MOSCOW, Dec. 29 (UPI) -- A new tax regime in Russia could pave the way to an increase in oil production from fields in Western Siberia, the Russian energy minister said.
Russian Energy Minister Alexander Novak said oil production in Western Siberia, once a major contributor to overall output, was declining at an average rate of around 1 percent per year. Changes in a tax system, where so-called excess profits will be taxed at 70 percent, will make Western Siberia commercially viable.
Under the current tax regime, Novak said about 73 billion barrels of oil are not economic.
"Changes in the tax system are to create conditions to make production of this oil commercially viable," he said in an interview with state-owned television station Rossiya-24.
Last year, a subsidiary of Russian oil company Gazprom Neft said it was assessing the shale oil potential in Western Siberia. The company employed hydraulic fracturing, known also as fracking, at the site in order to improve oil extraction.
Fracking is in part used to pull oil from inland shale basins in the United States, where the increase in production has helped push crude oil markets heavily toward the supply side. When coupled with weak global demand, the increase in oil production has pushed crude oil prices to near 11-year lows.
Novak said a return to oil priced around $100 barrel is a long ways off. Volatility is expected to linger through the early part of 2015 before some level of balance returns to the market.
"It is unlikely there will be a sharp surge in prices," he said. "In my opinion, as of today the price of around $50 a barrel would be fair, if we proceed from economic parameters, the balance of supply and demand and the cost of oil production."
Russian ministers are working on the final stages of a new tax policy. A bill may be headed to lawmakers for consideration in early 2016.