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Government of Azerbaijan Changes 2008 Taxation Mechanism for AIOC

Oil&Gas Materials 26 September 2007 17:48 (UTC +04:00)

Azerbaijan, Baku /corr. Trend I.Khalilova / The Government of Azerbaijan adopted amendments to the taxation mechanism of the Azerbaijan International Operating Company (AIOC) within the preparation of the 2008 State budget forecasts, a Government source stated. The AIOC is developing the Azeri-Chirag-Guneshli fields.

The necessity of amendments appeared due to the increase in oil prices and it decreases during the period specified in the contract for re-payment of the allocated investments. The average price for the oil sold in the second quarter by Azerbaijan amounted to $68.2 per barrel.

The new taxation system envisages changing the division of the profit oil according to the R-factor coefficient. Currently the oil revenues are distributed in the ratio of 30% (to the State Oil Company of Azerbaijan) and 70% (is shared amongst the foreign contractor companies in AIOC). The ratio is envisaged to be 55/45% from the first quarter and even after full defrayal of the expenses of the foreign investors - 80/20%.

If the oil prices stay at the level of $80 per barrel, from the second and third quarter, the State Oil Company of Azerbaijan (SOCAR) will receive 80% of the profit oil and the foreign participants in the AIOC - remaining 20%.

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