Russia mulls expanding tax break area

Russia may consider adding the Black Sea and the far eastern Sea of Okhotsk to the list of regions that will enjoy oil tax breaks to help the country reverse a decline in production, an official said today.

Deputy Finance Minister Sergei Shatalov told reporters the government would study the issue later this year but did not say whether the measures would come into force from 2009 or 2010, wrote Reuters.

Russian state-controlled oil company Rosneft plans to develop a number of deposits in both the Black Sea and the Sea of Okhotsk.

The government has already approved tax breaks for new fields in the Caspian, Azov and Arctic Seas alongside the Yamal peninsula and the northern Timan-Pechora region.

The proposals have been approved by the lower house of parliament, the Duma.

The measures also include cuts in the mineral extraction tax, which Russia's Finance Minister Alexei Kudrin said would cost the budget over $4 billion in lost revenues per year.

Tax breaks for new regions will come as oil fields are getting increasingly depleted in West Siberia.

Companies will be allowed to pay reduced taxes for a period of up to 15 years or until they produce a certain volume of crude from the field.