Oil Quality Bank Project May Destroy Bashkirian Producers

The recently suggested by Siberian petroleum producers project 'Petroleum Quality Bank' provides for a compensation for quality loss paid to them by Bashkirian companies. At this time, lower density and lower in sulphur oil produced by Siberian companies is mixed with more dense and higher in sulphur Bashkirian oil. The resulting product is then exported as the Urals grade Russian oil. According to Alexander Yakubov, the Senator from the Republic of Bashkortostan, the carrying out of this project may cause the political and economic destabilisation of his republic, forcing the Bashneft oil company to abandon low-yield oil fields and those with high water levels, these being the majority in Bashkortostan. Should this happen, about 30,000 people will lose their jobs and the very existence of the oil company paying about 25% of all taxes collected in the republic may become very doubtful.

Mr. Yakubov further said the creation of such a bank was a necessary but at this time premature and badly organised measure not accounting for the inequality of geological conditions oil companies had to adjust to. Albert Kharisov, the Representative of the Republic of Bashkortostan with the President of the Russian Federation, pointed out that the project would result for Bashneft in 28% higher costs, while an additional compensation paid by the suppliers of lower quality oil would be nothing if not the additional taxation of some and an unfair advantage of others. He also said the licence fees for the use of natural resources must be adjusted to the unequal geological conditions and the quality of oil, this being the official position of the government of Bashkortostan.

Mr. Kharisov said he did not think high sulphur content made for any lower quality of oil, high-sulphur oils being priced higher than others on some West European and American markets. Yet the Republic of Bashkortostan lacked the means of delivering its oil to those markets.

Azat Yagafarov, the head of the Moscow office of the Tatneft oil company, said the 'Petroleum Quality Bank' project was advantageous only to some, exactly seven stockholders of Siberian oil companies. Mr. Yagafarov said the allegation of an annual loss of $2.5 milliard suffered by some of those companies as the result of the mixing of oils of varying quality grades was too farfetched. If the project is carried out, he believes, all that will happen is the redistribution of profits, the total taxes paid remaining without change.

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