Ministry worried Polish gas levy a bigger burden than thought

WARSAW, April 3 Wed Apr 3, 2013 1:34pm EDT

WARSAW, April 3 (Reuters) - Poland's treasury ministry is worried that a new gas levy could take over 50 percent of profits at exploration firms, above original projections for a 40-percent hit, limiting companies' willingness to drill for shale gas.

The finance ministry last month said it wanted to levy a 1.5-percent and a 3-percent tax on shale and conventional gas exploration, respectively, in a long-awaited detailed draft of the law regulating oil and gas levies.

In an opinion sent to the finance ministry, responsible for implementing the taxation, the treasury quoted calculations by the state-controlled gas monopoly PGNiG, according to which the levy might eat away over half of their profits.

"Financial analyses by PGNiG show that starting from 2016 the average level of the fiscal burden for PGNiG will grow compared to the current model to over 1.2 billion zlotys ($367.6 million) annually," treasury minister Mikolaj Budzanowski said.

"PGNiG group net income for 2012 was 2.23 billion zlotys... In consequence, the additional levy would burden PGNiG's net profit by over 50 percent."

The ministry has said the taxes and levies on gas and oil exploration would total about 40 percent of the sector's profits from 2015, positioning Poland as a more attractive investment than Norway, Great Britain and Australia.

Poland had counted on an expected abundance of shale gas to boost growth and reduce its reliance on Russian oil and gas.

Besides PGNiG, which owns most of the shale gas exploration licences, the taxes will apply to such Polish companies as refiners PKN Orlen and Lotos, as well as to foreign players like Chevron Corp and Marathon Oil Corp .

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