No. 225-FZ from 11 January 1996 the Production-Sharing System. Similarly to the UK in respect of E&P activities, under the Subsoil Law,[79] any exploration and production activities should be performed under subsoil license. Likewise in UK, to acquire the license investor needs to go through auctioning or tendering process.[80]

However, despite the UK licensing process, where license issuing is mostly based on non-discriminatory Strategic Environmental Assessment set by the European Strategic Environmental Assessment Directive (Directive 2001/42/EC), which aimed to find a balance between encouraging economic development of UK oil and gas industry and environment protection,[81] licensing for exploration and production activities on Russia’s territory has strict limitations. For instance, according to Subsoil Law[82] there are significant limitations regarding projects of ‘federal significance’ such as areas positioned in territorial seas or internal waters of Russian Federation, plots containing oil reserves with oil extractible reserves of 70 MT or more. Licenses to ‘federal significance’ plots can be granted to Russian companies or private investors only.[83]

In summary, it is easier to obtain E&P license in UK, because the UK government does not impose additional limitations for foreign IOCs. By contrast, Russia is very protective in respect of its sovereign rights over mineral resources and often disregards foreign investor’s intentions to E&P in Russia. This policy significantly lowers the potential of mineral resource industry in Russian federation. Additionally, majority of oil experts admit that without foreign investment, technical innovation and best practice experiences, it is impossible to develop a competitive Oil and Gas industry.[84]

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