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. Last Updated: 07/27/2016

Oil Firms Push for Pipeline, Tax Deal

KHANTY-MANSIISK, Western Siberia -- Oil company access to Gazprom's network and the use of energy taxes to fund oil and gas exploration were the subject of intense lobbying at a meeting organized by the Fuel and Energy Ministry in Khanty-Mansiisk this week.

Intended as a forum on the strategic development of Russia's fuel and energy complex, the meeting was used by executives from Gazprom and the oil industry to push their interests with authorities.

Surgutneftegaz general director Vladimir Bogdanov and Rosneft president Sergei Bogdanchikov said that the state should resolve the strategic problem of associated gas use.

While producing crude, oil companies extract large amounts of associated gas. The producers are supposed to supply or sell most of their gas to refining company Sibur for treatment before it can be inserted into the national gas network. But for several years the price of associated gas has been stuck at a paltry 55 rubles ($2.20) per 1,000 cubic meters, which is less than the cost of its production, oil companies' representatives said.

Surgutneftegaz produced 10.3 billion cubic meters of associated gas in 1998, according to company data. Rosneft produces about 5 billion cubic meters annually, but could easily add another 15 billion cubic meters from its Kharampurskoye oil field in western Siberia, Bogdanchikov said.

But even though the government has set aside 15 percent of Gazprom's pipeline capacity for independent producers, no oil company has ever taken advantage of this. The only company to do so is the Itera gas production and trading company. Itera is itself close to Gazprom, officials said.

Liquefied petroleum gas, a refined associated gas product, is a strategic crude for the petrochemical industry.

Because Gazprom has gained control over Sibur and declared its intentions to build up its presence in the petrochemical industry, the gas company is vitally interested in both keeping associated gas prices low and independent firms away from its pipelines.

The oil executives also questioned the tax burden on their companies and the recent increase in export duties. The government this week decided to raise duties 50 percent to 7.5 euros ($7.80) on a metric ton of crude. Authorities also plan to raise export duties on oil products to 20 euros per ton of gasoline, to 12 euros per ton of diesel and 10 euros per ton of fuel oil or of kerosene.

Oil companies suggested diverting part of the tax increases to a special fund, which would serve as a reserve in case oil prices slide. The fund would also be used for oil exploration projects, capital expenditures and restoration of reserves to maintain the current level of production.