Irina Malkova, Boris Grozovsky, Yelena Mazneva, Alyona Chechel
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Oil producers lobby for another cut in export duties
Russian oil producers, terrified by the dramatic price fall, are lobbying for another cut in oil export tax, with Deputy Prime Minister Igor Sechin taking their side.
The new crude export duty taking effect December 1 will be $192.1 per metric tonne (down from $287.3), $141.8 on light petroleum products and $76.4 on heavy products. The draft resolution was sent to the Government a week ago, but has not been approved yet.
The problem is that Igor Sechin has not endorsed it, sources in the two ministries negotiating the issue told the Vedomosti daily. One of them hinted what the problem was: oil companies are lobbying for further cuts and Mr Sechin is trying to help them.
A top manager at one of the companies confirmed their hope for further reductions. With the Urals price as low as $52 per barrel and export duties as high as $192, their net loss from exports will be $20 per tonne. To export oil even at zero profit, they would need a customs duty rate of $160-$170, he said.
The source emphasized that the decision would be up to Prime Minister Vladimir Putin, but his spokesman Dmitry Peskov was unavailable for comment. Officials in the Energy, Economics, and Finance Ministries declined to comment.
Oil has plummeted by nearly 60% since the end of September, when it stood at over $100 per barrel of the Urals brand, to $46.9 on Wednesday, November 26. Government officials have made it easier on oil producers by raising the threshold of the "Kudrin scissors" taxation scheme.
Furthermore, oil export duties were earlier revised every two months, but the new rate of $192.1 was calculated under new rules. Customs duties are now changed monthly, based on a price monitoring period between the 15th of each month and the 14th of the next. The new scheme isn't officially in force yet - it has successfully passed through both houses of parliament, but is still subject to presidential approval.
However, the sharp drop in oil prices has forced government officials to break their own rules twice. The last time they changed the rates, they had to do it even earlier than planned - on November 1 instead of December 1.
The rate of $192.1 per tonne was calculated assuming that the average Urals price was $59.4. A Finance Ministry official said it was the highest possible level, because under the law on customs tariffs the export rate cannot be above the highest one calculated by price monitoring, but it can be lower than that.
Officials in LUKoil, Rosneft, TNK-BP, and Gazprom Neft declined to discuss whether or not their companies had asked to lower the export rates in December. Only smaller oil producers in Tatarstan openly admit their need for lower export duties. They published an open letter to the President, Prime Minister, and other top officials in Rossiyskaya Gazeta asking to cut the highest customs rate by half on December 1 and not raise it again until oil reaches at least $50 per barrel.
Experts, however, estimate that the recent complaints of exports at a loss, with the crude customs rate of $192, are somewhat exaggerated. Oil producers should be gaining a $3 per barrel profit, selling crude at the current price, minus taxes and transportation, asserted Lev Snykov from VTB Capital. His Unicredit Aton colleague estimated $2.6 per barrel. "That should be good enough for now," he said.
"With the export duty of $192.1, we can even get a small profit," said a manager at one of the top five oil producers. "But it is also true that we incurred losses in October."
LUKoil's losses totaled $300 million in one month, a company source said. Gazprom Neft estimated its export losses at $100-$130 per tonne, said spokesperson Natalya Vyalkina.
On the other hand, the federal budget shortfall from lowering the export duty at least to $170 will be $530 million, said Dmitry Belousov, chief expert at the Centre for Macroeconomic Analysis & Short-term Forecasting think tank.
Oil export duties accounted for 18.4% of Russia's federal budget revenues between January and September 2008.