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Oil duties cut

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Oil duties cut

By Ed Crooks

Published: September 19 2008 03:00 | Last updated: September 19 2008 03:00

Russia’s immediate reduction in oil export duties and promise of further cuts in taxes on production will raise hopes of a turnround in the industry of the biggest oil producer outside Opec, the oil cartel, reports Ed Crooks in London .

Russia’s oil output is falling, with the traditional heartlands of western Siberia in decline and new fields in eastern Siberia, the Caspian Sea and the Arctic in need of huge investment.

The country’s leading oil companies say the export duty that has taken 80 per cent of revenues above $27 a barrel made it unattractive for them to provide that investment.

The problems faced by western groups such as Royal Dutch Shell and BP, which have faced official campaigns that have disrupted their operations and forced them to accept worse terms for projects, are also a deterrent to new investment from outside Russia.

In its latest forecast in June, the International Energy Agency, the oil-consuming countries’ watchdog, predicted that Russian output would be essentially flat between 2008 and 2013 at about 10m barrels per day – a significant downgrade from last year’s prediction of growth of about 500,000 b/d by 2012.

However, the IEA added that “should investment levels recover in the event of continued fiscal changes, supply could be higher than the scenario shown here”. The markets bet yesterday that the tax changes would improve the economics of Russian companies.

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