Russia: Most Oil Projects May Not Be Profitable

The majority of new oil projects in Russia will not be profitable even with oil prices at $150 per barrel, according to an Energy Ministry proposal on how to reduce taxes at undeveloped fields.

Based on data from oil companies, the ministry determined that under the current tax regime most new oil projects would not be financially viable. Of the nearly 10 major deposits, just three would make sense to develop, and even then only with a Urals crude price of no less than $60 to $90 per barrel.

Without additional tax incentives for new fields, Russian oil companies will be producing 40 million tons less crude in 2013 than they did last year, the ministry said.

Following a meeting with Prime Minister Vladimir Putin in February, Energy Minister Sergei Shmatko promised oil companies a new taxation system. Shmatko said at the time that under the current system and low oil prices, the development of 94 percent of new fields would be unprofitable.

Moscow Times