Russia, the world’s second-largest oil exporter, will raise its oil output in the next few years as new tax cuts will allow oil firms to invest more in exploration and production, Prime Minister Vladimir Putin said.
Russia imposed heavy taxes on the oil industry, stashing away the proceeds in two oil wealth funds. Oil companies have complained about the excessive tax burden, which they say has led to underinvestment and stagnation. In its first major policy decision, Putin’s government has approved a number of tax breaks for the oil industry, including cuts in the mineral extraction tax and tax holidays for remote Siberian regions where oil is hard and costly to extract. “We are sure, in the next few years Russia’s oil output will increase,” Putin said in an interview with French daily Le Monde attended by Reuters and released on Saturday. The tax cuts announcement prompted a stock market rally.
France, which hosted Putin on his first foreign visit since becoming prime minister, has called on the Group of Eight industrialized nations to act together to restore oil prices to a more “bearable” level. French Economy Minister Christine Lagarde called on oil producing nations to increase their output while Prime Minister Francois Fillon said energy will be “at the heart” of the agenda of France’s rotating EU presidency, which starts in July. Putin told a news conference in Paris that global markets decided the price of oil and then joked: “If Russia could decide on the price of oil we would have given you a good deal.”
Oil hit a record of more than $135 a barrel last week and has doubled in cost over the past year. The price has eased in recent days, trading at around $128 on Friday, because of concerns about global energy demand and dollar strength. Russia, which is not a member of the Organization of the Petroleum Exporting Countries (OPEC), is the world’s second-largest oil exporter after Saudi Arabia.
Oil output in Russia dropped 1% in the first quarter of this year, confirming analysts’ gloomy outlook for the whole of 2008. Officials expect oil output to rise by no more than 1% in 2008. Oil output rose by only 2.3% to 491 million tons in 2007 after much bigger increases in previous years, including a record 11% in 2003. Russia at time produced, although did not ship, more than Saudi Arabia. (Reuters)