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Government Delays on East Siberian Oil Duties

The government on Wednesday delayed a decision on introducing export duties on East Siberian oil that would deprive three leading oil companies of $378 million in revenues this year alone.

The postponement suggests that there may be changes to the plan to start charging the duty on July 1.

“The Presidium didn't make a decision,” Natural Resources and Environment Minister Yury Trutnev said after the meeting of the scaled-down Cabinet.

Under the latest proposal, the duty measuring 45 percent would apply to the portion of the oil price that is above $50 per barrel, Deputy Prime Minister Igor Sechin said at the meeting.

The government has not been charging a duty since December to encourage development in the region, but the Finance Ministry has insisted on taxing the exports to narrow the budget deficit.

At the current price for Urals crude, which averaged $71 per barrel over the past 30 days, the budget would rake in 11.9 billion rubles ($381 million) by the end of the year, Sechin said.

The proposal calls for introducing a full export duty if oil producers reach the profit rate of 16 percent on their East Siberian operations, Sechin said.

The government still has time for deliberations. It set the duty for June in a decree dated May 26.

Rosneft is the main beneficiary of the tax holiday that accounts for 25 percent of the company's estimated net income this year, investment company Renaissance Capital said in a recent research note. Also developing in East Siberia are Surgutneftegaz and TNK-BP.

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