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. Last Updated: 07/27/2016

Longer Oil, Gas Licenses Backed

The State Duma on Wednesday passed in a first reading an amendment to the subsoil resources bill that would extend the license time for companies to explore reserves from five to eight years.

The main reason for the proposal is to offset the negative effects of seasonal and technical limitations, with exploration work often impossible in winter months, said Nikolai Gudkov, a spokesman for the Natural Resources Ministry.

The ministry is in charge of the national subsoil policy, managing state subsoil reserves and establishing the legal framework governing these spheres.

Analysts saw the amendment as a positive change.

Expenses for oil and oil services companies have been rising in recent years, said Andrei Fedorov, oil and gas analyst with Alfa Bank. An extension in the length of exploration licenses should help increase profitability for these companies, although service companies are likely to benefit more than oil companies from this, he said.

The increase makes it possible to spend more time on preliminary research and to work out better planning of exploration operations, said Nadya Kazakova, an analyst with MDM Bank.

Kazakova said the license term for subsoil extraction, which currently stands at 20 years, might now be extended as well, which would be good news for oil companies.