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21 Aug, 2009 08:24

Vankor start to bolster Russian crude output

Rosneft starts production on Friday at East Siberia's Vankor oil field. One of the largest fields in Russia, it is expected to prop up national oil output.

The field was discovered 25 years ago, but its development has been made possible by the construction of the special link to the East Siberian Pacific Ocean pipeline, according to Viktor Mishnyakov, Senior analyst at Uralsib.

“As long as this pipeline is in place, the speed of development of this area will accelerate. Rosneft has another 40 licenses there. Most of these licenses, many of them at least, assuming the geology of the area, probably will contain reserves similar to Vankor’s, of that size or a smaller size. In addition to that TNK-BP has assets in the same area.”

Analysts say Russia’s developed fields in West Siberia have depleted by up to 5%, but that can be offset by projects like Vankor. The country’s oil output has grown so far this year, but whether that will continue, or shrink, depends on industry taxation, according to Pavel Sorokin Analyst at Unicredit Securities.

”Currently the industry is taxed quite heavily – the government taking over 65% of the company’s revenues. If the approach changes, and it looks like its changing, oil companies will have more incentive to invest, and, if this is the case, of course, they will be able to, at least, maintain production, maybe not necessarily grow it, until further tax incentive is received, but at least keep it stable.”

A month ago Russia’s Prime Minister, Vladimir Putin, introduced tax breaks for 13 East Siberian oil deposits – Vankor included. However the proposed zero-rated export tax has not yet passed into legislation.