New tax regulations for depleting deposits will allow OPOs to reinvest in production — PetroMining

The Ministry of Energy of the Republic of Kazakhstan has previously initiated important legislative changes to stimulate deposits that are on the verge of negative economic profitability. As a result, amendments were made to the legislation. The PetroMining OPOs’Association also joined the consideration of this issue.

Currently, there is a steady decline in hydrocarbon production (excluding three major projects - Tengiz, Kashagan, and Karachaganak). Most of the fields being developed were discovered in the first half of the 20^th century and are at stages III-IV of development.

At the same time, production at mature fields is often accompanied by such additional geological challenges as water cut and depletion. In addition, such fields, as a rule, bear a high social burden, and therefore, there is a need to maintain their operability.

Normal operation of these fields can only be ensured by long-term investments that allow transferring geological reserves to the category of recoverable ones.

Earlier, in order to create additional incentives for depleting deposits, the Ministry of Energy of the Republic of Kazakhstan initiated amendments to the legislation. These changes introduce a new institute of depleting deposits, and also allow transferring such deposits to a separate tax regime with an obligation to reinvest tax savings - an alternative tax on subsoil use (instead of payments for historical costs, mineral extraction tax and sales tax).PetroMining experts, together with consultants, in turn, provided an analysis for four subsoil users that are members of the Association for justification, including an economic model with calculations.