Polish PM announces 40% tax on O&G profits

Poland’s Prime Minister, Donald Tusk, has announced plans to tax oil and gas companies at roughly 40% of their profits as the government begins to outline what it hopes will be seen as an investment-friendly regulatory framework.

According to the government’s proposed framework, natural gas would be taxed at 5% and oil would be taxed at 10%; the taxes would cover production volumes from both conventional and unconventional fields. In addition, a further 25% tax on revenue after expenses has been proposed.

The head of the Prime Minister’s office, Tomasz Arabski, was quoted as saying, “We are launching this system to ensure that investors who are currently investing in Poland can feel assured what the state’s strategy in this matter is … After all, we are talking about billions of zlotys in investments … This is why we need to conduct this debate with open doors. It is very important for us that investors feel safe an that these investments can be made in a transparent manner.”

There are also plans to create a 100% state-owned National Energy Minerals Operator (NOKE), operated by the Treasury, which will deal with the trade in licenses.

The Polish government is hoping that by outlining this regulatory framework, it will end the uncertainty that O&G companies have faced when it comes to the financial burden that they’re likely to face from operating in the region. However, there has been some criticism of the proposed taxes (which, when combined, amount to roughly 40% of an O&G company’s likely profits), with claims that they might scare off potential investors, especially considering the fact that companies will also have to pay company and real-estate taxes.

Breaking dependence on Russia

Much of the Polish government’s drive to boost investment in domestic oil and gas production is fuelled by the desire to wean the country off of Russian energy supplies. At present, Poland obtains more than half of the gas it uses from Gazprom; a high level of dependence that Warsaw is keen to reduce.

Despite the political will to make it happen (some 111 shale exploration licenses have been granted), Poland’s shale movement has encountered some serious blows on the route to fruition: Original estimates of the country’s reserves made by the US EIA predicted the presence of roughly 5.3 trillion m³ of shale gas, a vast amount, sufficient to meet current domestic demand well into the 24^th century. However, a government review in March revised this figure downwards by 90%.

Written, with additional content from various sources, by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/exploration/17102012/polish_pm_announces_40_percent_tax_on_oandg_profits/