NDPI Differentiation; ESPO

Excerpts from Russian Petroleum Investor

NDPI Differentiation: The First Results of Tax Reform
By Denis Borisov,Analyst of Investment & Financial Company Solid
In January 2007, a process began of differentiating the mineral extraction tax (NDPI). This has consisted of an introduction of a zero or lowered NDPI rate for taxpayers working on deposits in Eastern Siberia, as well as for exhausted and super viscous (bituminous) oil deposits. Starting in 2009, amendments to the Tax Code will provide a further decrease in the NDPI. The tax-free cut off price for the tax calculation will increase from $9 to $15 for barrel. In addition, there will be an opportunity of applying lower NDPI rates without the obligatory requirement of putting equipment for preferential deposits in commercial accounting units. For the tax payers working on remote deposits – new deposits on the continental shelf or above the Arctic Circle – tax vacations will result. Experts also believe that additional NDPI differentiation may result from the geological deterioration of developed deposits and the high sector rates of inflation.

First Segment of ESPO Commissioned
By Michael Barkov, Vice President of Transneft
On October 4, Transneft commissioned the first reverse segment on the main East Siberia-Pacific Ocean (ESPO) oil pipeline. The line extends 1,105 kilometers from the Talakan deposit in the Republic of Sakha (Yakutia) to the city of Taishet in the Irkutsk region. A year before the commissioning of the first ESPO stage, Transneft has created the necessary infrastructure to provide for the acceptance of oil from Eastern Siberia and Sakha (Yakutia) to the Russian pipeline system. Until that time, oil will move west, that is, in reverse direction. Transneft has already received applications from oil companies exceeding the 30 million ton capacity of the ESPO first stage.

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