July 22, 2019 / 7:41 PM / in a month

Putin orders review of Rosneft oilfield tax break request

MOSCOW (Reuters) - Russian President Vladimir Putin has asked his government to justify giving tax breaks to Russian oil major Rosneft (ROSN.MM) for developing a Siberian oilfield, a document published on the Kremlin website showed.

Rosneft’s request for tax deductions for developing Priobsky, its biggest oilfield, was approved by the government, the Kommersant newspaper reported in May, citing sources.

This was despite opposition from the finance ministry, which felt the tax breaks were excessive and would cost the federal budget over 460 billion roubles ($7.29 billion) over ten years.

The Kremlin document, dated July 20, instructs the energy and finance ministries to outline the economic justifications for providing Rosneft, Russia’s largest oil producer, with tax breaks for the Priobsky project.

“The finance ministry is against them,” a source in the department told Reuters on Monday.

“The oilfield’s output is growing, and it already receives a deduction for working with hard-to-recover reserves. It doesn’t need additional support,” the ministry source said.

Priobsky, located in the western Siberian region of Khanty-Mansiysk, is one of Russia’s biggest oilfields.

The Kremlin document also orders the introduction of a temporary moratorium on all new measures providing state support for the development of domestic oil fields.

The Kremlin document, compiled after a meeting on July 10, said the moratorium would be in place until Dec. 31.

It also includes an order for relevant ministries to complete an inventory of domestic oilfields and their reserves by Dec. 1, so that the effect of current tax legislation on their cost-effectiveness can be assessed.

Rosneft chief executive Igor Sechin previously requested the Kremlin provide tax breaks totalling 2.6 trillion roubles for supporting the development of oilfields in the Arctic, the Vedomosti daily reported earlier this month.

($1 = 63.1060 roubles)

Reporting by Darya Korsunskaya and Vladimir Soldatkin; Writing by Polina Ivanova; editing by David Evans and Deepa Babington

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