Rosneft asks for huge tax break for Arctic exploration
Igor Sechin (CEO of Rosneft) wrote to President Putin requesting an enormous tax break to enable his company to develop oil production in the Arctic Circle. Rosneft estimates it will spend anywhere between USD 80 billion and 135 billion. The tax exemption requested is worth about USD 41 billion. Rosneft specified its requested as no property or land tax on the project and reducing profit tax from 20% to 7%. It wants all this to last for 30 years.Russia is developing a huge oilfield near the Kara Sea. The project is very costly but Rosneft is getting savvy at keeping costs down. Putin is thought to be a sympathetic to the petition. Oil is crucial to the economy. But temporary exemptions have a habit of becoming permanent. The head of state does not wish to be accused of favoritism. If this company gets a tax break why shouldn't everyone. After all oil already is hugely profitable. The government's economic mantra is 'diversify'. It is the non-oil sectors of the economy that really need a boost. Rosneft argues that it is building crucial infrastructure what will benefit the country long term such as 5500 km of oil lines. There will be ports with a transshipment capacity of 100 million tons a year. Some airports will be built and new electric grids in this very remote and sparsely populated region.The government probably will agree to a tax exemption for Rosneft but it is likely to be considerably below the USD 41 billion requested and for rather shorter than 30 years. KPMG estimates the project will turn a profit by 2027.