Russia’s Rosneft-led Arctic oil project requires $157 billion of investment

File photo. Forum attendees walk in front of the exhibition stand of Russian mineral oil company 'Rosneft' during the St. Petersburg International Economic Forum in St. Petersburg, Russia, 24 May 2018. [Yuri Kochetkov/EPA/EFE]

A ambitious new Arctic oil project led by Russia’s top oil producer Rosneft will require about 10 trillion roubles ($157 billion) of investment, Russia’s deputy energy minister Pavel Sorokin told reporters.

Vostok Oil, a joint project of Rosneft and Independent Petroleum Company (IPC), is set to include some oil fields that are already producing and others which have yet to start, including Rosneft’s Vankor group and IPC’s Payakhskoye field.

The government has broadly agreed a new tax relief package to help develop the Arctic, seen as a new oil-producing region for Russia, which is among the world’s top crude exporters, Deputy Prime Minister Yuri Trutnev said this week.

Russia’s heavy support of oil production via a number a special tax breaks has been hotly debated at a time when the government is raising other taxes on its citizens and increasing pension ages.

Alexei Sazanov, the head of the tax department at Russia’s finance ministry, told reporters at the same event on Friday that tax benefits for Vostok Oil could cost up to 60 billion roubles per year. The comments by Sorokin and Sazanov were embargoed until early on Monday.

Russia’s budget surplus, projected at 1.7% of gross domestic product this year, is expected to shrink to 0.2% in 2022, partly due to the various supports offered to the energy sector, a cornerstone of budget revenue.

Rosneft hopes that foreign investors will also invest in Vostok Oil, which it expects to produce up to 100 million tonnes of oil per year (2 million barrels per day), or a fifth of what Russia currently pumps.

IPC is led by Eduard Khudainatov, a former Rosneft chief executive and a close ally of Igor Sechin, who now runs Rosneft.

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