Russia Seeks Solution to Taxing Oil Issue

Russia has some serious issues to overcome if it wants to remain competitive in the global oil market, despite saying it has enough oil to discredit Peak Oil Theory, according to Russian Minister of Industry and Energy Victor Khristenko.

Speaking today at the World Energy Congress in Rome, Khristenko warned of the burden taxes are having on the nation's oil industry and the desire to lesser the pain for Russian companies dealing in the oil and gas industry.

"The tax burden, it is felt, is much too onerus for Russian companies," Khristenko says.

"The problem we have at the moment is that producer's interests and the consumer interests are not entirely in line.

"We must lessen the tax burden [as our companies] have major set backs both in extraction and in transit."

Khristenko's views are backed up by private companies also speaking at the congress.

TNK-BP deputy chairman for the UK Lord George Robertson says the rising price of oil has only made situations worse for companies working out of Russia, where the government only supports oil and gas producers when the barrel value is 25 cents or less.

His company has paid US$15bn in taxes, duties and excess to the Russian Government to operate since it first started up in 2003.

"There really is a problem [with] operating in the Russian environment in what we call the growing margin squeeze," Robertson says.

"Rising levels of tax and rising margins of cost means [companies have] less profit and less money to invest into the industry."

According to Robertson, the present margin sqeeze could halt future investment efforts taking place in the Russian oil market such as those already being carried out by TNK-BP, which is working with fellow oil company Rosneft to help train a new generation of Russian oil and gas workers.

This is all important to Russia's future plans for output.

Khristenko says Russia has an agressive plan to ramp up production in coming years to help meet the world's thirst for oil.

"We have not reached our peak," Khristenko says.

"We are opening our Vancor fields in the near future and we want to treble our supply in Asia by 2020."

Russia, he says, is starting new partnerships both with Asia and the US and is working alongside Europe as a second partner in 10 major projects looking at upstream sectors.

By Penny Jones