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. Last Updated: 07/27/2016

Oil Ventures Win Extra Quotas for Exports

Four joint ventures producing oil in Russia's far-flung regions have won extra export quotas in the cramped national pipeline as compensation for unexpected changes to their tax burden.

Prime Minister Sergei Kiriyenko signed an order allowing four ventures including foreign investment -- Northern Lights, White Nights, KomiArcticOil and Chernogorskoye -- to export 100 percent of their production from Aug. 1 to May 1, 1999.

The ruling, which comes almost one year after the joint ventures began protesting scheduled cuts in their export quotas, marks a small victory for the long-suffering joint ventures.

"It's a good decision for the company. It shows a kind of economic support from the government," said Viktor Arestov of the Northern Lights project. U.S. company Conoco owns half of the Far North project, while Rosneft and subsidiary Arkhangelskgeolodobycha share the other half.

Before a steep slide in world oil prices, exports were the key profit earner for Russian oil companies. Today export prices are just a shade higher than domestic prices -- this week, a barrel of Russian crude fetched about $11.50 abroad and about $10 at home -- but the joint ventures welcome the increased quotas as a sure source of cash payment, Arestov said.

Last September the government cut Northern Lights' exports down to about one-third of production, in line with the quotas of most Russian oil companies. For three years up to that point the venture had been allowed to export 100 percent of production as a way to recoup its investment.

But abrupt increases in excise taxes, local taxes, road taxes and others left most joint ventures struggling with unforeseen expenses. Mike Schall, general director of Vanyoganneft, a joint venture involving U.S. Occidental Petroleum and Russia's Chernogorneft, said his project pays half of its revenues in tax.

"In this price environment it pretty well puts the squeeze on us," Schall said.

White Nights, located in West Siberia, was established by U.S. firm Phibro Energy and Sidanko subsidiary Varyeganneftegaz. British Gas and Russia's Ukhtaneftegazgeologia own KomiArcticOil, which is located in the Komi Republic. Chernogorskoye, which is located in West Siberia, is owned by U.S. firm Anderman/Smith Overseas and Sidanko subsidiary Chernogorneft.