Oil price volatility highlights tax structure vulnerabilities of exporting countries

- Profit-based taxation structures best positioned to withstand ongoing volatility

- New incentives, adjustments to tax regimes required in current price environment

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Jun 16, 2015, 01:00 ET

LONDON, June 16, 2015 /PRNewswire/ -- Exporting countries around the world are reconsidering how they tax the oil and gas industry in the wake of ongoing oil price volatility, according to EY's Global oil and gas tax guide 2015, launched today, which summarizes the oil and gas corporate tax regimes in 84 countries.

Alexey Kondrashov, EY Global Oil & Gas Tax Leader, says:

"Over the last decade, and especially in the last five years, governments of exporting countries around the world have gradually introduced or adjusted their fiscal regimes to capitalize on the high oil price environment. The dramatic oil price drop that started a year ago exposed the vulnerabilities of many of these tax structures and is forcing jurisdictions to focus on revising them."

Fiscal regimes in many countries involve taxation on a per barrel basis. But taxing based on volume hasn't served exporting countries well amid oil price volatility. Countries that tax profit are best positioned to withstand further dips in oil price.

Kondrashov says: "Many tax regimes include terms that automatically respond to oil price variations, but even these are being stretched in the current price environment. For projects to remain economically viable, some countries will need to impose new incentives or make adjustments to existing tax regimes."

A number of jurisdictions have already begun adjusting fiscal terms. For example, Argentina, the UK, Colombia, Kazakhstan and China have introduced important changes to their regimes to support and intensify investments.

Kondrashov says: "Tax regimes can't depend on a high oil price environment. Governments must work with industry to create a regime with the flexibility to withstand price fluctuations and incentives to encourage investment regardless of price point. A sustainable model is in reach."

Notes to Editors

About the report

The Global oil and gas tax guide summarizes the oil and gas corporate tax regimes in 84 countries and also provides a directory of EY oil and gas tax contacts. The content is based on information current to 1 January 2015, unless otherwise indicated in the text of the chapter.

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About EY Global Oil & Gas

The oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY's Global Oil & Gas team supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oilfield service sub-sectors. The team works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant key sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively.

For more information, please visit ey.com/oilandgas.

Sarah Shields
EY Global Media Relations
+33 6 74 57 73 43
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