23 Jun 2009 16:31

Energy Ministry for zero duty on E. Siberian crude in 2009

MOSCOW. June 23 (Interfax) - The Russian Energy Ministry will lobby for a mechanism to set zero export duty on crude oil produced in East Siberia to be introduced as early as this year, Deputy Energy Minister Sergei Kudryashov, told reporters.

"We propose introducing this mechanism as quickly as possible, before 2010," he said.

Kudryashov said the Russian Economic Development Ministry had already submitted proposals on the mechanism to the government, on June 10.

The mechanism will depend on factors like the quality of the oil, how exports are recorded and the availability of supply contracts. It will rule out the possibility of zero export duty being extended to oil produced in West Siberia, Kudryashov said.

A document is being drafted on the procedure for keeping record of the oil to be exported from East Siberia. The document does not specify how long the zero duty would be in effect. Fields will be assigned individual customs codes for the purposes of setting the zero duty. The system will apply to the Talakan, Verkhny Chon, Vankor, Yurubcheno-Tokhomskoye and other fields, and it is intended to ensure the profitability of developing these fields.

The Finance Ministry opposed allocating a separate crude blend for the Eastern Siberia-Pacific Ocean (ESPO) pipeline because the oil to be pumped along the pipeline has similar properties to the oil produced throughout West Siberia. The ministry thought that could present an opportunity for corruption.

An Economic Development Ministry source told Interfax that the main talks at this stage of drafting the decree on zero duties are being conducted with the Energy Ministry. "The Energy Ministry originally included six fields in the list, then added a seventh, but now it is proposing zero duty on oil from 17 fields," the source said.

The source said the Finance Ministry's objections were "not insurmountable" and that the Federal Customs Service (FCS) had already worked out ways to itemize the oil to be exported. "It remains to reach a decision on the list of fields," he said.