Russia's Lukoil and Tatneft have revealed the heavy hit from the cancellation of tax privileges for capital intensive greenfield projects rubberstamped by authorities late last year to help increase budget revenues.
Lukoil has warned First Deputy Prime Minister Andrey Belousov that it may idle its Korchagina oilfield in the Caspian Sea unless the government takes measures to boost economic returns from the asset.
Korchagina is the first oilfield that Lukoil commissioned within its large block in the Caspian, at an estimated cost of 140 billion roubles ($1.9 billion).
The block contains several other larger assets that Lukoil intends to bring online in the next few years to form a major offshore oil producing cluster.
Moscow business daily Kommersant quoted a recent letter from Lukoil president Vagit Alekperov to Belousov as saying that the removal of tax concessions for Korchagina would make oil production at the asset economically unattractive “in mid-term”.
Alekperov has asked authorities to consider the provision of new tax concessions for Korchagina to bolster Lukoil's plan to invest a further 60 billion roubles to maintain plateau production and avoid a shutdown.
Regional producer Tatneft, meanwhile, revealed in its latest financial report that it wrote off 1.3 billion roubles in relation to its fields with unconventional shallow high viscosity oil reserves after tax concessions ended for such projects.
The company, which operates mostly conventional highly depleted deposits in Tatarstan, had high expectations of commercialising high viscosity oil to bolster its long-term production.
Tatneft's oil output declined by 12% to below 46.1 million barrels in the first quarter of this year as against the same period of 2020.
Revenues fell by almost 23% to 721 billion roubles following the 12% decline in oil production to 185.3 million barrels last year as against 2019.
Tatneft reported net income of 103 billion roubles in 2020 as against 193 billion roubles a year earlier.
On a positive note, the oil producer has avoided growing its debts, with short- and long-term borrowings declining by 16% to 34.6 billion roubles by the end of 2020.
Tatneft also said that among planned capital investments of 111 billion roubles for this year, just over 20 billion roubles will be made in its upstream projects.