Impact of Fiscal Regimes on Attractiveness of Investments into Unconventional Oil Production: The Case of Russia, the USA and UK

Abstract

Goal: To identify what investment options become most attractive under various tax regimes Tasks: 1) Study the fiscal regimes for O&G industries in Russia, US and UK; 2) Explore the academic approach to evaluating a tax regime’s impact on business; 3) Evaluate attractiveness of the 3 investment options depending on oil price and fiscal regime; 4) Draw conclusions and managerial implications on investment choice regarding unconventional production Main results: 1) Companies should invest first and foremost into enhancing oil recovery on mature fields, as it brings highest returns; 2) Under optimistic (or neutral) oil price scenario, companies should also invest into development of new unconventional fields onshore; 3) Companies should invest into development of unconventional fields offshore only anticipating high long-term oil prices (above 90 USD/bbl) 4) Companies should invest into projects in Russia, as they bring greatest returns, especially under the regime of the Tax on Financial Result 5) If because of external limitations investments into Russia are not possible, companies should invest into UK projects under high oil price and into US ones in neutral and pessimistic oil prices scenarios.