Siberian oil duty deal struck
The new rate on oil exports is the result of a compromise after hard bargaining between the oil industry and finance officials.
A new export duty for East Siberian oil fields will replace a zero rate from July 1, Finance Minister Alexei Kudrin and First Deputy Prime Minister Igor Sechin announced at the St. Petersburg International Economic Forum.
Experts called it a compromise that ended a long standoff between the powerful oil lobby, which was advocating zero duties for Eastern Siberia, and finance officials striving to plug budget gaps.
The decision was coordinated with the Federal Customs Service, the Energy Ministry and the Economic Development Ministry.
“As the export duties on oil are subject to change on a monthly basis, there shouldn’t be any final document signed by the government,” said Vadim Mitroshin, senior oil and gas analyst at Otkritie.
Despite this, Igor Sechin has already stated that he expects Rosneft’s Vankor field to have met the 15 per cent requirement by the end of 2010. It is also planned that other major oil fields will catch up by 2013.
Svetlana Grizan, an oil and gas analyst at VTB, said duties would not affect capital expenditures by Rosneft on Vankor.
“In Vankor, most of the investment has already been made,” said Grizan. “By March 2010, Rosneft had invested about $7 billion there.”
Vankor, with estimated reserves of half a billion tonnes, is the biggest of 22 oilfields that will supply China and the Far East through the East Siberia-Pacific Ocean pipeline system.
Rosneft CEO Sergei Bogdanchikov said on the sidelines of the St. Petersburg forum that his company’s 2011 production target of 17 million tonnes would remain intact, despite the change in taxation regime.
“The approved export duty scheme is in full accordance with the proposal of [First
Deputy Finance Minister] Sergei Shatalov, who has spoken a lot on this subject over the last couple of months,” said Vadim Mitroshin, of Otkritie.
“The cut-off price will be set at $50 per barrel and the marginal tax rate will be 45 per cent, leading to approximately 67 per cent savings (versus 100 per cent currently),” Renaissance Capital said in a report on the issue.
It was also agreed that once the returns of the fields exceed 15 per cent, the full export duty on East Siberian oil should be levied. Sechin has said it should bring the federal budget more than 353 billion roubles ($11 billion) within three years.
“The preferential [export duty] rate of 0.45 for 2011 and 2012 will be more than satisfactory for Rosneft – it’s something they insisted on, and its one of the main things investors are watching,” said Grizan, adding that zero export duty gave Rosneft an 20 per cent increase in EBITDA.
“It’s quite a substantial amount – we are talking about $3 billion to $4 billion,” she said. “And in the first quarter of 2010, Rosneft saved… about $600 million.”