With falling domestic output in Russia, the government is pushing to cut oil taxes in the industry. Rosneft, a leading Russian oil producer, has held a meeting attended by leading representatives of the oil industry.
With its 13 billion barrels of proven reserves, Rosneft is the only Russian oil company where production is rising. After Gazpromneft, Surgutneftegaz and TNK-BP, on Wednesday Russia’s number two producer Lukoil admitted for the first time output was falling, down 3.3% in the first quarter. In response the government has pushed through the first significant oil tax concessions in over a decade, raising the tax-free threshold for mineral extraction from $9 to $15 a barrel. The theory is oil firms will pump the estimated $ 4 billion a year savings into new exploration. Rosneft President Sergey Bogdanchikov believes the government will now build on the mineral extraction allowance. “We’re confident this law will come into force before the end of the year. We can then expect other tax cuts,” Bogdanchikov says. The plans are thought to include cuts in excise duty, 10-year tax holidays on offshore investment and a zero rate for extraction in depleted oilfields. Experts say the government’s developing an elaborate tax regime adjustable down to each individual oilfield. “They will try to design the taxation system in such a way to make it very sophisticated, to achieve deep differentiation depending on a field-by-field basis,” supposes oil and gas analyst of Alfa Bank Konstantin Batunin.