By the year 2030, more than half of new oil production in the Russian Federation will come from hard-to-recover reserves, which require adjustments to the tax regime to encourage their development. This was stated by Alexander Dyukov, Chief Executive Officer of Gazprom Neft.
In mid-April, the Government of the Russian Federation approved the updated Energy Strategy of the Russian Federation through the year 2050. According to Dyukov, the strategy places significant emphasis on the development of hard-to-recover reserves.
“This is absolutely justified. Even to maintain current production volumes, oil producers are being forced to bring increasingly complex reserves into active development. By 2030, more than half of all new oil production in Russia will be derived from hard-to-recover reserves,” Dyukov told reporters.
“However, for these reserves to be widely developed, there must be an appropriate state policy in place. There needs to be fine-tuning of the tax regime, specifically aimed at stimulating the development of hard-to-recover reserves. As I have stated many times before, the industry is also interested in expanding the application of the excess profit tax regime (known in Russian as NDD), which has proven to be effective. It has enabled the launch of many new projects and improved efficiency at mature fields,” Dyukov said.
At present, more than 60 percent of Gazprom Neft’s oil production comes from hard-to-recover reserves. The company has consistently advocated for tax incentives to support the development of these reserves.
This view is shared by the authorities. In February, Igor Shpurov, Head of the State Reserves Commission of the Russian Federation (GKZ), acknowledged that oil producers lack sufficient tax preferences for the development of such resources. Former Minister of Energy Nikolay Shulginov also previously voiced support for this position. The Ministry of Finance of the Russian Federation has stated that it does not plan to consider tax incentives for “difficult” oil and gas before the year 2027.
“Reserves will become increasingly complex, and demand for new technologies in the industry will continue to grow. That is why government support for technological development is necessary to stimulate companies in the oil sector and related industries to engage in research and development (R&D), pilot industrial testing, and the scaling of new technologies,” Dyukov continued.
“The role of the state is also critical as a coordinator of industry demand for equipment, chemicals, and materials, which will help realize economies of scale and reduce the cost of key components required for the development of such reserves. At the same time, I would like to emphasize that by encouraging the development of hard-to-recover reserves, the state also improves the efficiency of conventional oil production, as the new technological solutions will be actively applied to traditional reserves as well,” the Chief Executive Officer concluded.
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