The government has proposed approving a 3.5 tax rebate rate for spending on Arctic shelf exploration projects, Deputy Prime Minister Alexander Khloponin told RIA Novosti.

"We analyzed several approaches, including special rates that were proposed for geological exploration projects and profit rate rebates that could reduce profit taxes by 1.5 to 3.5 times. Moreover, we specifically considered a 1.5 rebate rate for seismic exploration and geophysics projects, which are not very expensive, and proposed a 3.5 rebate rate for drilling, especially deep-water drilling in the Arctic," Khloponin said.

He went on to say that the government was only considering tax rebate rates as an exploration benefit. "During the recent meeting [of the government commission], which Arkady Dvorkovich and I co-chaired, we have narrowed our work to profit tax rebates, which we are now analyzing," he added.

Khloponin also commented on Rosneft's initiative that incentive mineral tax rates for offshore Arctic oilfields be reduced from 5 percent to 1 percent.

"If the proposed reduction of the mineral tax rate is approved, where will the government find the money for Arctic exploration projects and a large number of onshore exploration projects? Should we cut back on our exploration activities?" he asked.  "On the other hand, we need to make the necessary calculations, which the ministries of finance, natural resources, energy and economic development make for our companies."

Natural Resources Minister Sergei Donskoi told the media last week that the Ministry of Natural Resources and Environment and the Finance Ministry had coordinated the figure for profit tax rebates for all exploration projects. He said the Finance Ministry had rejected Gazprom Neft's proposal that a markup factor of 3.5 be applied to offshore exploration projects.