DAVOS, Switzerland (Reuters) - Russia will maintain its tax breaks for oil extracted from East Siberian fields but a government taskforce is reviewing the zero export duty and list of eligible fields, Finance Minister Alexei Kudrin said.
Russia granted numerous tax breaks to the oil industry last year to boost stagnating production, but the Finance Ministry has been considering whether to abolish or amend them because oil firms keep pressing for more.
In the long term, the Finance Ministry aims to replace the existing oil industry taxes — mineral extraction tax and oil export duty — with a uniform levy on excess profit. But Kudrin said the tax breaks policy would remain for now though the zero export duty could be changed depending on the field.
“On the whole the state policy regarding the East Siberian oil stays. We are ready to levy a different export duty (from the rest of the oil extracted in Russia),” Kudrin told reporters on the sidelines of the World Economic Forum.
“We just need to establish the rate and it will depend on the economics of a particular field.”
Russia, the only country pumping more than 10 million barrels a day, returned to oil production growth in 2009 after suffering its first decline in a decade the previous year.
The zero export duty on East Siberia, whose beneficiaries include state-controlled sector leader Rosneft, TNK-BP and Surgutneftegaz, was designed to spur investment in hard-to-access regions.
Export duties on 13 East Siberian fields was lifted last June but in December the Energy Ministry extended the list of fields to 22 and adjusted the quality parameters of oil eligible for the zero duty. The tax breaks for the extended list came into effect on Jan 19.
“It happened without a proper analysis,” Kudrin said, adding that a special government commission will look into the list of fields and oil quality again.
“In February, we are going to carry out research into the economics of these enterprises in order to define the final size of the export duty.”
Kudrin said that, for example, oil quality at Rosneft’s giant Vankor field, used as justification for its inclusion in the extended list, was not very different from oil extracted in the rest of Russia and therefore the presence of Vankor on the list was questionable.
“It requires a deeper analysis,” Kudrin said. Rosneft expects to pump 0.5 million barrels a day at Vankor when production reaches its peak and the inclusion of Vankor in the tax break list will carry large costs to the budget.
A projected increase in Russian oil production in 2010 relies heavily on East Siberian fields replacing mature deposits further west. JPMorgan analysts forecast East Siberia will account for 2.3 percent of Russia’s crude output this year.
Russia’s No. 2 oil firm LUKOIL, which has almost no assets in East Siberia, urged the government on Thursday to extend tax breaks to new areas rather than end existing benefits for giant East Siberian deposits.
“We believe that the Russian government should support the oil industry, especially exploration in new provinces — in East Siberia and North Caspian,” CEO Vagit Alekperov told Reuters on the sidelines of the World Economic Forum in Davos.
“We do not need new breaks but the existing ones should be extended to new oil provinces.”
Writing by Gleb Bryanski, Editing by Lin Noueihed