Moscow (Platts)--17Apr2009

Russia's energy ministry does not expect the country's crude oil output
to fall in 2009 from 9.735 million b/d seen in 2008, given the current trend
in the industry, it said late Thursday.

"On the contrary, there is a possibility for a slight increase in the
production, given the current dynamics," the ministry said in a statement.

"At present, we expect crude output to rise by 1% or maybe even 2%," a
spokesman from the ministry said.

The launch of a number of new fields in East Siberia justifies the
ministry's optimism. It pointed that oil production at major Talakan and
Verkhnechonsk oil fields in East Siberia started last year, and the startup of
neighboring giant Vankor field is scheduled for the second half of this year.

Rosneft is developing Vankor and expects to begin producing as planned
despite the crisis if "nothing serious happens," head of Rosneft's
investment relations department, Alexei Bogdanchikov, said earlier this year.

In March, Russia's crude output rose marginally by 0.4% to 41.437 million
mt (9.76 million b/d), according to the energy ministry's preliminary data.
Throughout 2008 as well as the first two months of 2009, oil output fell by
nearly 1%.

Russian oil producers have been encouraged to produce more crude as the
recent drastic decline of the ruble against the dollar and the euro, coupled
with cuts in export duties has reduced expenditure, analysts said.

Nonetheless, the downward trend is expected to continue through 2009 as
the ongoing global economic crisis forces companies to cut investments.

In the middle of March, Prime Minister Vladimir Putin's press office said
that crude output was expected to drop 1.1% to 482 million mt (9.64 million
b/d) this year, citing a government forecast.

The crude output forecast was "based on insufficient volumes of financial
resources to maintain production from old depleted fields, mainly in West
Siberia, and develop new fields in East Siberia and [northwestern]
Timan-Pechora oil province." The forecast was also based on the current
taxation in the oil sector, it said.

NEW TAXATION MODEL FOR OIL INDUSTRY

Looking forward to 2013, the ministry reiterated that oil output would
not drop if the government approves the ministry's proposals to change
existing taxation.

In February, Energy Minister Sergei Shmatko said that if Russia
implemented new tax measures to stimulate oil production, the country might be
able to increase output to 511 million mt/year (10.2 million b/d) in 2013.
Otherwise, production might drop 8% to 450 million mt/year in 2013, he added.

Russia is discussing a new tax regime to stimulate production from the
new oil and natural gas fields. Under the current system, which focuses on
boosting earnings from existing fields and gives little incentive to develop
new ones, about 36% of existing fields and 94% of new fields are not
profitable, Shmatko said.

The industry wants a new tax model to be implemented from 2010-2011,
Gazprom Neft chief financial officer Vadim Yakovlev said Wednesday.

"By the end of the year, we hope to understand what the figures are
likely to be," he said, adding that the government aimed to develop a new
taxation model for the industry by the middle of the year. He added that
Gazprom Neft, among other companies, was actively involved in this.
--Nadia Rodova, nadia_rodova@platts.com