Kazakhstan wants to impose duties on export of oil and is read to sacrifice with WTO

/REUTERS, Astana, Raushan Nurshaeva, January 29, 08/ - Kazakhstan studies the opportunity of imposing duties on export of oil starting from the next year that can affect western companies, working in the country, said the minister of energy and mineral resources Sauat Mynbayev on Tuesday. According to him, the government considers the possibility of imposing since January 1 of 2009 the export customs duty on raw oil and oil products. "We would ask for another month for additional calculations, and preparation of documents", - he said on the meeting of the government. At the same time, the minister alerted that imposing of such duty could deteriorate the entry of Kazakhstan into the World trade organization and to make the companies shrink the investments. According to Mynbayev, the innovation (for example, similar duty is effective in neighboring Russia) will depend on the contents of agreement about sharing products with Kazakhstan and will affect such firms whose contracts for subsurface use do not foresee the stable taxation. A large number of oil contracts in Kazakhstan have been concluded on the base of an agreement about sharing products (ASP) and foresee immutability of taxation. Trust of foreign companies in stability of the contracts with Kazakhstan themselves has been shaken because of a long last year dispute around the giant oilfield Kashagan, as a result of which the authorities accomplished the doubling of their stake in the project. Mr. Mynbayev said that the possible duty is not likely affect the Kashagan consortium that has postponed again the start of industrial oil production till 2011. "It is clear that, in the end, it would not be manageable to impose the tax duty to every subsurface user. For example, for Northern Caspian consortium, the negotiations about restructuring the economical interests of Kazakhstan with which were closed just recently", - the minister said. Mr. Mynbayev informed that by January 1 of 2009 the government would have conducted the "individual" negotiations with companies, working on the principals ASP, and will finally determine the list of contracts, in which it is impossible to impose the duties. "The attempt to impose the export custom duty for everyone in accordance with unilateral provisions, ...can result in a great confrontation will all subsurface users... We do not need that", - the minister said. Mr. Mynbayev made understand that imposing of duties can be compensated by refusal from other additional taxes. Some bureaucracy propose to change the unearned income tax and royalty with the tax on production of minerals for all companies. "If we tried to realize all our fiscal appetites, we can destroy the sector", - the minister said. He said that the duty would become an instrument of regulating the stability of supplies on domestic market against the background of increase export capacities and rise of oil prices on the global market and also a mean to restrain the prices for fuel in Kazakhstan that faced a splash of inflation last year. There are three refineries in the country, the refinement volumes in them made more than 12 million tons last year. Last year, the state company Kazmunaygas bought a big petroleum refinery in Romania, having implemented an old dream to have oil-processing capacities in Europe. PRO AND AGAINST According to Mynbayev, the export duty would affect the volume of oil equalt to 27 million tons. Last year, Kazakhstan produced 67.5 million tons of oil and condensate. With a forecasted global price for oil at $60 per barrel (Brent) next year, the duty would total $103.4 per ton; if $88 per barrel, the duty would total $173.8 per ton of exported oil, the minister said. The head of Samruk holding Kanat Bozumbayev alerted his colleagues in the government that imposture of export duty may lead to a decrease in the quote of shares of a "daughter company" of the state oil and gas company - Exploration Production Kazmunaygas - by 30-50 percent. "If we impose the duty to the sum of $103 per ton, we receive $1.3 bn. into the budget, but at that we would loose on the price of shares about $2.0-3.5 bn. Such risks are present; my responsibility is to warn the government", - Mr. Bozumbayev said. He has not explained, where besides the budget would money from the duty go taking into consideration that the mentioned by minister Mynbayev 27 million tons would bring $2.78 billion to Kazakhstan in case of the duty at $103 per ton. "The imposture of export custom duty would in our case complicate the negotiation process (with WTO)", - the minister said. "But if this is not done right now, then we would never do it...it is hard, but it is possible", - Mr. Mynbayev said. The Prime minister Karim Massimov shared his position. "We should go in this direction regardless of whether everyone likes it or not", - the prime minister said. [2008-01-29]