Rosneft oil major advocates increase in oil cutoff

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KRASNOYARSK, July 8 (RIA Novosti) - The chief executive of Rosneft, Russia's state-owned oil company, said the cutoff level used for replenishing the Stabilization Fund, which holds windfall oil revenues, should be raised at least to $30 per barrel.

"It is time to raise the cutoff price to at least $30 per barrel," Sergei -Bogdanchikov told a conference devoted to the development of the Vankor oil and natural gas field in Krasnoyarsk Region, in the west of Central Siberia. Bogdanchikov said the government would understand that it was necessary to encourage oil companies to increase production.

At the moment, cutoff level is set at $20, and starting from January 1 it will be raised to $27, in line with a government decision.

Deputy Prime Minister Alexander Zhukov said recently it would be economically wise to reduce the cutoff price to $18 per barrel. He said this would help keep inflation down and end the strengthening of the ruble. Zhukov said increasing the price to $27 had been a difficult decision for the government.

The cutoff level determines where petrodollars go. Taxable revenues on oil above the cutoff level are channeled to the Stabilization Fund, and what is left over goes to the budget. Therefore, reducing the price to $18 would have resulted in dramatic inflows into the Stabilization Fund, which currently holds about $35 billion.

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