Unconventionals add complexity to oil and gas tax regimes
- Governments are competing for exploration investments and making oil and gas tax regimes attractive to investors
- Many countries are altering their fiscal framework to provide incentives for unconventional oil and gas and hard-to-recover projects
Moscow, 18 June 2014: Despite the geopolitical uncertainty that looms over the global oil and gas industry the continued imposition of taxes on income from oil and gas operations remains a certainty. In a global environment of constantly evolving tax and fiscal policy, the scope, impact and makeup of taxes are far from certain. This is according to EY’s newly released annual Global oil and gas tax guide which summarizes the oil and gas tax regimes in 80 countries.
Alexey Kondrashov, EY’s Global Oil & Gas Tax Leader says: “Fiscal policy has never been more important to governments as they compete to attract large-scale investment. Revenues need to be maximized from hydrocarbon production to create stable fiscal environments for efficient resource development.
“Some countries are certainly better at achieving this stability than others, thus allowing reasonable returns for investors. Quality and economics of basins naturally evolve over the lifetime of the basin, but also shift in response to other challenges, such as declining production caused by the maturity of fields. Forward-thinking governments recognize this and continually review and revise their tax regimes to equate for these changes,” says Kondrashov.
According to the 2014 Guide, countries continue to develop tax policies specifically around unconventional as well as difficult-to-recover oil and gas in an effort to provide incentives for such projects. Governments see the potential of shale within their counties energy mix and want to create the right conditions for the industry to explore and unlock these opportunities.
Differentiated taxation is increasing on a global scale as governments learn more about the complexities and challenges the oil and gas industry faces. In order to address specific tax policies in their fiscal regimes, governments are considering different project economics for gas and oil, onshore and offshore projects, shallow and deepwater projects, and for pipeline and LNG project profiles.
Kondrashov concludes, “It is critical for governments to make oil and gas tax regimes competitive and attractive to investors going forward.”
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