MOSCOW, July 26 (RIA Novosti) – Minor Russian crude producer RusPetro, which focuses on hard-to-recover oil in Siberia, said Friday that 97 percent of its reserves were likely to be eligible for new tax breaks signed into law earlier this week by President Vladimir Putin.
Shares in RusPetro jumped sharply on the news, rising as much as 23 percent in London, but then paring gains to about a 7 percent day-to-day rise by the late afternoon.
About 97 percent of RusPetro’s reserves will qualify for an 80 percent mineral extraction tax relief that “will increase wellhead revenue per barrel for RusPetro's crude oil production from approximately $22.4 to approximately $39.1 at a gross price of $100 per barrel,” the company said in a statement.
Putin signed off Tuesday on a law implementing a differentiated tax regime for so-called tight oil, unconventional reserves that require more sophisticated technology to exploit than traditional drilling.
In the face of the declining production at Soviet-era western Siberian fields, Russia is pushing ahead with efforts to stimulate the development of different oil reserves, including tight oil and offshore hydrocarbons in the Arctic.
The extraction of tight oil, from shale rock formations, demands more investment because of the complicated technology needed, including horizontal drilling and hydraulic fracturing, or fracking, when water and a chemical mix are pumped into rock at high pressure to stimulate oil flows.
The new tax regime will come into force on September 1.
Other Russian energy companies, particularly state-owned Rosneft, have also invested heavily in tight oil developments, focusing on Siberia's Bazhenov rock formation, which some estimates predict could contain an eye-watering 143 billion metric tons of oil.
“This is a very positive development for the company which puts the business on a much more cash generative footing,” RusPetro CEO Tom Reed said in a statement.
RusPetro has about 1.8 billion barrels of proved or probable reserves of oil equivalent. The company is jointly controlled by its management, investment fund Altera Capital and Andrei Likhachev, an associate of billionaire Oleg Deripaska, according to Reuters.