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What does Rosneft want by refusing VNHK?

The only project in the TOR "Neftekhimichesky" - the construction of an oil refining complex of the Eastern Petrochemical Company - is on the verge of cancellation

What is seeking
This week, Rosneft announced its refusal to implement a project to create an Eastern Petrochemical Company (VNHK) in Primorye. The first information passed 13 May, when "Vedomosti" with reference to the first vice-president of Rosneft, Pavel Fedorov, they wrote about excluding the oil and gas industry from the investment program of the oil company. 

“VNHK was profitable within the framework of the existing tax system,” the newspaper quotes the top manager. - And today, due to the implementation of the tax maneuver, it is not profitable. And it was withdrawn, excluded from the company's investment program. ”

A little later, Rosneft released a special statementin which the position was somewhat relaxed. On the one hand, the entire responsibility for removing the project from the agenda was assigned to the state regulator: "Due to the high capital intensity, the possibility of its implementation directly depended on the stability and attractiveness of the fiscal regime, state support in building external and social infrastructure (gas, electricity, housing ). Over the years, the company has made every possible effort to obtain appropriate support at the federal level. However, its initiatives have not been supported by regulators. On the contrary, in recent years there have been significant changes in the Tax Code around 50, which directly and negatively affect investment projects in oil refining and petrochemistry. ”

On the other hand, Rosneft left a “window” for the opportunity to return to the implementation of the VNHK: “At the same time, Rosneft will continue the dialogue with the executive authorities in order to try to find an effective economic model of the project.”

Recall that a project worth up to 1,5 trillion rubles was wanted to be implemented in the Partizansky district of Primorye, it was supposed to be one of the largest in petrochemistry. Within its framework, Rosneft planned to create the largest oil refining and petrochemical complex in the Far East. It was planned that after its implementation it would be possible to solve the problem of local shortages and high fuel prices in the DFO, and also send products with a high level of added value to the market of the Asia-Pacific region.

Everything looked rosy and promising. In the autumn of 2015, Rosneft and the China National Chemical Corporation signed a memorandum of understanding regarding cooperation on the VNHK project. He referred to the proposed acquisition by ChemChina of a controlling stake in VNHK. Also, Rosneft, in the presence of Russian President Vladimir Putin, signed a memorandum of understanding with the Italian company Pirelli regarding the production and supply of synthetic rubber as part of the VNHK project. The Italians wanted to use VNHK to supply rubber to their own tire companies in Asia.

The project has been repeatedly supported by President Vladimir Putin, Prime Minister Dmitry Medvedev and regional authorities. VNHK was often placed on a par with the Amur GPP as one of the brightest examples of the efficiency of advanced development territories. The analogy with the Gazprom project is not accidental here - for both investment projects a couple of years ago there was an active rhetoric about the need for an almost “exclusive” application of the new economic legislation in the Far East to such “trillion-dollar” initiatives of state-owned companies. And, what is important, concrete steps were taken at the government level on both projects, which not only gave the initiators the opportunity to use the entire palette of benefits and preferences, but also improved the position of the “giants” in a certain way against the background of other residents.

So, specifically for the VNHK project, the government of Russia on March 7, 2017 created the advanced development territory (PDA) "Neftekhimichesky". The TOP included cadastral quarters in the area of ​​the Elizarov Valley of the Partizansky District of the Primorsky Territory, namely the site on which the construction was to develop further. On September 8, 2017, entry No. 175 appears in the register of residents of the Far East ASEZ - under contract 1 / R-175 between JSC KRDV and JSC Eastern Petrochemical Company, the latter undertakes to implement an investment project for the construction of an oil refining complex. By CCD data as of July 2018, the amount of investment obligations under the contract amounted to 658 740,00 rubles plus the creation of 4420 jobs. Two additional agreements were concluded for the above-mentioned agreement - from 19 September 2018 of the year and from 19 of April 2019 of the year, the essence of these additional agreements was not known to the EastRussia editorial board.

By the way, until now, VNHK is the only resident of the Neftekhimicheskaya Tor. Just recently - at the end of March 2019 of the year - the Neftekhimicheskaya TOR was expanded by a separate resolution of the Russian government to almost 1000 hectares. Border changes were motivated by the need to provide a TOR mode for an investor intending to locate a mineral fertilizer construction complex (ZAO NZMU) here. Whether enterprises are technologically connected and how the failure of one investor to take the initiative to the activity of another is not clear. By the way, CJSC “NZMU” has not yet been registered as a resident of the TOR “Neftekhimicheskaya".

The creation of TOR and the provision of a set of tax benefits to the VNHK project is not the only measure taken in support of the project through the Ministry of Eastern and Eastern Development. So, for example, VNHK is one of the key beneficiaries of the mechanism for extending the tax benefits for large investors in PDA. According to the Ministry of Economic Development of Russia, according to the adopted amendments to the Tax Code, for projects with investments exceeding 500 billion rubles, the corporate income tax benefit should be extended from 10 years to 19 years. The need for an appropriate adjustment was justified by the leaders of the Ministry of Eastern and Eastern Development by the fact that over a period of 10 years, established by the basic legislation on ABD, a large enterprise will not have time to build up, reach its design capacity and start generating profits.

According to EastRussia, the main interest of the project lobbyists in the TOR mechanism in the case of VNHK was formed not so much because of possible tax benefits and preferences, but because of the formal possibility to build external and social infrastructure for the company at the expense of the federal budget. Actually, it was these expenses that became the stumbling block for the project, which also follows from the recent statement by Rosneft.

