Russia sets new oil products export duty formula

Russia's government has approved a new formula for oil products export duties, confirming earlier reports that it would cut duty on light products and increase it on heavy oil, a document on its Website showed on Wednesday.
Although the new tariffs are in line with expectations, there had been some concern they could be set higher, with the Finance Ministry having suggested levels of up to 85-90 percent, which could have made refining unprofitable. The new formula is meant to stimulate output of higher grade products at Russia's refineries and is in line with the government plans to modernise the downstream sector.
But some analysts are sceptical that it will be sufficient, saying the oil and gas sector in Russia is overburdened with heavy taxes. "All those recalibrations would not help the main goal which is to increase oil output in the country. What would help is a cut in taxes, and we are not seeing this at the moment," Oleg Maximov from Troika Dialog brokerage said. Russia, which pumped a record 10.25 million barrels per day in November, draws unfavourable comparisons from oil companies and analysts with other major emerging market countries, such as Brazil, for its heavy tax burden on the oil industry.
"According to our calculations the decision for Russia's top oil companies, Rosneft and LUKOIL, is neutral," Maximov added. The light oil products duty is set at 67 percent of the crude oil export tax, starting from February 1 2011, and then 64 percent in 2012.
The levy for heavy oil products is set at 46.7 percent of crude export tax in 2011 and 52.9 percent in 2012, the government said, confirming figures reported by Reuters last month. Duties for the two types of oil products will then equalise at 60 percent of the crude tariff in 2013. Currently, the government levies an export duty for light oil products equal to 72 percent of crude oil export fees. Tax on fuel oil totals 39 percent of the crude duty. This mechanism will remain in place during January 2011.
Russia, the world's biggest oil producer, is set to raise its crude oil export duty in January to $317.5 per tonne, which will be a new two-year high, following an increase in oil prices. Russia is also preparing to introduce a new profit-based tax on oil from new fields starting in 2012, which will be subject to reduced export duties and mineral extraction taxes. The Finance Ministry had previously said that a new tax regime, which will move away from the practice of taxing different oil fields at varying levels, would likely be in place by 2012-2013.