26 Oct 2017 12:02

Energy Ministry suggests establishing criteria for water cut oil field concessions in future

MOSCOW. Oct 26 (Interfax) - The Russian Energy Ministry considers it necessary in the future to set down criteria for water cut oil fields that might be eligible for tax breaks, Energy Minister Alexander Novak said in an interview with RBC TV.

He said the ministry had, on instructions from the government, drafted a bill on concessions for water cut fields in which the criteria for the water cut, depletion and location of a field were written down.

"We think that in principle we need in the future to work on the basis that such decisions can be reached regarding the criteria for concrete fields," Novak said.

At the same time, proposals on the obligations of companies to increase oil production at fields that are potentially eligible for such concessions have to be drafted, he said.

"Of course an important factor is that companies must undertake commitments to increase output, to adjust the profile of their production. Today, the profile of oil production is declining mainly at water cut fields, so granting such concessions must be accompanied by obligations by companies to increase production so that the Russian budget can be compensated for its initial one-off losses and even increase its revenue in the future for the second and third year of the concessions," he said.