Murmansk region wants to collect taxes on Shtokman project


Publish date: April 22, 2009

Written by: Alexey Pavlov

Translated by: Charles Digges

MURMANSK – In their first meeting, new Murmansk Regional Governor Dmitry Dmitrienko made clear to Shtokman Development AG head Yury Komarov that he expects his region to collect all taxes connected with the development of the Shtokman oil and gas condensate field.

Dmitrienko intends to send an appeal to Russian Prime Minister Vladimir Putin on the issue, he said in the meeting last week.

In the first meeting between Dmitrienko and Komarov, discussion centered around what benefits the mammoth oil and gas drilling project should bring to the Murmansk Region for hosting the numerous facilities the project will require.

The Shtokman field, located beneath he Barents Sea north of Murmansk is estimated to hold more than 35 trillion cubic meters of gas and oil.

But other economic benefits that Shtokman will bring to the region, such as new jobs, investment and infrastructure renewal, could derail the bid that the region collect all taxes associated with the contracting necessary to kick the project off. But even that is still only on paper.

Komarov told Dmitrienko that the project has yet to reach the stage of holding tenders for contractors for construction and supplies. However, the Murmansk region is in a unique position to lay the foundation for mutually beneficial cooperation.

At their meeting, Dmitrienko told Komarov that he intends to appeal to Putin on the issue of taxes resulting from the realization of the Shtokman project into Murmansk’s coffers.

“The one point we insist on and will insist on is that all or the majority of contractors that win tenders on legal basis, must become taxpayers in the territory of the Murmansk Region,” said Dmitrienko. “And if we receive fair taxes in alls senses, this will be sufficient for us to successfully develop our region.”

It is abundantly clear, however, that Moscow will not use only local companies for a project of such magnitude and national significance. And regardless of how much local companies may want this, they simply do not have the power, resources and labour for the entire complex of work. Local authorities have therefore had the foresight not to imply any coercion or constraints.

“There is a most simple form – during the tender process, a complex of documents should be attached to the project contract,” said Dmitrienko. “There only needs to be one point introduced into this contract – that in the situation a company wins a contract, the company or its local representative office go through registration with the tax inspectorate on the territory of the Murmansk Region.

Upon hearing this revolutionary suggestion, Shtokman’s Komarov strained and asked for a month to work out the issue. He said he will have an answer by May 20th, in time for the next meeting with Murmansk officials.

The second question, slated to be discussed on May 20th, will be whether to include the enterprises of the Shtokman projects into the electrical system of the Murmansk Region. It is a serious issue, as the Shtokman project will spike the demand for electricity in the Region. The gas fired electrical station that is planned to be built to power the project next to the gas condensate plant in Teriberka will not cover all of the land-based power needs of the Shtokman venture.

Shtokman’s developers will soon have to solve the problem of where they will get their needed energy.
As this meeting was the first between Dmitrienko, who succeeded Governor Yury Yevdokimov, and Komarov, its success or failure will influence whether the two will have a good working relationship with respect to the Shtokman project.

Speaking with reporters after the meeting, Komarov noted that it is not important to him who is governor of the region because there is nothing that can stand in the way of a project of such magnitude. But he did say that he intends to establish the kind of working relationship he had with Yevdokimov.

Alexsei Pavlov wrote this report.