''Our tax system is overexposed to changes'': Alekperov drags Tatarstan with him

The world's second energy company is bringing allies together to defend the interests of the Russian oil industry against launching tax experiments

Tatarstan President Rustam Minnikhanov has met with President and CEO of LUKOIL PJSC Vagit Alekperov, who again managed to enlist the support of the president of Tatarstan in defending the interests of the oil industry at the federal level, in the Kazan Kremlin. ''Most likely, the active discussion of the tax changes at the level of the Russian government will begin in the middle of next year, and your support will be significant for us,'' the head of the oil company addressed to Minnikhanov. This could not but flatter — just the day before, LUKOIL was named the second largest oil company in the ranking of the world's largest energy companies according to S&P Global Platts (immediately after the US ExxonMobil). ''No matter how they assess [in the preparation of ratings], they do it for reason,'' the head of Tatarstan commented on this fact. Read the details in the report of Realnoe Vremya.

LUKOIL's turnover reaches 50 billion rubles

LUKOIL oil company and the Republic of Tatarstan annually prolong the agreement on cooperation, which was concluded in June 2010 for the development of partnership in the economic, social and cultural sphere, and has never been interrupted. It seems that the LUKOIL agreement is of an indefinite character, since it is enough for the parties to sign the annex to it for the coming year and the agreement continues to act as the roadmap. Let us note that Tatarstan does not have such friendly pact with any other Russian oil company. Which, however, is quite explicable: the entrance to the Tatarstan fuel and energy complex is forbidden to everyone except LUKOIL. Later, Vagit Alekperov reminded reporters that the company has been operating in Tatarstan since 1995, during which 15 million tonnes of oil were produced. According to him, LUKOIL's annual investments in the republic exceed 3 billion rubles, and the company intends to continue to cooperate both in exploration and development of the fields and in the active work with the machine-building complex.

As usual, before the conversation in the Kremlin, the president of Tatarstan and the head of LUKOIL signed another protocol to the cooperation agreement, which involves ''strengthening the production capacity and improving the investment climate'', as well as the support of the projects aimed at socio-economic development. Rustam Minnikhanov reminded that Tatarstan and LUKOIL have historically developed close relations. ''LUKOIL is our strategic partner. The trade turnover between Tatarstan and LUKOIL has increased to 50 billion rubles,'' he said the latest data on the results of the cooperation. According to him, the company remains a long-established customer of the machine-building products of Tatarstan producers (KAMAZ, Kazancompressormash), and Tatarstan, in turn, began to buy raw materials for the development of petrochemical projects from LUKOIL.

The president of Tatarstan and the head of LUKOIL signed another protocol to the cooperation agreement before the meeting in the Kremlin

''LUKOIL is a supplier of raw materials for petrochemical enterprises. We want our contacts to be strengthened because we have a large programme on oil and gas chemistry and the issue of raw materials is important to us,'' the Tatarstan president said.

In the field of oil production, the LUKOIL subsidiary, its ''scientific-technical polygon'' – the company RITEK (TatRITEK) — continues to work in Tatarstan. Now it operates on the territory of 13 municipal districts and is the largest among the small oil companies of Tatarstan. In addition, LUKOIL gained a foothold in the retail market of petroleum products.

''I must say that LUKOIL filling stations have a high rating. According to the figures, we see that there is growth, today LUKOIL filling stations occupy 16% of the market,'' Minnikhanov said. Speaking about LUKOIL's business directions in Tatarstan, he noted that the company remains a major investor in the regional economy, ''Last year, the investments amounted to 3,5 billion rubles.''

The second line in the world ranking

It was impossible not to notice that Rustam Minnikhanov was somewhat jealous of the rise of LUKOIL in the ranking of 250 largest energy companies in the world according to S&P Global Platts. Just a day before the meeting, it became known that LUKOIL took the 2nd place in it and is now second only to the American ExxonMobil, which was the leader for 12 years, until 2017. Meanwhile, Tatneft has worsened its position, dropping from the 46th place to the 54th. ''When I looked at the ratings of oil and gas companies,'' then the head of Tatarstan paused. ''No matter how they assess — they do it for reason. I congratulate you that you are a global company with a good prospect today,'' the president concluded his greeting.

''I congratulate you that you are a global company with a good prospect today,'' the president concluded his greeting

The head of LUKOIL took the compliment for granted and responded with a counter remark — that he sees Tatarstan as his ally 'in defending the interests of the oil industry''. ''It is with great pleasure that I come to Tatarstan to talk and exchange information that will help us to overcome difficulties together,'' he began. Alekperov said that LUKOIL has recently adopted a new strategy for the development of oil and gas chemistry, according to which investment programmes worth $10 billion will be implemented within 6 years.

''Therefore, the relationship that has developed with TAIF Group is valuable for us,'' he said. ''Our colleagues constantly exchange information about market conditions, discuss niches that will allow us to be present in the global markets. Therefore, we would like to see our contacts only strengthened.''

42 changes in the tax system over the past 5 years

At the same time, the head of the company complained that the tax legislation in Russia ''is not perfect''. Therefore, a consolidated position of the oil companies is required to defend the interests of the industry at the federal level.

''Our tax system is overexposed to changes: over the past 5 years, 42 changes have been made. With such large-scale inertial investments, which pay off in 10-15 years, the changes have a negative impact on the capabilities of our investors,'' he explained the reason for the discontent of the oilers. Alekperov also said that today new initiatives are being discussed, in the announcement of which LUKOIL would like to enlist the support of Tatarstan. ''We are for that the tax on added income is applied to all gas and oil fields,'' he revealed the essence of the proposed new introductions. ''This will allow us to approach the development of the field more economically. There is the opportunity to involve low-permeability and low-yield resources in the development. This law will take into account our capital expenditures and inflation. Most likely, already in the middle of next year we will begin to actively discuss it at the government level after the study, and your support will be significant for us.''

Alekperov also said that today new initiatives are being discussed, in the announcement of which LUKOIL would like to enlist the support of Tatarstan

We remind that the law on introduction of the tax on added income in the oil industry since 2019 has been recently adopted. The tax will be levied not on oil volumes, but on cash flow. The basis for its calculation will be the estimated revenue from operating and investment activities for the exploration and production of raw materials in the license area, reduced by the amount of actual costs, extraction tax, export duties, transport costs. The tax rate is 50%.

At the end of the conversation with the Tatarstan president, Vagit Alekperov promised that LUKOIL would continue to buy products of Tatarstan mechanical engineering industry. ''Perhaps, we do not always buy directly, but through our contractors, but we encourage them to use KAMAZ vehicles in our fields. I want to assure you that we will continue to be guided by this.''

By Luiza Ignatyeva. Photo: tatarstan.ru

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