Russia Expecting Tax Reforms to Boost Oil Output
Russia aims to bring on line 1.4 million to 2 million barrels of oil equivalent per day with new tax reforms designed to reduce the levy on future projects and codify ad-hoc discounts currently in force, Energy Minister Alexander Novak said on Tuesday.
* Additional 37 bln bbls seen profitable-oilmin
* Half of Russia’s budget revenues come from energy
* Export duty methodology to be fixed in decrees, law
Tax holidays extended under the packages are expected to cover 50 fields in East Siberia. The ministry estimates the moves will render profitable some 37 billion barrels of oil equivalent, or 20 percent of Russia’s reserves.
Among them are major undeveloped fields whose licence holders say they need tax relief to put them onstream.
The discounts are expected to cover 50 fields in East Siberia containing about 20 percent of Russia’s total, among them major undeveloped fields whose licence holders say they need tax relief to put them onstream.
Novak met investors, including major funds and energy majors, in London on Tuesday at the offices of a major Wall Street bank, continuing a London City charm offensive launched on Friday by the chief executive of state oil company Rosneft .
Russia, the world’s second largest producer of crude oil, pumped 10.41 million barrels per day of oil last month, a post-Soviet record, thanks to new fields and foreign-operated projects operated under production-sharing agreements.
But its core fields in Western Siberia are declining at an annual rate of around 2 percent, and regulators have struggled to find ways of encouraging new production without robbing the state budget, which depends on energy for 50 percent of its revenue.
The new package offers little in the way of immediate tax relief for producers, but secures some longstanding tax breaks – namely relief on export duty, the single largest tax item for some producers – for the long term.
Under the package, the government is expected to codify a methodology for calculating customs duty instead of setting it in monthly decrees which left producers facing unpredictable field economics from month to month.
“In addition to offering tax holidays, we are proposing to enshrine the methodology in law,” Novak told investors.
Novak said the ministry had the support of both President Vladimir Putin and Prime Minister Dmitry Medvedev, who have clashed recently on budget issues.