Exploring Arctic oil and gas

Summary attractiveness of Arctic opportunities by country

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As shown in the chart below, the fiscal and tax perspective is extremely important. In the accompanying table, we have summarized the key characteristics of the tax regimes of the five countries. Notably, we have included two “views” of the Russian regime: the current state and a summary of the proposed new regime for the Arctic offshore.

Summary Arctic tax regimes by country

	US (Alaska)	Canada	Greenland	Norway	Russia (current)	Russia offshore (proposed)
Fiscal basis¹ and key features	Profits-based Corporate income tax and royalties	Profits-based Corporate income tax and royalties	Profits-based Corporate income tax	Profits-based Corporate income tax with additional income tax for upstream activities	Revenue-based Royalties (Mineral Extraction Tax (MET)) and export duties	Profits-based Corporate income tax and royalties (MET)
Indicative average level of overall fiscal burden on project's economics at US$80/bbl²	48% - 72%	42% - 54%	35% - 40%	79%	75% - over 100%	Less than 70%³
Timing of taxation toward project's payout⁴	Weakly to average front-end loaded	Average front-end loaded	Weakly front-end loaded	Weakly front-end loaded	Extremely front-end loaded	Average front-end loaded
Investment incentives	Various capital allowances	Various capital allowances	Various capital allowancess	Capital allowances and uplifts	Reduced royalties, limited holidays and lower rates for designated locations and specific fields	Production royalties (MET) significantly reduced, export duty abolished, import duties and property tax exemptions allowed, and capital allowances and uplifts
Loss carryforward / carryback period	20 years/2 years	20 years/3 years	Indefinitely/0 years	Indefinitely/0 years	10 years/0 years	70 years/0 years

¹ Generally, under production — or revenue-based systems, the investor pays taxes before it deducts its costs.
² Based on World Rating of Oil and Gas Terms, Volume 3 (Rating of Arctic Oil and Gas Terms). PFC Energy, Van Meurs Corporation and Rodgers Oil & Gas Consulting, 2011. An overall fiscal burden or a government's "take" is the relationship of all payments to the government to economical project's profit (all income less all expenses).
³ The announced new tax regime applies only to offshore projects and envisages much more favorable terms for investors compared with the current terms for offshore. For the announced new tax regime for Arctic offshore, the government's take should be significantly lower (below 70%) than under the current terms. Per the estimates of certain experts, the government's take ranges from 30% to 70%, depending on project's specifics. Currently the announced regime is under development and has not yet been enacted. All other criteria (other than the government take) are provided for offshore projects only. The proposed tax regime does not apply to Arctic onshore.
⁴ Timing of taxation is more important than the level of a fiscal burden. The timing of the government's take depends on a composition of fiscal features; profits-based systems shift the timing toward the payout and after-payout period, while royalties and other non-profits-based systems could result in high fiscal payments before a project reaches a payout.

	US	Canada	Greenland	Norway	Russia
General fiscal terms
Access to resources
Competition for resources
Cost environment
Existing infrastructure
Access to infrastructure
Access to markets
Potential for material discoveries
Potential for material value creation