05 June 2014, 00:00

Sechin slows down the maneuver

The Ministry of Finance and the Ministry of Energy are ready to carry out a tax maneuver in the oil industry in four years, but Rosneft President Igor Sechin is categorically against the changes. The tax system in the industry will still have to be changed, experts warn Margarita Papchenkova Oil refining will lose from the tax maneuver / A. Rudakov / Bloomberg

At yesterday's commission on the fuel and energy sector under the president, they discussed the main parameters of the tax maneuver in the oil industry - a sharp reduction in duties to a level close to Kazakhstan ($80), a reduction in excise taxes and an equally sharp increase in the mineral extraction tax. The day before, the Ministry of Energy and the Ministry of Finance agreed on the final version of the maneuver.

Vedomosti got acquainted with the parameters of the maneuver. It is planned that it will last four years, not two, as the Ministry of Finance initially proposed. But oil workers can expect strong changes in tax parameters as early as next year (see table). In 2015, the marginal coefficient in the oil export duty formula will decrease from 59 to 42% (the current budget for 2014-2016 next year provides for a reduction only to 57%). By 2018, the duty will drop to 30% - almost to the level of Kazakhstan (currently $80, i.e. 28%). This will reduce the budgetary risks from the creation of the Eurasian Economic Union (EEC): Russian companies will not be tempted to export oil not through Russia, but through Belarus, which can arbitrarily set very low duties.

Duties on light petroleum products will be reduced to 26% by 2018, including on gasoline. Currently there is a protective duty on gasoline - 90%. It was introduced to prevent shortages in the domestic market. The duty on fuel oil will increase to 100%, but not sharply, as provided for in the current budget, but by 2018.

The mineral extraction tax on oil in 2015 will increase to 775 rubles. for 1 ton (in 2014 - 493 rubles), and in four years it will reach 950 rubles. This is not as strong an increase as the Ministry of Finance initially expected. But the effect on the budget even in this scenario will be zero, there will be no shortfall in revenue, explains an official from the financial and economic block.

Companies' margins may decrease in the first year due to increased costs: if the oil duty is reduced to a level close to that in Kazakhstan, the cost of raw materials for refineries will increase by about $300 per 1 ton and many projects will become unprofitable, according to estimates from the EY Moscow Oil and Gas Center. But in subsequent years, companies will compensate for losses thanks to rising gasoline prices - according to the Ministry of Finance's plan, they may increase by 1-2 rubles.

The Ministry of Finance has prepared other support tools: low excise taxes for producers of petroleum products, negative excise taxes in petrochemicals and low prices for raw materials.

The extractive segment will benefit from such a maneuver, estimates Denis Borisov, director of the EY Moscow Oil and Gas Center: an average project without benefits at an oil price of $110 per barrel in the next two years will additionally receive approximately $0.7 per barrel, in 2017-2018. this value will exceed $1 per barrel. When oil prices rise, the positive effect on production increases, and when oil prices fall, it decreases (due to the peculiarities of the formula for calculating the mineral extraction tax and export duty).

The refining segment will lose from the maneuver, although it is more profitable for them than the current scenario of increasing duties on fuel oil to 100% from 2015: profitability will not decrease so much, Borisov continues. With this configuration of the maneuver, the margin of a conventional refinery in Central Russia in the next two years will decrease from $9 to $4 per barrel, and by 2018 - to zero, the expert estimates: “And only the completion of the modernization of the plants will allow the margin level to be restored.”

The impact on the budget is still difficult to assess, analysts say. In the next two years, at current oil prices, it will be neutral, and then everything depends on changes in commodity flows, explains Alexey Kondrashov, head of the EY international tax practice for the oil and gas sector: “We must take into account changes in the structure of the basket of petroleum products - for example, with an increase in the production of light budget revenues may decline."

However, even the agreed upon parameters of the maneuver did not suit Rosneft President Igor Sechin. “These proposals create a disincentive effect on production and contradict the objectives of the development of Siberia and the Far East,” he said. The maneuver will worsen the economics of new large projects, serious risks will arise for Rosneft when implementing the Eastern Petrochemical Company project, and the investment climate as a whole will decrease, he warned President Vladimir Putin.

The decision on the maneuver needs to be made quickly, Deputy Finance Minister Sergei Shatalov answered Sechin: changes are needed to maintain budget revenues, harmonize duties within the EEC, and also protect oil workers from a sharp increase in duties on fuel oil.

Putin agreed with Shatalov: the government must decide on the parameters of the maneuver in the near future. A tax maneuver is inevitable, it must be carried out in the near future, warns IFC Markets analyst Dmitry Lukashov: “Otherwise, the conditions for exporting Russian oil will be much more favorable in Belarus, and this will collapse the revenue of Russian duties to the budget.”