Novatek sees no gas tax hike before 2009

MOSCOW (Reuters) - Russia's largest independent gas producer Novatek (NVTK.MM: Quote, Profile, Research, Stock Buzz) does not expect the government to introduce higher taxes on gas extraction before 2009 and does not think the rise will be as much as five fold.

Novatek's Chief Financial Officer Mark Gyetvay told Reuters Russia Investment Summit he was confident the tax would be raised to such a level that companies like Novatek would be left with enough money to fund expensive projects.

"We don't see any realistic threat of a tax increase before 2009," said Gyetvay who added that signals were coming from the government that new legislation will be submitted to the parliament for debate before the end of 2007.

Russia's Finance Ministry has suggested raising the gas extraction tax five-fold, while other ministries have opposed the measure.

"What they (government) are looking at now is similar to what we have seen in the oil industry. They will do it on a field by field differentiation based on depletion, reserves, and capex requirement and formulate a formula of a new tax regime," Gyetvay said at the summit at the Reuters office in Moscow.

Government officials' comments about a new gas tax have been a major factor affecting share prices of firms such as Novatek or gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), as analysts say a sharp increase would hurt their profits.

Gyetvay said a big increase in taxes on the Russian oil industry has already restricted oil firms' investment plans.

Russian oil extraction tax fluctuates with global prices, while the gas extraction tax is fixed at 147 roubles ($5.76) per 1,000 cubic meters, relatively low compared with oil.

Gyetvay said there was a general consensus in the industry that the gas tax should be increased, but not too sharply as Gazprom and independent firms have to invest in large new projects amid growing demand for gas in Russia and Europe.

"There is a faction in the government that recognizes that they cannot tax the gas industry away particularly when you have huge capital expenditure projects," he said.