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Tax and Legal Guide to the Russian Oil & Gas Sector

Key facts and general statistics

Tax and Legal Guide to the Russian Oil & Gas SectorRussia was the world’s largest gas exporter and crude oil producer in 2010 with a market share of 12.9%, according to Deloitte Touche Tohmatsu Limited’s Guide to the Russian Oil & Gas Sector. With 23.9% of the world’s proven natural gas reserves in 2010 and major exploration and mining projects underway in Eastern Siberia and the Arctic shelf, Russia is an increasingly attractive prospect to foreign investors.

Historically, the energy sector has been one of the main drivers of the Russian economy, amounting to roughly 25% of the country’s GDP. Exports of crude oil, oil products and natural gas made up over 60% of all Russian exports in 2009. While the Russian energy market is characterized by a high share of state-controlled companies and tough administrative restrictions, the government is currently pursuing an agenda of modernisation and introducing tax incentives to promote investment into the country, including into the energy sector.

Special Economic Zones (SEZs), such as the Skolkovo Innovation Centre near Moscow, are bringing tax benefits to many companies involved in activities including oil & gas research and development. Companies in the oil & gas sector can also enjoy tax benefits such as reduced (or 0%) VAT rates and social insurance concessions. Additionally, Russian legislation on production sharing agreements allows investors to be granted the exclusive rights to explore and extract subsoil resources on specified subsoil areas. Other tax benefits are available to oil & gas companies, as explained in the publication.

About the Guide

The Guide to the Russian Oil & Gas Sector outlines the legislative framework for the oil & gas industry. The principal taxation and legislative requirements that foreign investors should consider when considering operations in Russia is also reviewed, including profits tax, mineral extraction tax, employment legislation and VAT, among others.

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