“Favorable” Tax Conditions For Barents Sea Field Development promises were given by Putin

By Finance

The Prime Minister of Russia, Vladimir Putin has assured the chief executives of France’s Total SA (TOT) and Norway’s Statoil ASA (STO) that favorable tax conditions will be created for the giant Shtokman gas project in the Barents Sea.
“We took several decisions for the taxes at the federal and regional levels (…) that will create better conditions for implementing the Shtokman project,” Putin said at a meeting in Moscow with Total’s Christophe de Margerie and Statoil‘s Helge Lund, according to a statement on the government website.
The date took place after the Shtokman shareholders–Total, Statoil and Russian state gas company OAO Gazprom (GAZP.RS)–had decided to postpone a final investment decision for the 4-th time until July 1.
Shareholders are going to decide by the end of March, but discussions have been held up after the shareholders wanted tax breaks from Russian authorities for the challenging gas condensate field located in the icy waters about 650 kilometers north of Russia.
The Shtokman consortium, in which Gazprom holds a controlling stake of shares, said it would work on further optimizing costs at the project, while awaiting Russian authorities’ decision on a potential tax-rebate.
“The challenge is to make this commercially viable,” a Statoil spokesman said. “We are continuing to work on optimizing the project to maintain a good dialogue with Russian authorities.”
Last week, however, Russia’s deputy Finance Minister Sergei Shatalov cast doubt about the project, saying that until now the Shtokman partners had failed in providing the necessary information needed to decide on tax breaks.
The Russian government is preparing a range of tax stimulus for offshore projects, but the process is going to be longer than expected. Thursday, Energy Minister Sergei Shmatko said that due to high operating costs and investment volumes the internal rate of return for offshore projects should “significantly exceed the 16% level” that is set for East Siberian fields, according to the Interfax news agency.
The shareholders plan to begin production from Shtokman in 2016 and launch a liquefied natural gas plant in 2017.