WEC: TNK-BP calls on Russia to change tax regime

Russia will have to change its tax regime if it is to attract future investment from energy companies, a senior figure from TNK-BP said.

Nov 12th, 2007

Uchenna Izundu
International Editor

ROME, Nov. 12 -- Russia will have to change its tax regime if it is to attract future investment from energy companies, a senior figure from TNK-BP said.

Speaking at the World Energy Congress in Rome, Lord George Robertson, TNK-BP deputy chairman, said the company has paid $50 billion in taxes to the Russian government over the last 4 years. "There are rising levels of taxation and cost, which means that margins are being squeezed and so there is less cash to invest," Robertson said. "Russia's tax environment supports prices of under $25/bbl but when it's beyond $27/bbl, the Russian government takes the bigger share."

Russia is looking for investments in Siberia and offshore in the arctic, but Robertson said this would be difficult if costs remain high. TNK-BP, with production of 1.3 million boe/d, is one of Russia's largest oil and gas producers.

"Diversity of supply will be key to the future so that we can find flexible ways of solving our problems," Robertson said.

Forging closer ties with Asia also is a major priority for Russia, said Sergey Boydanchikov, Rosneft chairman and president. The company plans to more than triple to 18% its supplies to Asia by 2020, but Boydanchikov stressed that Europe would still remain an important market.

"Europe is our traditional partner and it won't suffer because of our policy," Boydanchikov said. "This will be in the interest of Russia to sell oil and continue to seek profit and higher added value."

Russia plans to develop leadership in other sources of energy, including hydroelectric and nuclear, Minister of Energy Victor Khristenko said. Assuring delegates that Russia is a reliable oil and gas provider, he said the country has complied with its supply contracts. With forecasts predicting an energy supply crunch in 2015 rather than 2030 as originally speculated, Khristenko said, "Dialogue between producers and consumers is necessary to understand each other's position and find solutions to current challenges."

Russia has struggled to shed its image as an unreliable supplier since its spat over increased prices with Ukraine in 2006, which led to cutting gas deliveries.

Contact Uchenna Izundu at uchennai@pennwell.com.

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