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Expected economic effect for OPOs — PetroMining

In August 2023, the PetroMining Association organized the first congress of independent oil producing enterprises of Kazakhstan, which brought together more than 70% of the OPOs.
After a year of operation, PetroMining presents the interim results of coordinated work with government agencies on the OPO agenda. Oil producing companies will be able to experience the economic outcomes from the performed work, starting in 2025, as part of the activities to implement the Decree of the Head of State "On Measures to Liberalize the Economy."
One of the important focuses of the Association during the first year of its operation was maintaining the tax burden on OPOs, including corporate income tax (CIT) at 20%. Previously, it was planned to increase CIT for the extractive sectors of the economy of Kazakhstan to 30%, including the oil and gas industry.
"The PetroMining Association has prepared an unprecedented analysis showing the negative impact of an additional increase in the tax burden on the oil and gas industry. As a result, we have assessed the economic benefits for OPOs while maintaining the CIT rate, with the exception of three large operators and the quasi-public sector. According to our data, the savings will amount to about 54.7 billion tenge per year, - commented Yaromir Rabay, the Executive Director of the PetroMining Association.
In addition, the Ministry of Energy previously initiated work to stimulate fields that are on the verge of negative economic profitability. As a result, amendments were made to the legislation. The PetroMining Association also joined the work on this issue, providing an analysis of four subsoil users – members of the association.
"Based on the results of the analysis, the efficiency for subsoil users for the cost-effective period was estimated at 325.6 billion tenge. That is, this is a tax savings that will be invested in the development of deposits. We appeal to the Ministry of Finance to support this initiative. This is also extremely important for OPOs, who have found themselves facing difficult conditions," emphasized Yaromir Rabay.
From the very first days of PetroMining's existence, the Association's team promoted the process of transition to market pricing with the expected abolition of state regulation of wholesale prices.
"The Association's experts have conducted a number of analyses and justifications, which served as the basis for working with government agencies. In particular, the issue of transition to market pricing was included in the Presidential Decree "On Measures to Liberalize the Economy" and in the action plan for its implementation.

“The transition to market conditions will provide OPOs engaged in the extraction and processing of petroleum products with additional income in the amount of 141.6 billion tenge annually,” said the head of the PetroMining Association, Sayat Boranbekov.
Morever, the PetroMining Association took part in the development of the issue of reducing the calculation base for the mineral extraction tax (MET) when flaring gas in the new Tax Code. In the current Tax Code, the calculation base is determined based on the world price for gas. The provisions of the new Tax Code reduce the MET payments by approximately 8 times - from 59,000 tenge to 7,500 tenge per thousand cubic meters of gas.
“The PetroMining Association, together with the Agency for the Protection and Development of Competition, is working on the issue of providing unimpeded access for NDOs to the sale of aviation fuel on the territory of airports. According to our estimates, the effectiveness of this initiative exceeds 15 billion tenge annually,” commented Laura Ibraimova, Director of the Analytical Department of the PetroMining Association.
To date, more than 40 oil producing organizations have become members of PetroMining. The Association is accredited with six ministries.
"The PetroMining Association has achieved the status of a leading association and brought the OPO agenda to the public level. It would be fair to note that it would have been impossible to build an effective dialogue without the participation of our colleagues from the Ministry of Energy and the Agency for the Protection and Development of Competition of the Republic of Kazakhstan, as well as partners represented by the National Chamber of Entrepreneurs of the Republic of Kazakhstan, PetroCouncil.kz, Kazservice, NAFT@KZ, and others.

For the first time in many years, oil producing organizations have been heard, and we are seeing positive dynamics in the OPO agenda," summed up the Head of the PetroMining Association, Sayat Boranbekov.
In order to popularize the activities of OPOs, PetroMining has launched educational projects such as "On the Watch", where OPOs share their experience, opening the doors to their enterprises. And the Association, together with PetroCouncil.kz, supported the monthly analytical oil bulletin from Naft@KZ
2024-08-12 12:00