Ministry: Russias oil quality deteriorating, FinMin lifts Siberia tax breaks.

By bne IntelliNews April 27, 2011
Report on 2009 oil extraction and reserves by Ministry of Nature shows that quality of Russias oil reserves is gradually deteriorating. Ministry notes that the main reason for worsening oil quality is picking and using up more qualitative light oil and thus increasing the reserves of heavy oil rich in metals and other side elements. So, in 2009 reserves of light oil declined by 2.8%, while reserves of heavy oil increased by 2.9%, while reserves in West Siberia rich with light-oil abundant oil fields, are used up on average by almost 40% and even 70% for some fields. In the meantime, spending on renewal of the resource base declined by 40% in 2009, the ministry reports, with oil field of West Siberia also rich in light oil being explored at less than 10%. In this respect, it is important to report that FinMin is consistently trying to shift the cost for resource base renewal on the oil companies: it is announced this week that discounted excise duty on oil extracted in some West Siberian fields is going to be lifted as of May 1 2011 (fields controlled by oil majors Rosneft, TNK-BP and SurgutNefteGas). FinMin argues that profitability of Vancore field controlled by Rosneft, for example, already exceeds 20% and thus believes that lifting the discounted excise duty is justified. As estimated by the experts surveyed by on the issue, Rosneft, TNK-BP and SurgutNefteGaz are going to lose about USD 1.8bn-USD 2bn, USD 0.4bn-USD 0.6bn, and USD 0.5bn-USD 0.6bn, respectively, on cancellation of the discounted excise duty. However, discounted duty is going to remain for 18 fields in West Siberia and 2 oil fields in Northern Kaspian sea (controlled by Lukoil oil major).

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