25.09.08

Measures being taken by the government to stabilize financial markets may result in oil companies getting all the tax reductions they asked for. Presidential aide Arkady Dvorkovich told Kommersant that a “principle decision” was made at a meeting with Russian President Dmitry Medvedev on Thursday to lower the tax burden on the oil industry. Discussion is ongoing bout whether the tax on mineral use or the export duty will be reduced. The changes may be formulated by the end of the year and go into force in 2009.

The first set of industry tax breaks, which also go into effect next year, raises the mineral use tax exemption on a barrel of oil from $9 to $15 and will save the oil companies up to 100 billion rubles per year. The oil companies have repeated said in recent years that it will take investments of 400 billion rubles per year in the industry to overcome falling production rates. The Energy Ministry predicts that oil production will fall by 1 percent this year compared to last and that the West Siberia – Pacific Ocean pipeline now under construction will not have sufficient supplies.

At the beginning of the month, the Deputy Energy Minister Stanislav Svetlitsky announced that the ministry has prepared a package of proposals to lower the tax burden on the oil industry by 400 billion rubles. Those proposals include raising the tax exemption on a barrel of oil from $15 to $25, increasing the “amortization premium” from 10 percent to 30 percent and lowering excise taxes on petroleum products. There is also a proposal to set export duties on petroleum products at 52-54 percent of the duty on oil to encourage refining within the country. The export duty on oil will go down from $485.80 to $372.20 per ton on October 1, which will save companies 140 billion rubles by the end of the year.

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Source: www.kommersant.com