Russia’s Finance Ministry against support for NGL production

MOSCOW, Jan 25 (PRIME) -- Russia’s Finance Ministry is against the proposal of the Energy Ministry to change the Tax Code in order to make production of natural gas liquids (NGL) more profitable, as it will deprive the budget of 30 billion rubles of revenue per year, a representative of the ministry told PRIME on Wednesday.

On Tuesday, the Energy Ministry suggested changes to the mineral extraction tax (MET) aimed at creating of equal conditions between production of NGL from gas condensate and from associated petroleum gas. The ministry thinks the current taxation makes production of NGL from gas condensate loss-making.

“The Finance Ministry does not support these amendments and is not a part of their development. Regarding the non-profitability of NGL produced from gas condensate, it should be noted that the MET rate for gas condensate is only half of the MET rate for oil. But gas condensate costs more per tonne than oil,” the ministry’s representative said.

“Calculation of the economy of production has to be done on the basis of a basket of gas condensate plus NGL, as the mixture of them is produced from the subsoil. It is incorrect to calculate the cost of production of NGL and gas condensate separately. If we take the basket, production of NGL cannot be loss-making. Approval of the amendments will mean that the budget will lose 30 billion rubles of revenue per year.”

(59.2186 rubles – U.S. $1)

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