Russia’s continental shelf with its gigantic oil and gas reserves should remain under state control during exploration and development work, Deputy Prime Minister Arkady Dvorkovich said on Thursday.
“I believe state control during shelf development should remain,” Dvorkovich, who is in charge of the fuel and energy sector in the Russian government, said.
Dvorkovich’s statement came after a government meeting on Thursday on a draft program of Russia’s continental shelf development to 2030.
The government has yet to discuss whether this control should be maintained through state companies or directly by the state.
Under existing rules, only Russian companies with over 50 percent state ownership and no less than five years experience working in marine exploration are allowed to develop the Russian continental shelf. Only oil major Rosneft and gas giant Gazprom currently meet these requirements and can involve other companies in the shelf development through joint ventures.
The initial overall recoverable resources of hydrocarbons of the Russian continental shelf are 90.3 billion tons of oil equivalent, including 16.5 billion tons of oil and condensate and 73.8 trillion cubic meters of gas. The lion's share of the resources, about 70 percent, is located on the Barents, Pechora and Kara sea shelves.
The government should offer tax incentives to stimulate the commencement of offshore deposit development, he said.
“I wouldn’t disclose details right now but the point at issue is the [tax] regime that helps minimize the burden at the initial stages so that the maximum tax burden arises only at the stage of active development and the attainment of maximum output targets,” he said.
The government is likely to make a decision on the slower rates of increases in the gas extraction tax to stimulate gas production, Dvorkovich said.
“My position and the position of most departments is that the parameters of raising the [gas extraction tax] rate should be reduced for 2013 while a model should be introduced for 2014 and subsequent years to stipulate the rate differentiation depending on specific conditions,” he said.
The government intends to introduce a new formula of the gas extraction tax calculation from 2014 to take into account gas export prices and the complexity of gas deposits. This formula is set to reduce the gas extraction tax by one-third for Gazprom and by one half for independent producers by 2015 compared with the increases planned by the government’s decision made in May.
Dvorkovich also said he was doubtful about the expediency of further participation of state-run holding company Rosneftegaz in deals involving Russian energy companies.
Rosneftegaz manages state fuel and energy assets and holds 75.16 percent of state-controlled oil major Rosneft and 10.74 percent of energy giant Gazprom.
Russian President Vladimir Putin signed a decree in late May to sell stakes in fuel and energy companies held by Rosneftegaz holding in 2013-2015. The decree, however, takes into account that before the start of 2015, Rosneftegaz will act as a co-investor in fuel and energy companies whose assets are slated for privatization.
“There is no predetermined plan for transactions with FGC (Federal Grid Company), IDGC (Interregional Distribution Grid Company), recapitalization of RusHydro [hydropower plant operator) or Inter RAO UES [power utility]. The government will work on this issue. I highly doubt the expediency of these deals,” he said.
