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Summary of Working Paper No. 130-1999

III.07.7 Analysis and Evaluation of Economic Conditions of the Energy Prospects Implementation in the Yamalo-Nenets Autonomous Okrug. Part II: Comparative Analysis of Taxation Schemes Potentially Applicable in the Development of the YaNAO Hydrocarbon Reserves

By V.A. Kryukov, A.N. Tokarev and V.V. Shmat, Institute of Economics and Industrial Engineering, Novosibirsk, Russia.

This report is a natural continuation of previous work carried out within the framework of INSROP (See Working Paper No. 56 1996 and Working Paper No. 102 - 1998).

In this report, approaches to identification of conditions under which the implementation of the energy potential of North-West Siberia can be efficient are considered in the case of different types of exemplary individual hydrocarbon fields.

The objective of the present subproject is to identify possible taxation schemes under which oil and gas projects will be implemented, and define bounds within which their parameters may vary without loss of profitability in the development of hydrocarbons on the YaNAO fields close to the NSR catchment area.

The most general conclusion made in the study is that implementation of the energy potential in North-West Siberia requires that the present paradigm of state regulation of the oil and gas sector in Russia be changed. It is necessary to give up the inflexible fiscal pattern of taxation which although aimed to enhance total tax payments and levies is based mainly on the taxation of gross income.

The changed paradigm of state regulation will permit the creation of an attractive investment climate in the oil and gas sector and provide not only an inflow of investments but also employment of new and more effective technologies for search, exploration and production of energy resources.

The proposed methods permit, at the stage of preliminary evaluation of the energy, an estimation of the economic efficiency (expedience) of its economic development. The general conclusions are as follows:

INSROP00090000.gif the potential of large and average gas fields in North-West Siberia can be efficiently realized within the framework of the existing systems of land trunklines (in a southern direction);

INSROP00090000.gif the potential of the average gas and almost all oil fields can be developed only in a high price (favorable) situation on probable hydrocarbons markets and in combination with measures of target state regulation.

On the whole, development and bringing into operation of hydrocarbon resource fields in North-West Siberia require a well-coordinated federal and regional policy in the Russian Federation. It is also necessary to give up as soon as possible the policy of fiscal regulation of the oil and gas sector which appeared in the period of economic crisis and to switch to a flexible policy stimulating the development of hydrocarbon resources.