New tax regime to boost crude production

Russian Energy Minister, Sergei Shmatko, is looking to increase continental shelf production through a new tax system after Russian crude production has reached a peak in 2010.

According to Shmatko, speaking in the State Duma, Russia oil production rose 2.4% year on year between January and September 2010 to reach 420 million tons, on the back of Government support and a favorable tax export regime. “In general, positive dynamics of increasing oil production in Russia is related to the measures of Governmental support and also with the introduction of new infrastructure projects.”Shmatko added that Russia also wants to develop continental-shelf oil-production prior to the introduction of a new taxation regime. The Energy Minister added that such a move could boost crude production significantly."The implementation of these measures will make it possible to grow oil-extraction on the shelf to 34 million tonnes and gas-extraction to 216 billion cubic meters by 2025.”The new tax regime will see equal export duties for both dark and light oil products by 2013, and will shift part of the tax burden from oil extraction to oil processing as well as stimulate oil companies to develop and modernize their downstream operations, and boost budget revenues.The move will make it possible to ensure added value is shared between the investor and the state, Shmatko explained, adding that this form of state-private sector partnership was applied at northern Caspian fields."Before the new tax system is introduced, we must not put the brakes on the realization of shelf-development projects. An effective targeted measure here might be the introduction of a reduced customs export duty rate."