Russia's crude export duty is likely to hit all-time record highs once
again, reaching some $265-$270/mt (around $36.3-37/barrel) from December 1, up
from $250.30/mt effective in October and November, following an ongoing upward
trend in international oil prices, a senior finance ministry official said
Wednesday.
"The crude export duty is likely to raise to a new high of $265-270/mt,
if the 11 remaining trading sessions in October see the average price of Urals
crude at $75-76/barrel," said Alexander Sakovich, a finance ministry official
in charge of monitoring prices and setting the duty.
"If the remaining trading days see the average price at some $80/barrel,
the export duty will exceed $270/mt," he said. On Tuesday, the average price
of Urals amounted to $81.5/barrel, up from $79/barrel on Monday, according to
Russia's Finance Ministry.
Russia reviews crude export duties every two months taking into account
the average price of Urals, the country's main export grade, in the previous
months.
The average price of Urals was $73.78/b in September, with the first 12
trading days in October seeing the price at $75.85/b, according to the Finance
Ministry.
The 11 remaining trading days in October would have to see the average
price of Urals crude at below $63/b to keep the new export duty level from the
start of December at the October-November level of 250.3/mt, which is unlikely
to happen, Sakovich said.
The latest raise in Russia's crude export duty to a high of $250.3/mt
($34.29/barrel) effective for two months took place from October 1, up from
$223.90/mt ($30.67/b) in August and September.
The previous record for Russia's crude export was in the same period of
2006, when it reached $236.60/mt ($32.41/b) in October and November 2006.
In December 2006, the duty plummeted by 24% to $180.70/mt, following a
decline in Urals prices in September and October 2006.
The duty was gradually reduced to $179.70/mt in February and March and to
$156.40/mt in April and May. This downward trend ended in June, when it was
hiked by 28.3% to $200.60/mt.
Despite high crude export duties, the oil business remains lucrative for
oil companies, Sakovich said, dismissing crude companies' allegations that
high taxes imply too heavy burden on the industry, restricting its
development.
"The average combined net income of Russia's oil industry amounted to
some $45 billion a year in the previous two years," he said.
The new increase in export duties would not affect seriously crude
producers if the upward trend in international prices of Urals crude remains
in the future, analysts said.
"In the short-term perspective, companies would still earn significant
money despite record export taxes providing that the price would continue to
rise,?" said Konstantin Batunin, an analyst with Moscow-based Alfa-Bank. In
this case, a duty is based on lower prices in the previous months allowing
companies to gain profits from higher prices.
But if the prices are fixed aborting the upward trend, companies'
financial results would go down significantly, he said.
In any case, financial results of crude producers in Russia in third and
forth quarters are most likely to be poorer than those in the second quarter,
Batunin said. In the second quarter, relatively low export duties provided a
more favorable situation for Russia's crude producers.
--Nadia Rodova, nadia_rodova@platts.com