Assessing the Investment Attractiveness of Oil Field Development Projects under the Tax Maneuver: The Evidence from West Siberia

Elena V. Ryabova (), Natalia V. Feruleva () and Olga A. Zamotaeva ()
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Elena V. Ryabova: HSE University, Nizhny Novgorod 603000, Russian Federation
Natalia V. Feruleva: HSE University, Nizhny Novgorod 603000, Russian Federation
Olga A. Zamotaeva: HSE University, Nizhny Novgorod 603000, Russian Federation

Finansovyj žhurnal — Financial Journal, 2022, issue 3, 86-101

Abstract: The West Siberian economic region remains a territory with high potential of liquid hydrocarbons production, which serve as a reserve for long-term development not only for this region, but for Russia as a whole. Experts claim that Western Siberia provides 70% of Russia’s oil production and accounts for 61% of the mineral extraction tax revenues. According to forecasts of the Ministry of Energy, if oil production is not stimulated, then by 2035 the volume of oil production will significantly reduce and budget revenue will decrease by 4.1 trillion rubles. At present, in order to increase the investment attractiveness of the industry, changes in tax and customs legislation are being introduced. However, the effects of the reforms are not obvious. Employing scenario analysis, the case method and financial modeling on the basis of publicly available information, we assess the impact of changes in tax and customs legislation on the investment attractiveness of oil field development projects. The main hypothesis of the study about the positive impact of the tax maneuver on the attractiveness of projects was partially confirmed. However, in all considered scenarios the internal rate of return does not exceed 13%. This is significantly lower than the global average rate of return for oil and gas industry. This points to the need for further adjustments to the tax and customs legislation to ensure sustainable growth and development of the oil and gas industry. The model created to assess the impact of alternative tax regimes on the investment attractiveness of hydrocarbon exploration and development projects can also be used to identify potential benefits and tax consequences for both the investor and the state.

Keywords: tax maneuver; tax on additional income; export duty; tax legislation; efficiency of investment project; oil fields; West Siberian economic region; investment attractiveness; oil industry (search for similar items in EconPapers)
JEL-codes: G17 G38 H22 H32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:220306:p:86-101

DOI: 10.31107/2075-1990-2022-3-86-101

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