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INTERVIEW-Russia could boost oil output next year, to test new tax regime
June 1, 2017 / 9:44 AM / 6 months ago

INTERVIEW-Russia could boost oil output next year, to test new tax regime

(Adds comments on taxes, background)

By Oksana Kobzeva and Olesya Astakhova

MOSCOW, June 1 (Reuters) - Russia could increase oil production next year to as much as 551 million tonnes, or 11.07 million barrels per day (bpd), and will begin testing a new tax regime to support output growth, Alexei Texler, first deputy energy minister, told Reuters.

The increase will depend on how smoothly a global output-cutting agreement is wound down, Texler said, adding that this year’s oil output was seen at 547 million tonnes.

“My forecast for next year - 547-551 million tonnes - depends on how smooth the exit from the agreement is,” Texler said in an interview.

Russia and 10 other non-OPEC nations agreed last December to join OPEC output cuts for the first time in 15 years. Last week, the Organization of the Petroleum Exporting Countries and non-OPEC producers agreed to extend the curbs by nine months to March 2018.

Russia has cut production by 300,000 bpd under the deal.

Texler said a new tax regime was expected to be introduced in 2018 for selected oilfields for up to five years as part of efforts to increase production.

If successful, it could be expanded to the entire domestic oil sector, already the world’s largest by volumes produced.

The bulk of Russia’s oil production comes from mature fields in western Siberia and is subject to two key taxes - the mineral extraction tax (MET) and the oil export duty.

Some oilfields, both mature and new, receive tax breaks and Russia has long been considering the introduction of a new, unified, profit-based taxation system instead.

“Thanks to the profit-based tax, we expect that the fields covered will see an increase in production of up to 20 percent over the next five years,” Texler said.

The new tax regime will be tested at fields with combined production of 15 million tonnes a year (300,000 bpd). Five Russian oil firms have applied for the trial to be carried out at 21 fields, Texler said.

The proposed switch has prompted a debate with the finance ministry, which fears the new system would be harder to control. The finance ministry also opposes plans to apply both the new tax regime and existing tax breaks.

Rosneft, Russia’s biggest oil producer, has been lobbying for a lower MET at Samotlor oilfield, one of its largest and which is battling water inundation. The finance ministry has instead proposed testing the profit-based tax at Samotlor.

Texler did not comment specifically on Samotlor but said that in the energy ministry’s view, the profit-based tax and tax breaks for so-called watered fields were separate issues.

Special tax regimes and breaks have helped to increase production and budget revenues, he said. Without them, he added, oil production would have been 470 million tonnes at best, while it reached 547.5 million last year.

Texler added that the oil export duty, which under the existing tax regime has been gradually cut while the MET has risen, was not expected to come to zero before 2021. (Reporting by Olesya Astakhova and Oksana Kobzeva; Writing by Katya Golubkova; Editing by Maria Kiselyova and Dale Hudson)

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