Exclusion of tax amendments from Environmental Code will complicate BAT implementation
The experts discussed the issue during the meeting of the Oil and Gas Industry Committee of the Atameken Presidium of the Republic of Kazakhstan.
According to the Tax Code, from 2020, it is prohibited to include in non-tax legislation of the Republic of Kazakhstan the norms regulating tax relations.
"The only incentive norm for the introduction of the best available techniques (BAT) - the abolition of payment for negative impact (emissions) from the date of obtaining the Integrated environmental permit by applying a coefficient of zero to the payment rate may not be adopted, as it will be excluded from the text of the associated bill and considered under another bill on tax issues," Yaromir Rabay, Executive Director of the Kazenergy Association, said.
The costs of implementing the BATs prescribed in the Draft Code directly affect the oil, mining and metallurgical and energy sectors, which will lead to additional costs. The business community fears that the new working group on a separate tax bill will not be able to immerse itself in the draft environmental code in detail, where the introduction of BAT is impossible without the application of economic (tax) incentive measures.
In turn, the Сhairman of the Сommittee Daniyar Abulgazin noted that these issues should be considered in aggregate, otherwise the principle of BAT implementation will not be achieved.
The Сommittee also considered the issue of electronic trading platforms (ETP). In February 2019, sales of liquefied petroleum gas (LPG) via ETP began. This was to solve the problem of fair market pricing and trade liberalization. ETPs became the analogue of exchange trade. To restrain the range of potential price hikes, a growth limit of 20% was set.
During the year 176,000 tonnes of liquefied gas was sold through ETPs, but several LPG buyers were dissatisfied.
"At the end of the year, there were situations when prices rose at some sites. Therefore, the Energy Ministry has initiated amendments, which entail some restrictions," Yaromir Rabay said.
It is proposed to reduce trade sessions, to toughen LPG export by rail and road transport. In the rules of trade, the threshold for price increases has been reduced to 10%. The acceptance of the limit growth was due to the Mangistau region as the only LPG supplier.
"The problem is equal selling prices for all plants. In Mangistau, the difference between the sale price of KazGPZ, the gas processing plant, and the market price reach 116%. We need to raise the price of the plant, then those IEs and LLPs, which do not trade gas at gas stations, but resell it, will close by themselves," Alik Aidarbayev, Chairman of the Board of NC KazMunayGas, said.
Asset Magauov, Vice-Minister of Energy of Kazakhstan emphasized that trade through ETPs should lead to market liberalization.
KazGPZ LLP lost KZT 15.5 billion on LPG sales in 2019. The average price of LPG sales from the plant is 25 tenge per liter, while the market value is 55 tenge.
"There are 170 IEs registered, although there are not so many gas stations in the city. We support trade via ETPs, and during the year the company was able to process 16,000 tonnes of additional LPG and sell them on the trading platform. Experience has shown that the cost depends on the market: if in 2019 we sold LPG for KZT 25 per liter, in March it already costs KZT 34 per liter. The ETPs will be a transparent mechanism, while we do not see any other," Zhakyp Marabayev, deputy chairman of the KazMunayGas production board, said.
Daniyar Abulgazin recommended that the Energy Ministry carefully study possible mechanisms for regulating the liquefied gas market and consider all options for liberalising it. The ultimate goal should be a fair market price for both the wholesale buyer at the plant and the retail buyer at the gas filling station.
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