Foreign influence in fuel and energy complex: hidden danger and clear opportunities

11 april 2014

Foreign influence in fuel and energy complex: hidden danger and clear opportunities. This was the header of the 11th energetic bulletin created by the experts of the Analytical Center.

Taxes and contracts in oil-and-gas energy is a topic of endless debates, theses and conferences. One can notice rises and falls (some sort of a cycle) in relations between deposit rights holders (states) and exploitation companies. To a large extent this depends on the price level of energy sources and on the financial position of states (governments) that control the deposits. Low prices and absence of own investment sources can cause tax cuts, easing contracts and production sharing agreements. The development is more important in the long term – the only need here is to compose contracts rationally: to include the share of national production, transfer or co-developing of technologies and socio-economic development of the digging area.

As soon as oil prices increase significantly (e.g. $20 to $100 dollars per barrel), the governments of many countries believe, they need to increase the income and “buy” everything themselves. It happens regularly that high taxes make it difficult for the companies to invest, they have no activity (and payback) horizon. The conflict arises between immediate fiscal benefit and long-term development interests, i.e. improvement of job qualities, development of own technologies. Manufacturing industry shrinks, research institutes experience difficulties, skilled personnel emigrates. If there is no “simple” industrial policy, there is no complex economical development.

At the same time common insurance and industry risks grow. State technological dependence on imports increases sharply. Domestic exploitation companies start to depend on external credits and begin to lobby tax remissions or budgeting for creating infrastructure – whereas the problem of the overall development should be solved on long-term basis and risks should be minimized, especially in XXI century.

Bulletin presents statistics of Russian and world energy, gives examples of Russian fuel and energy complex’ dependency on import (which is especially remarkable referring to high-technology and products with high profit margins, particularly to some types of petrochemical products and power engineering), represents the view on oil contracts in terms of national interests and foreign investments – and considers other relevant issues.