New Delhi: Ahead of Russian President Vladimir Putin's New Delhi visit, Kremlin has rejected special tax concessions to state-owned Oil & Natural Gas Corp'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 USD 2.1 billion, says high taxes mean its gets only USD 19-20 per barrel at an oil price of USD 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 extent any special treatment to Imperial Energy.
It has however indicated that some relief may come in 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.
Gas utility GAIL India Ltd had recently signed a 20-year contract to buy 2.5 million tons per annum of LNG from OAO Gazprom beginning 2018-19. LNG will come from Gazprom's Shtokman production facilities, which has an estimated 130 Trillion cubic feet of reserves.
During talks, India may push for participation of ONGC in the Yamal LNG project. Initial talks have already been held with Novatek, the second largest gas producer in Russia after Gazprom.
ONGC has teamed up with GAIL and the nation's largest liquefied natural gas importer Petronet LNG Ltd for taking a stake in the Yamal project which is controlled by Novatek. Total SA of France has 20 percent stake in the project.
Besides Yamal, GAIL is eyeing interest in a planned greenfield LNG project on the eastern coast of Vladivostok. Also of interest is the capacity expansion of the existing Sakhalin-2 project, aimed mostly at catering to the Asian market.
Also, Indian refiners are interested in procuring crude oil from Russia on long term contract.
ONGC Videsh Ltd, the overseas arm of the state explorer, currently owns a 20 percent interest in the Sakhalin-1 project in Far East Russia.
First Published: Sunday, December 23, 2012, 16:32