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Total inspection for Russian oil companies

Russian authorities can conduct total inspection of the oil companies.
Minister of Natural Resources Yury Trutnev can initiate the campaign, he believes that the oil companies drill more oil than they declare in their reports.

In other words, the oil companies allegedly evade taxes. Experts are surprised that the Ministry of Natural Resources became preoccupied with collecting taxes. This initiative of the Ministry could be caused by the intention to demonstrate its good work results, as the Ministry can be disbanded because of the Russian government administrative reform.

The Ministry of Natural Resources is going to conduct the inspection for the oil companies in cooperation with the Interior Ministry, Federal Security Services and the Customs Service. Minister Yury Trutnev says that the oil companies conceal the information on the part of the oil they drill not to pay taxes for this oil. "Today the Ministry of Natural Resources is not sure that it possesses correct information on the amount of the oil drilled", said Yury Trutnev.

The Ministry is only aware of the amount of the exported oil, but has no information on the amount of oil transported by rail and by boats around Russia. The representative of the Ministry said in a Gazeta interview that the inspection can last for several years. 

The oil companies did not comment on the new initiative of Russian authorities. The source in one of the major oil companies said in a Gazeta interview that his company is not afraid of the new inspection as the Ministry of Natural Resources had already conducted inspections of the company several times.

The experts call the new inspection weird. An analyst for Petroleum Argus agency Mikhail Perfilov said in a Gazeta interview that measuring the amount of oil drilled by the oil company, requires installing indicators on all its oil wells. "We have many institutions which trace drilling and transporting oil. However, no institution collects all information: some of them have statistical data on the oil transported by rail, others – on the oil transported by sea. For this reason, the ongoing inspection is unlikely to produce positive results”, says Mr. Perfilov.

According to analysts, major oil companies are unlikely to be interested in concealing a major part of the drilled oil. "If this fact is revealed, a company will be in trouble. It can be ruined because of a minor thing”, says one of the experts. The analysts estimate the possible amount of the concealed drilled oil up to 10 million tons.

According to the Scientific Advisor of the Economic Expert Group of Russian Ministry of Finance Evsei Gurvich, 97% of the tax on extracting natural resources is being collected in Russia, contrary to the accusations against the oil companies of concealing the tax. Mr. Gurvich says that this tax collection is among the best.

Elena Korzun, general director of AssoNeft association which comprises more than 70 small and middle-sized oil companies, says that “it is high time to make order in the oil-drilling industry". "The inspection will make oil-drilling more transparent and will allow to pass to differentiated taxation system. (The Ministry for Economic Development is preparing a related bill, to tax all oil drilling companies depending on the state of their oil wells, the depth of oil location, the infrastructure and the abundance of oil in the oil deposit. Currently, all the oil companies pay equal percentage of taxes”, says Ms. Korzun. She states that the companies being in AssoNeft association, reveal all the drilled oil, despite the absence of good control system for each oil well. There are about half of Russian oil drilling companies in AssNeft association.

Meanwhile, the oil companies’ CEOs believe that the activity of the Minister of Natural Resources is a pure self-promotion in the midst of the currently conducted administrative reform. "Surprisingly, the Ministry which is supposed to control issuing licenses and long-term development of the industries dealing with natural resources, decided to go in not its domain”, said an analyst for Zenit-bank Sergey Suverov in a Gazeta interview. Probably, the government officials become overactive as they are afraid to be deprived of some their authorities during the current administrative reform. They can also be afraid of  possible disbanding of the Ministry of Natural Resources.

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