September 5, 2008 / 2:46 PM / in 9 years

Russian energy minister suggests more oil tax cuts

MOSCOW, Sept 5 (Reuters) - Russia’s Energy Ministry suggested on Friday a further cut in the mineral resource tax saying the reduction already approved by the government was not sufficient to mitigate falling oil output.

Deputy Energy Minister Stanislav Svetlitsky was quoted by news agencies as saying his ministry was preparing proposals for the government to raise the tax-free threshold on extraction to $25 from already approved $15.

“We believe and will suggest it to the government that we should switch to $25,” Russian news agencies quoted Svetlitsky as saying.

The government has this year approved amendments to the tax code which raise the threshold on extraction to $15 per barrel from the current $9. It also approved tax breaks for new fields in hard-to-access regions of East Siberia, Timan Pechora and Yamal. The amendments are due to come into force next year.

Svetlitsky said the approved benefits were not enough to stimulate oil companies to invest more in new fields to compensate for falling oil output from mature deposits in traditional oil producing regions.

Oil companies, which are estimated to save over $5 billion from the approved amendments next year, have welcomed the reform but said it should go further as they needed at least $16 billion of additional investments next year to support output.

Oil production in Russia has been falling since the beginning of the year after last year’s 2.3 percent growth, already a slow-down after impressive spikes earlier this decade including an 11 percent rise in 2003.

    The decrease concerns the government, which depends heavily on oil revenues, and global markets, as Russia is the world’s second-largest oil exporter.

    Svetlitsky said his ministry still expected oil output to rise by one percent to 497-500 million tonnes (9.95-10.00 million barrels per day) in 2008 from 491.5 million tonnes last year. In the first eight months of 2008 output fell 0.5 percent.

    Svetlitsky said the ministry expected new barrels to come from East Siberia’s Talakan deposit to be launched by Russia’s fourth-largest oil producer Surgut (SNGS.MM), and nearby Verkhnechonsk field, developed by BP’s Russian oil venture TNK-BP. (Reporting by Tanya Mosolova)

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