New Delhi: Ahead of Russian President Vladimir Putin’s New Delhi visit, Kremlin has rejected special tax concessions to state-owned Oil and Natural Gas Corp. Ltd’s (ONGC) Siberia-focused firm Imperial Energy.
India had been pressing for tax concessions to Imperial Energy to make up for the prohibitively high cost of extraction from tight oil assets in Siberia because of bad terrain, cold climate and killer taxes. Putin is to visit New Delhi on Monday for the 13th annual bilateral summit and New Delhi was hoping the high taxes on oil produced by Imperial Energy will be sorted out before that, sources privy to the development said.
ONGC Videsh Ltd, the overseas arm of the state explorer which had in 2009 acquired Imperial Energy for $2.1 billion, says high taxes mean it gets only $19-20 per barrel at an oil price of $90-100. This nominal net back is generated from the exploratory and production efforts made in the harsh conditions of West Siberia, from where a meagre 13,803 barrels per day of output has to be transported through 5000 kilometres of pipelines. This is hardly enough to cover the operational expenditure, it feels. The Russian government, in the last three years of ONGC’s presence has gained about half a billion dollar in taxes. Sources said Moscow has stated that it cannot extend any special treatment to Imperial Energy. It has, however, indicated that some relief may come in the form of rebates Moscow is planning for exploitation of tight oil reserves all over the country. India had also sought to include Imperial Energy fields in the list of the fields where produced oil is subject to a reduced rate of export customs duty. Russia has remained non-committal on the issue. Besides seeking a pie in the future exploration projects planned in Arctic, India may push for more LNG supplies during Putin’s official visit.