UPDATE: Ministry sees minimum losses of budget from Samotlor incentive

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MOSCOW, Oct 9 (PRIME) -- Russia’s Finance Ministry expects little or no losses of the budget from introduction of a tax incentive for the Samotlor oil field of oil major Rosneft, Deputy Minister Ilya Trunin told reporters on Monday.

On October 6, the ministry and Rosneft agreed to introduce a mineral extraction tax (MET) incentive for watered oil field Samotlor at 35 billion rubles annually for 10 years starting from January 1, 2018.

“We will see (the impact on the budget from the incentive). We hope that it will be minimal even if it is a negative impact. But it would be biter if it is positive,” Trunin said answering a corresponding question.

The ministry has not yet calculated the impact of the incentive for the budget, but expects it to be positive depending on the structure of the mechanism. “If they drill wells for the 35 billion rubles, it will obviously result in higher oil production,” he said.

“We provide a fixed amount of the incentive, so it largely depends on the oil price, which may change strongly during the next 10 years.”

The ministry does not want to tie the incentive to the tax benefits for other watered fields as it thinks that other fields do not need these preferences, he said.

The ministry wants to adjust Tax Code’s article 342.2 that provides incentive to the fields in the republics of Tatarstan and Bashkortostan to cover the Khanty-Mansi Autonomous District, where the Samotlor is located, with specific parameters.

 “I doubt that anyone else will fall (under these specific criteria), but it is not included into the law,” he said. “Of course, we do not refrain from discussion. But we would not like to expand the practice in the future…We specifically don’t want to tie any preferences to the water content of a field as it would create a wrong feeling that the higher the water content the less tax it will pay.”

The high content of water in a field is a consequence of impractical use of subsoil resources, he added.

“We would not want to promote this impractical watering of fields with the goal of raising oil output. In this case (with Samotlor), it was not Rosneft, it was not Rosneft’s mistake. So we don’t want to provide the incentive on the basis of water content,” he said.

(57.7612 rubles – U.S. $1)

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