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. Last Updated: 07/27/2016

Rosneft CEO Calls for Lower Oil Tax

VedomostiBogdanchikov, left, Putin and Surgutneftegaz general director Vladimir Bogdanov at a Kremlin meeting in February.
Rosneft, the country's biggest oil company, will lobby the government for tax breaks in new oil regions because the tax regime is "too harsh," the company's CEO said in an interview Tuesday.

"The current tax regime is too harsh" for oil producers, CEO Sergei Bogdanchikov said in an interview on Russia Today television.

A growing chorus of industry participants, including LUKoil's CEO Vagit Alekperov and Alfa Bank analyst Dmitry Loukashov, is calling for lower taxes to facilitate investment and new production. Russia has seen output growth slump to less than 3 percent last year from 11 percent in 2003 as field development costs have soared, according to BP.

Rosneft will push for tax breaks to develop offshore oil deposits in the Caspian Sea and Arctic Ocean, Bogdanchikov said.

"New regions require new approaches, notably the Arctic shelf and Russia's southern seas with their depth and lack of infrastructure," Bogdanchikov said. "We will be lobbying the government for preferential terms in these regions, which we expect to become law by 2008."

Russian explorers planted a national flag on the seabed under the North Pole on Aug. 2, staking a claim to the mineral-rich territory over nations including the United States.

Russia, which says the Arctic's energy and mineral resources are becoming more accessible because of global warming, says the underwater Lomonosov Ridge links Siberia to the Arctic seabed and may allow the country to extend its territory. The area of the Arctic shelf may hold 10 billion tons of oil equivalent, the government says.

Bogdanchikov also said Rosneft will work with local companies to expand in China and India.

Rosneft plans to build an oil refinery near Beijing by 2010 as part of a joint venture with China's CNPC. The refinery has a planned annual capacity of 10 million tons of oil per year, Bogdanchikov said. Rosneft expects Chinese demand for oil products to double within the next decade and consumption of petrochemicals to triple, he said.

"As a new entrant to the Chinese and Indian markets, we will expand through joint ventures with local companies, not on our own," Bogdanchikov said. "The Chinese refinery project will cost us several billion dollars, and we will not risk making mistakes by branching out on our own."

Rosneft became the country's largest oil producer this year after it spent more than $25 billion buying assets from Yukos. Once Russia's top crude exporter, Yukos went bankrupt after the government filed more than $30 billion in taxes and fines against the company.