Russian Oil and Gas Sector Faces Sanctions, Taxes

Russian Oil and Gas Sector Faces Sanctions, Taxes

The Russian oil and gas industry keeps encountering impediments to growth. Oil and Gas Technology noted that the Russian energy industry is likely to be forced to restructure, even as production remains at a record high.

Anna Belova, Ph.D., GlobalData’s Senior Upstream Analyst covering the Former Soviet Union, stated that Russia’s response to sanctions is focused on addressing issues without affecting production numbers.

“In addition to strengthening and extending geopolitical ties on the international stage, Russia’s oil and gas industry is actively seeking foreign participation in the domestic sector and lobbying for legal incentives to foreign investments,” Belova said.

“While domestic and foreign entities could provide capital inflow for the Russian upstream sector, both would require regulatory changes, and the sanctions could provide the impetus for a restructuring of the subsoil law.”

Sanctions are not the only obstacle faced by the industry. Reuters has reported that a new tax hike will raise the liabilities of major producers such as Gazprom by nearly 40%.

The new taxes are expected to raise an additional $1.6b for the budget of 2016, and will only apply to those firms that export natural gas in its gasouos state. Gazprom is the only major firm that will likely be affected.

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