Tax benefits for Prirazlomnoye

The Prirazlomnoye project is getting the tax benefits it needs for profitable drilling. Photo:

Russia’s first offshore oil field in the Arctic – the Prirazlomnoye – is getting a new and beneficial tax regime.


The oil field, which is located in the Pechora Sea, will get the export tax cut 50 percent compared with standard rates, an announcement from Russian authorities says. The tax breaks, which are similar to conditions at several fields in Eastern Siberia and the Caspian Sea, will come into force from July 1, newspaper Vedomosti reports.

The tax cut is likely to speed up operator Gazprom Neft’s startup of drilling at the site. As previously reported, the company late December 2011 towed the “Prirazlomnaya” platform from Murmansk to the field destination in the Pechora Sea. Since then, the platform and crew has been lying idle in the icy Arctic water.

Gazprom has openly signaled that production at the field will not start before tax breaks are introduced.

The development of the Prirazlomnoye field, which was discovered in the late 1980s, has undergone numerous delays and postponements. In May this year, Head of Gazprom’s department for production of gas and oil Vsevolod Cherepanov said that production probably will not start up until late 2012 or early 2013

The Prirazlomnoye tax breaks come as Russian federal authorities are about to decide on a set of new beneficial tax regulations for Arctic projects. A document from the Ministry of Energy proposes a new harmonized methodology for Arctic tax benefits, expected to be approved by the government this fall. In addition, the federal government in April this year presented a document, according to which a zero export tax, as well as beneficial mineral extraction tax would be introduced.  The latter regulations will however have effect only for projects launched after 2016, Vedomosti informs.

The tax regime is a major issue in practically all the oil and gas projects under planning in the Russian Arctic, among them the Shtokman project and the projects included in the Rosneft-ExxonMobil partnership in the Kara Sea.