Production Sharing Agreement (Russia)

The direct author, developer and initiator of the consideration of the bill on production sharing is a member of the Yabloko party A. Yu. Melnikov . During the meeting on December 6, 1995, contradictions arose between the two groups of deputies regarding the further consideration of the bill approving the PSA. The co-chairman of the conciliation commission from the Federation Council, Yu. Yu. Boldyrev, insisted on the need for the adoption of the PSA law immediately, in the first reading , without further elaboration - this was supported by the Yabloko faction, the LDPR faction and the Russian Agrarian party . Of the representatives of local authorities who were invited to hear, the position of Boldyrev was supported by the Governor of the Sakhalin Region I.P. Farhutdinov and the Chairman of the Khabarovsk Regional Duma V. A. Ozerov . The group of opponents of the adoption of the law on PSAs in the first reading was headed by V. S. Medvedev , their position did not find wide support. Based on the source compiled by Melnikov, several versions of the text of the bill were developed: ^[4]

Timeline

• July 8, 1997 - for more effective implementation of the provisions of the agreement, Presidential Decree No. 694 “On measures to implement the Federal Law“ On Production Sharing Agreements ”was issued.
• June 18, 2001 - supplement of the Law “On PSAs” with the “direct division” scheme: Federal Law No. 75-ФЗ “On Amendments and Additions to the Federal Law“ On Production Sharing Agreements ”entered into force.
• August 30, 2001 - RF Government Order No. 1155-r is issued, which introduced the institution of “authorized organizations ( Rosneft and Zarubezhneft ”).

In 2006 , in the framework of the PSA, 3 projects are being developed that are not regulated by federal law No. 225-FZ. Since the PSAs for these projects were concluded separately at the regional government level.

• Kharyaga oil field (operator - ZARUBEZHNEFT-Kharyaga Production LLC ),
• Sakhalin-1 (operator - ExxonMobil ),
• Sakhalin-2 (operator - Sakhalin Energy ).

The total income received by the Russian state from these projects amounted to about $ 686 million ^[5] by the beginning of 2006, $ 5.6 billion ^[6] by the beginning of 2010, and more than $ 10.9 billion by the beginning of 2012 ^[7] .

During the audit, it was found that in violation of the provisions of the PSA for the Sakhalin-1 and Kharyaga PSA projects, property created during the implementation of the PSA, which amounted to $ 16.3 billion and was fully reimbursed by the state, was not transferred to the Russian Federation at the time of 2012 Federation. ^[eight]

Thanks to the implementation of PSA projects, Sakhalin Oblast is on the fifth line of the Russian rating by the composite index of socio-economic status; the region ranks third in the development of the real sector of the economy; in terms of investment attractiveness - sixth place; 12th place in income and employment; the gross regional product in the Sakhalin Oblast is two times higher than the average for the Far Eastern Federal District, and revenues are 1.5 times; since 1996, the gross regional product has grown from 9.6 to 455.2 billion rubles, the region ranks third in Russia as a whole in terms of gross regional product per capita; since 1996, oil production on Sakhalin has increased almost 9 times, gas - 13.2 times .; only in the oil and gas sector of the economy of the Sakhalin Region accumulated foreign investment in the amount of $ 32.6 billion; the first in Russia and one of the world's largest natural gas liquefaction plant was built ^[9] .

ZARUBEZHNEFT – Kharyaga Production LLC is the operator of the Kharyaga project in the Nenets Autonomous Okrug . The company is developing 2 and 3 facilities of the Kharyaginskoye field under the terms of the Production Sharing Agreement. Kharyaginsky PSA is one of three projects in Russia that are implemented on the basis of a production sharing agreement. The agreement entered into force in January 1999. From August 1, 2016, the shares of participants were distributed as follows: Zarubezhneft JSC - 20%, ZARUBEZHNEFT-production Kharyaga LLC - 20%, Statoil Sverige Haryaga AB - 30%, Total Exploration Development Russia - 20%, Nenets Oil Company JSC - 10%.

Sakhalin Energy

Sakhalin Energy signed a Production Sharing Agreement with the Russian side represented by the Government of the Russian Federation and the administration of the Sakhalin Oblast in 1994. This agreement was the first PSA in Russia.

The purpose of the PSA for the Sakhalin-2 project is to determine the conditions for the exploration, development, production, processing and transportation of hydrocarbons - when replacing the existing tax and licensing regimes with an organization on a contract basis, valid throughout the project duration. In accordance with the terms of the PSA, the Russian Federation reserves the right to own oil and gas fields, and Sakhalin Energy invests the necessary funds in the exploration and development of these fields.

The agreement provides for full transparency of the Sakhalin-2 project economy. The state (Russian Federation) approves cost estimates and has the ability to verify investor costs. In addition, the parties are mutually responsible for complying with the PSA requirements.

The PSA for the Sakhalin-2 project provides for a special tax regime, according to which most of the taxes and customs duties are replaced by the production section. This means that instead of VAT, mineral tax and other charges, Sakhalin Energy pays 6 percent of royalties starting from the moment the first oil is produced. From the beginning of the production sharing, that is, after reimbursement of the costs of the project, Sakhalin Energy pays income tax at a rate of 32 percent and transfers part of the production in the form of natural gas to the Russian side. The actual production division began in 2012, a few months earlier than originally planned.

Since the start of the project, payments to the Russian Federation have already exceeded $ 5 billion.