Home to abundant oil reserves, Russia rarely worried about where the next barrel would come from - until now. With analysts expecting production to fall this year for the first time in a decade, Russian companies are pushing to find new oil in remote regions such as the Arctic Shelf and East Siberia - but their efforts are hampered by crippling taxes that give the government much of the recent gains from high oil prices. The Kremlin is now apparently considering tax cuts aimed at letting companies keep enough of the country's windfall from higher oil prices to invest in exploration - on top of cuts earlier this year that analysts and industry executives said they didn't go far enough. Industry is calling for 400 billion rubles ($16.3 billion) in further breaks from next year if the country is to galvanize its flagging industry. The prospering energy industry has been crucial to the career of Prime Minister Vladimir Putin, who as president oversaw an eight-year, oil-fueled economic boom which improved the lives of many ordinary Russians and helped restore national self-confidence. Declining oil production is bad news for a resource-based economy where revenues from the oil industry account for about 25 percent of GDP - and undermines Russia's efforts to position itself as an influential guarantor of global energy supplies, providing as it does some 30 percent of Europe's oil imports. “The Kremlin was very uncomfortable seeing the declining production curve,” said Artyem Konchin, an oil and gas analyst at UnicreditAton. “If the Kremlin wants to position itself as an energy superpower - and a place where reserves are abundant, or at least available - a decline in production is detrimental to this message.” Oil production reached 491.5 million tons (9.87 million barrels per day) last year, a 2.3 percent rise. It is down 0.5 percent in the first eight months of the year. While the Energy Ministry is sticking with its forecast of 1 percent production growth this year, analysts expect production to decline by up to 0.5 percent - its first decline in 10 years - followed by a rebound next year, as the already approved tax cuts take effect. Older fields - located mainly in western Siberia - are nearing maturity, and there are few huge new developments coming onstream to drive production in the next few years, say analysts. Costly exploration is badly needed in areas such as East Siberia and the Arctic Shelf. Rosneft - the country's largest oil producer - said it would delay the launch of its Vankor project and trimmed its production forecasts for the year, further blows to the Ministry's estimates. And according to data from Uralsib bank, Surgutneftegaz and Sibneft - a unit of Gazpromneft - both have seen falling output in recent months.
