DAVOS-Russia’s Kudrin says E.Siberian tax breaks to stay

* Kudrin says govt commission is reviewing list of fields

* Says list should be adjusted

* Says Rosneft’s Vankor not eligible for breaks

(Adds Kudrin’s quotes, LUKOIL comment, background)

By Gleb Bryanski

DAVOS, Switzerland, Jan 28 (BestGrowthStock) – Russia will maintain
its tax breaks for oil extracted from East Siberian fields but a
government taskforce is reviewing the zero export duty and list
of eligible fields, Finance Minister Alexei Kudrin said.

Russia granted numerous tax breaks to the oil industry last
year to boost stagnating production, but the Finance Ministry
has been considering whether to abolish or amend them because
oil firms keep pressing for more.

In the long term, the Finance Ministry aims to replace the
existing oil industry taxes — mineral extraction tax and oil
export duty — with a uniform levy on excess profit. But Kudrin
said the tax breaks policy would remain for now though the zero
export duty could be changed depending on the field.

“On the whole the state policy regarding the East Siberian
oil stays. We are ready to levy a different export duty (from
the rest of the oil extracted in Russia),” Kudrin told reporters
on the sidelines of the World Economic Forum.

“We just need to establish the rate and it will depend on
the economics of a particular field”.

Russia, the only country pumping more than 10 million
barrels a day, returned to oil production growth in 2009 after
suffering its first decline in a decade the previous year.

The zero export duty on East Siberia, whose beneficiaries
include state-controlled sector leader Rosneft, TNK-BP and
Surgutneftegaz, was designed to spur investment in
hard-to-access regions.

Export duties on 13 East Siberian fields was lifted last
June but in December the Energy Ministry extended the list of
fields to 22 and adjusted the quality parameters of oil eligible
for the zero duty. The tax breaks for the extended list came
into effect on Jan 19.

“It happened without a proper analysis,” Kudrin said, adding
that a special government commission will look into the list of
fields and oil quality again.

“In February, we are going to carry out research into the
economics of these enterprises in order to define the final size
of the export duty.”

Kudrin said that, for example, oil quality at Rosneft’s
giant Vankor field, used as justification for its inclusion in
the extended list, was not very different from oil extracted in
the rest of Russia and therefore the presence of Vankor on the
list was questionable.

“It requires a deeper analysis,” Kudrin said. Rosneft
expects to pump 0.5 million barrels a day at Vankor when
production reaches its peak and the inclusion of Vankor in the
tax break list will carry large costs to the budget.

A projected increase in Russian oil production in 2010
relies heavily on East Siberian fields replacing mature deposits
further west. JPMorgan analysts forecast East Siberia will
account for 2.3 percent of Russia’s crude output this year.

Russia’s No. 2 oil firm LUKOIL, which has almost no assets
in East Siberia, urged the government on Thursday to extend tax
breaks to new areas rather than end existing benefits for giant
East Siberian deposits.

“We believe that the Russian government should support the
oil industry, especially exploration in new provinces — in East
Siberia and North Caspian,” CEO Vagit Alekperov told Reuters on
the sidelines of the World Economic Forum in Davos.

“We do not need new breaks but the existing ones should be
extended to new oil provinces.”

Stock Basics
(Writing by Gleb Bryanski, Editing by Lin Noueihed)

DAVOS-Russia’s Kudrin says E.Siberian tax breaks to stay