The whole issue of construction head in the Report on the Comprehensive Development of the Far East to the State Council of the Russian Federation in 2017. So, the document says that "On December 29, 2016, the President of the Russian Federation V.V.Putin approved a list of instructions to support the construction of the Eastern Petrochemical Complex, which includes such tasks as: inclusion in the corresponding state and federal target programs of measures for construction of external infrastructure facilities of the Eastern petrochemical complex and financing of such construction at the expense of budgetary allocations from the federal budget; supply of the Eastern petrochemical complex with natural gas supplied by PJSC Gazprom, in the required volume; creation of the Neftekhimichesky ASEZ ".

"TOR" Neftekhimichesky "was created by 7 March 2017 of the year. Other orders of the President of the Russian Federation V.V. Putin as of 1 August 2017 were not fulfilled,” the report says.

The key issue for supporting the project is the construction of supporting infrastructure, including a sea terminal in the Vostok Bay, utilities at the construction site, railway infrastructure and highways, an oil pipeline from the ESPO, energy and social infrastructure. "The cost of this infrastructure is estimated at 137 billion rubles. Thus, the expected multiplier of the project will be 4,8 rubles of private investment per 1 ruble of public investment," the report says. 

As a source for these investments in the report to the State Council of the Russian Federation, it was proposed to use tax revenues from the project, “which will become possible after the adoption of the bill on targeted tax benefits for investors in the Far East in the volume of investments in infrastructure for new industries.” Even the deadline was calculated - to return to the investor 137 billion rubles for infrastructure, it must be completely exempted from income and property taxes for 15 years.However, this instrument - benefits in exchange for infrastructure - has not yet been adopted and has not earned, respectively, the project support plan proposed at that time by the Ministry of Eastern Development, was not implemented. 

Of course, for those who are aware of those on the state development of the Far East, it is a bit strange that in its statement, Rosneft appeals to the “stability and attractiveness of the fiscal regime”, without mentioning the received status of a resident of the TOP. resident status, the company has already obtained the right to tax benefits. As noted above, in the interests of including VNHK, these benefits have been specifically extended. As for the “stability” of the fiscal regime, the law has been specifically adopted on this subject and in January 1 about the “grandfather clause”, which states that acts of legislation on taxes and fees that change taxation conditions do not apply to residents of TOR and SPV, within ten years from the moment they received the corresponding status, provided that such acts of legislation on taxes and fees entered into force after they receive the appropriate status.

Moreover, for Rosneft all these mechanisms are extremely understandable and familiar - because despite the “problem” VNHK, the company here, in Primorsky Krai, successfully implements another major investment project - the development of a shipbuilding cluster in the Far East, the core of which should be the shipbuilding complex "Star" in the city of Big Stone. This year they plan to launch the first ship, an ice-class supply vessel, this year. In 2021, the first tanker, Aframax, will be built at the shipyard, and in 2020, the Leader icebreaker will be built. The company intends to modernize the social, transport and municipal infrastructure of the city and build housing for its employees of Zvezda.

LLC “Shipbuilding Complex“ Zvezda ”is a resident of the“ Big Stone ”TOP specially created for this project. The company enjoys all the benefits, and through the mechanism of state financing of infrastructure for TOR residents, the budget in parallel invests 3,15 billion rubles in energy, housing and networks. Note that these budgetary expenses were laid in the “Big Stone” Torus right from the moment of its creation. In contrast, the creation of the TOR “Neftekhimichesky” at the time of its establishment did not provide for public investment in infrastructure. 

Certain satisfaction with the conditions of the implementation of Zvezda is “audible” in the statement of Rosneft itself: "... The company supports the initiatives of the Deputy Prime Minister of the Russian Federation, Yu.P. Trutnev, to stimulate strategic projects in the Far East ... With attractive and guaranteed stable fiscal and regulatory conditions, Rosneft and its partners will be ready to return to the implementation of the VNHK project. "

In fact, nothing new happened, say experts interviewed by EastRussia. The above-mentioned instructions of the President in fact remain unfulfilled, the infrastructure financing mechanism proposed by the Ministry of Eastern and Eastern Development did not work. The investor postponed the project for a long time. And now, in fact, it has also suffered, but in a more rigid form - by refusing to implement it with the reservation that it can be returned to consideration in other terms. 

Moreover, until the moment when JSC “VNHK” will formally be a resident of the “Neftekhimicheskaya” TD, the investor retains the initiative. The fact that the investor already has a land plot, in particular, is evidenced by the fact that he has paid the land tax: According to of open sources, in the 2017 year JSC “VNHK” paid to the budget for this item 6,7 million rubles. 

But what is interesting is that investments of the VNHK have already been calculated in all possible reports of the Ministry of Eastern and Eastern Development of Russia as attracted. And if, at the initiative of the investor, when they are rescheduled, they remain as such, then the public refusal of Rosneft puts the agency in an extremely awkward position. Formally, the agreement with the KRDV is still in force, so that, as it were, investments can be considered to be offset. And in fact - the investor has publicly stated that he is not satisfied with the current investment conditions, and he refuses to build. Consequently, according to conscience, it is necessary to deduct these investments from reports. But the amount here is quite “painful” - if at the moment in the reports of the KRDV on investments in TOR and SPV the figure in 2,96 trillion rubles sounds, the “deduction” from here 650 billion VNHK reduces the figure immediately by a quarter. 

Actually, the fact that Rosneft's statements came as a surprise to the Ministry for the Development of the Russian Far East and the Far Eastern authorities is also evidenced by the complete absence of an official response to the statement. They refused to comment on the topic in JSC "KRDV", in the Ministry of the Russian Federation for the Development of the Far East and the Arctic, in the Administration of the Primorsky Territory: not a single EastRussia request for clarification of the position was satisfied.
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