Report: Russia oil sector tax plan expected back on track from 2017

MOSCOW, Jul 20 (PRIME) -- The Russian oil sector next year should return to a previously agreed tax plan, with the oil export duty going down and the mineral extraction tax (MET) rising further, Russian Energy Minister Alexander Novak told Reuters in an interview published Wednesday.

Facing low oil prices and western sanctions that left holes in the state budget, the Russian government opted this year to postpone a plan to cut the oil export duty.

The postponement was designed to increase budget revenues, but it distorted incentives for producers, stimulating exports of oil and high-quality oil products where the margin is higher, while making exports of heavy products almost prohibitive.

In the interview, Novak said the planned changes would get back on track next year.

He said the coefficient used to calculate the oil export duty, which was kept at 42% this year, will come down to 30% from January 1, 2017.

He also said that the mineral extraction tax, which did rise this year in line with the government's plan to 857 rubles per tonne, would go up again next year, to 919 rubles per tonne.

TAX SCRUTINY

Changes to the tax system have been under close scrutiny by the oil industry and markets because, if the tax becomes too burdensome, it can push down investments and hence production.

Sources had told Reuters in April that the finance ministry was considering an additional increase in the MET in 2017, which may yield up to 200 billion rubles, to compensate for the lower oil export duty.

Novak's comments indicated this proposal would not be implemented next year.

The xport duty for fuel oil is calculated under a separate system. That duty is set at 82% of the oil export duty for 2016, with a plan for it to rise to 100% in 2017. Novak said at the moment, there were no plans to change that planned increase for next year.

The finance ministry plans to submit a revised three-year budget to the government later this year.

Novak said the finance and energy ministries had overcome disagreements over a proposed overhaul of the tax system for the oil sector, which would rely less on traditional levies on production and instead track firms' financial results.

Russian oil production, among the world's highest, was seen at 542-544 million tonnes this year (10.85–10.90 million barrels per day) and roughly the same in 2017, with investment in oil upstream up by 15% to around 1.3 trillion rubles this year, Novak said.

BELARUS GAS ROW

Novak said efforts were still underway to resolve a gas row with Russia's neighbor Belarus, but that Moscow would stick to its stance that Minsk needs to settle its debts.

He said Belarus, a major transit route for Russian gas to Europe, owes Gazprom U.S. $270 million for gas supplies.

Minsk buys Russian natural gas at a price of $132 per 1,000 cubic meters but has said that a fair price would be $73.

In a move Russian officials have linked to the gas dispute, since the start of this month, Russian oil pipeline monopoly Transneft has been pumping about 40% less oil to Belarus than in the second quarter of this year.

"There were talks between the prime ministers (including on gas), orders were given to continue talks in the coming days and look for compromise. Our position is that the debts should be paid off," Novak said in the interview.

(62.9891 rubles – U.S. $1)

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