Russia needs to transition to additional income tax - Lukoil VP
MOSCOW. Feb 2 (Interfax) - Russia needs to transition to a system of levying an additional income tax, Lukoil Vice President Leonid Fedun said at the Russia 2012 forum organized by Sberbank and Troika Dialog .
"Significant potential exists for increasing oil production by changing the tax system," he said.
To date, companies in Russia have been able to extract around 20% of geological reserves. Over the past few years, the oil recovery coefficient in Russia has only risen from 34% to 37%, whereas in the U.S. the coefficient is 43%, and in Norway it stands at 50%. "If Russia's oil recovery coefficient were like that of the U.S., Russia would be able to start developing an additional 30 billion barrels of oil or more," Fedun said.
Russia's tax system renders unprofitable a number of later stages of field development, so the authorities should continue to take steps toward improving taxation, he said. Despite the fact that highly viscous oil is exempt from the natural resources extraction tax (NRET), the economics of extraction are still loss-incurring and require that discounts be introduced on the export duty for heavy oil, volumes of which are estimated at 12-15 billion barrels in Russia. Projects involving Bazhenov Suite development also need an export duty discount, he said.