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How will US Inflation Reduction Act affect oil & gas output?

Oil&Gas Materials 27 September 2022 17:08 (UTC +04:00)
How will US Inflation Reduction Act affect oil & gas output?
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, September 27. The US Inflation Reduction Act will have a limited impact on oil and gas production, Trend reports via Fitch Ratings.

Fitch says in its latest report that changes to minimum royalty rates, rents and minimum bids for federal land leases for oil and gas developments will affect companies’ investment plans, project designs and opex.

“However, since only a fraction of oil and gas development occurs on federal land, the overall impact on production will be limited and demand for oil and gas products is expected to remain stable throughout the decade. A new methane emissions charge, applied on facility level, will further encourage the sector to invest in efficiency and emissions reduction measures.”

The IRA plans to invest around USD369 billion in energy security and climate change mitigation and adaptation programs over the next ten years. The investments are financed through an increase in the corporate minimum tax rate to 15 percent, a prescription drugs pricing reform, improved enforcement of tax collection and an excise tax on stock buybacks.

The key provisions of the IRA include tax credits, grants loans and other incentives for production of and investment in clean energy (incl. renewables, nuclear and hydrogen), clean vehicles and clean fuel production, energy efficiency measures, and development of carbon capture and direct air capture projects. The IRA also contains provisions for government investment in low-carbon materials procurement, biomass, carbon removal and forest management, a program for advanced emissions reduction from energy-intensive industries, and research.

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