"Let bygones be bygones", an article for the "Neft... | KPMG | RU

"Let bygones be bygones", an article for the "Neft Rossii" magazine (issue 9, September 2016)

"Let bygones be bygones", an article for the "Neft...

How new draft legislation on the repatriation of funds can significantly affect oil & gas companies' activities abroad?

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Partner, Head of Oil & Gas

KPMG in Russia

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The government has recently increased pressure on business in terms of reporting and transparency, and as part of this trend, new amendments have been developed for currency legislation: Russian residents will be obliged to timely return loans transferred to non-residents' authorised bank accounts. These amendments expose oil & gas companies to certain risks. Many of them manage their foreign projects by creating local investor firms and financing these firms via loans; the loans can be rather large if the project involves geologic exploration, but if the exploration activity is not successful, investor firms may fail to return the money, and thus cause problems for the parent company in Russia under the new legislation. That is why, if the amendments are passed in their current version, oil & gas companies are likely to halt their geologic exploration activity abroad, which will lead to a decline in the sector's overall development. One of the potential solutions is to exempt from the legislation oil & gas projects where extraction has not yet started, until the moment it starts, or until the project is declared unsuccessful.

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