July 23, 1998 - The leaders of Russia's leading oil and gas companies held a joint press conference in Moscow yesterday to discuss the current crisis in the Russian oil and gas industry, and the tax policy pursued by the government in the main economy sectors.
In the past few years, oil output has been dangerously decreasing in Russia. Oil and gas condensate production has gone down 1.8 times from 542 million tons in 1985 to 301 million tons in 1996.
Under conditions of a sharp drop in world oil prices, from October 1997 to March 1998 the price of 1 barrel of oil dropped 1.5 times, which caused losses in revenues of the oil sector of more than 30 billion rubles. The taxation mechanism applied to the oil sector practically excludes a possibility of any flexible reaction to the changing situation. Among the main problems are the actual excise rates on crude oil. A fixed excise rate on crude oil does not ensure objectivity of taxation. Russian oil exports are becoming unprofitable.
The oil sector losses in 1998 amounted to 34 billion rubles. If oil prices continue to decrease, the loss will rise to 58 billion rubles. The oil industry will fail to withstand further decline of oil prices.
Thus, the oil sector stability as well as the country's economic security will be threatened. To prevent negative consequences, a tax reform in the oil sector should be carried out, and the presidential veto on the federal law on amending Article 4 of the Federal law on Excises, virtually unanimously approved by the parliament, should be reconsidered. With international experience taken into account, taxes on crude oil and gasoline sales should be shifted from production and wholesale to retail sales.
The leaders of oil and gas companies have sent an appeal to the president and government which sets forth their concern about the crisis in the fuel and energy complex. Among the participants of the press conference were the leaders of oil companies LUKOIL, YUKOS, SIBNEFT, TYUMEN OIL COMPANY, SIDANKO, SURGUTNEFTEGAZ, EASTERN OIL COMPANY AND GAZPROM.
Press Centre OAO "LUKOIL"
phone.: (095)927-1677, fax: (095)927-1653,
E-mail: pr@lukoil.com
