Fitch: Kazakh Oil & Gas Tax Changes Positive in Low Oil Price Environment
18.03.09 09:29
/Fitch Ratings, London, March 17, 09/ - Fitch Ratings says today that the
overall tax burden on Kazakh oil and gas companies, levied by a new tax
code introduced at the beginning of 2009, is not likely to change significantly
given the offsetting nature of other tax initiatives. "Overall, in a low price
environment the new tax regime is expected to be less burdensome for the
oil and gas industry compared with the older system" said Angelina Valavina,
a Director in Fitch's Energy, Utilities and Regulation team. Furthermore, Fitch
believes that it is likely to remain less punitive than sector taxation in
Russia and thus should not adversely impact incentives to invest in Kazakhstan's
oil and gas sector.
The introduction of a new mineral extraction tax (MET) in replacement of
royalties implies a higher tax load for an upstream company, as the MET
rates are set in a range of 5-18% for 2009 depending on production volume
whereas most royalty rates ranged within 2-8%. Moreover, the introduced
rent tax on exports of oil and gas condensate, which will replace the export
duty, is imposed on a progressive scale of 0-32% depending on the oil price,
but without a marginal approach to calculation. Hence, in a higher oil price
environment it may become less favourable when compared to the previous
export duty which was calculated based on a more rigid scale initially
announced by the Kazakh government.
Nevertheless, Fitch notes that a potential increase in an oil and gas
company's tax level caused by the above taxes could be largely offset by
other tax initiatives, for example, a gradual reduction of corporate income tax
to 20% in 2009 from 30% in 2008 (declining to 17.5% in 2010 and 15% in
2011) and the introduction of a marginal approach to the calculation of
excess profit tax as well as an increase in the threshold for this charge.
At the same time, the agency believes that the new tax code, when
effectively implemented, will establish a clearer framework for taxation of the
energy sector, which could lead to greater certainty and transparency in
Kazakhstan's taxation system. A more predictable taxation regime in turn
could foster a more stable operating environment, which will be especially
important with respect to the challenging conditions facing the oil and gas
industry at this point in the market cycle, and may benefit the sector's
investment climate in the long run. All oil and gas companies operating in
Kazakhstan, such as state-owned KazMunaiGaz National Company ('BBB-
(BBB minus)/Rating Watch Negative) and privately owned Tristan Oil Ltd
('B+'/Rating Watch Negative), are subject to the new tax rules. However,
participants in production sharing agreements concluded before 2009, which
contain a stability of tax regime clause, such as Tengizchevroil (senior
secured rating of 'BBB-'(BBB minus)) and the consortium developing the
Kashagan project, will be exempted from the new regime.
Contacts:
Angelina Valavina, London, Tel: +44 (0) 20 7682 7383;
Andrew Steel, Tel: +44 (0) 20 7682 7486.
Contacts for media:
Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364,
Email: peter.fitzpatrick@fitchratings.com;
Alexei Mironov, Moscow, Tel: +7 495 956 9908,
Email: alexei.mironov@fitchratings.com.
[2009-03-18]