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Prime-Tass: Chief of public spending watchdog calls for revising Sakhalin PSAs

MOSCOW, Oct 23 (Prime-Tass) — Sergei Stepashin, director of Russia’s Audit Chamber, called Monday for “a drastic revision” of production sharing agreements (PSAs) for the development of Sakhalin Island’s oil fields.

The Audit Chamber is Russia’s public spending and revenue watchdog.

However, the PSAs must remain in effect, he added.

The increase in Sakhalin Energy’s Sakhalin-2 oil and gas project’s costs would be unprofitable for the Russian government, Stepashin also said.

Earlier this month the Audit Chamber said that Sakhalin Energy’s plans to increase its spending targets for 2003-2010 to U.S. $22.2 billion from $12.04 billion were unjustified.

Earlier in October Arkady Dvorkovich, a top presidential aide, suggested that Sakhalin Energy switch from the PSA taxation regime to the normal regime if it wanted to increase the costs.

The taxation of PSA projects differs from the taxation of other economic activities. In Russia the operators of PSA projects pay fewer taxes but have to give part of their output to the government. The Russian government’s share of output increases as PSA operators’ costs break even.

Russian authorities have recently probed the compliance of Sakhalin-2, and another PSA project, ExxonMobil-led Sakhalin-2, with environmental standards. They have also inspected the Kovykta field, which is controlled by a BP affiliate, Total’s Kharyaga deposit, 19 oil and gas field licenses held by Lukoil, as well as the projects of Gazprom Neft, a subsidiary of gas giant Gazprom, and state-controlled oil major Rosneft.

End

23.10.2006 20:02

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