At Shtokman, tax breaks in the pipeline

Tax breaks might give a breakthrough at Shtokman. Photo:

A series of significant tax breaks will be introduced at the Shtokman field, as well as other offshore gas projects in the Russian Arctic.


The Russian State Duma has in a first reading proposed to abolish the property tax for all offshore Arctic gas projects. The tax reform, which is included in a legislative bill on offshore gas fields, comes after major pressure and long-dragged negotiations between Gazprom and government officials. As previously reported, the tax issue has been a key obstruction for the Shtokman field developers and is one of the reasons behind the many project postponements. In 2012, project partner Statoil withdrew from the Shtokman Development AG because the development costs were considered too high.

According to newspaper Kommersant, a first version of the tax bill was presented to the Duma by a group of legislators already in 2011. Among the authors of the bill is Valery Yazev, the powerful State Duma deputy representing Murmansk Oblast.

With the new tax conditions in place, the Shtokman project is likely to win new appeal among the oil companies, including in Statoil, which reportedly has “continued a dialogue with Gazprom on how to make the project profitable”. 

However, although the legislative signals from the State Duma are seen as a possible breakthough for the Shtokman developers, the new law is not yet finally adopted. According to Andrei Makarov, Head of the Duma Budget Committee, the upcoming second reading will include “comprehensive work” and conflicting positions by different parliament committees.

In its current form, the bill includes the abolishment of property tax on all offshore Arctic objects, and defines the legal status of offshore installations. It also facilitates the state border-crossing regime for companies involved in the project development, Kommersant reports.

The State Duma Budget Committee also indicates that the new law ultimately might include also tax breaks on gas exports. Furthermore, Committee Leader Makarov also does not exlude that ultimately also offshore oil fields will get the tax cuts.