Gazprom Neft is reported to have finally been granted tax breaks for its Prirazlomnoye project in the Pechora Sea, paving the way for Russia’s first Arctic offshore oilfield to start production.
Start-up of the much-delayed field had been postponed to the second half of this year, from the previous first-quarter date, as the operator’s parent Gazprom had signalled that it would not kick off production until it gained tax concessions.
Launch of the project had already been hit by cost overruns and delays to construction of the $2 billion Prirazlomnaya platform, which has been lying idle with its crew onboard at the icy field location since December after tow-out last year from the state-owned Sevmash fabrication yard.
However, the Moscow authorities have now announced that the field will gain beneficial fiscal terms - similar to those for fields in the Caspian Sea and East Siberia - that will take effect from 1 July, Russian business daily Vedomosti reported.
These will include a 50% reduction in oil export tax compared with standard rates.
The move comes as the Russian government is set to decide on a package of tax breaks for Arctic frontier fields to oil the commercial wheels of projects that are considered technologically and financially challenging.
Tax issues have been a stumbling block for foreign partners Statoil and Total in the stalled Shtokman gas project in the Barents Sea, as well as in ExxonMobil’s exploration partnership with state-owned Rosneft in the Kara Sea.
Newly elected President Vladimir Putin, while still prime minister, earlier this year outlined new fiscal incentives for Arctic development including the abolition of export duty and a lower mineral extraction tax for complex projects.
Russia’s Ministry of Energy has also issued a document proposing a new harmonised Arctic tax regime that is expected to be approved by the government this autumn, the Barents Observer reported.
Russia is looking to tap vast Arctic hydrocarbon reserves to offset a production decline from depleted stalwart fields in West Siberia in a bid to lift crude output to at least 10 million barrels per day by 2020.
Putin has said Arctic projects could attract as much as $500 billion in investment over a 30-year period.