Russia's President Vladimir Putin has signed into law a bill to phase out Russia's crude oil export duty by 2024, which is expected to increase export netbacks for oil producers.
Another oil-related law introduces the so-called 'negative excise duty', or excise refund for refiners, aimed at stimulating refinery upgrades and higher light oil product output.
At the beginning of June, Russia's Finance and Energy Ministries said that they had agreed with the domestic oil companies to begin phasing out crude oil export duties by 5 percentage points annually over the next six years, from 30 percent now to zero as of 2024. The producers are happy about this: the duty-along with a so-called mineral resource tax based on production size-will be replaced by a profit-based tax that, oil companies say, will stimulate investments in oil production expansion.
According to Platts, the phase-out of the oil export duty actually seeks to reduce state support for the local refining industry, which has-over the last ten years-exceeded industry spending on refinery modernization by five times. This success is largely due to the difference in oil export duties for crude oil and oil products.
Currently, oil product exports are taxed on the basis of a percentage of the crude oil export duty, which is tied to the price of oil. Changing that will save the Russian government some US$15.44 billion (1 trillion Russian rubles) a year from subsidies for refiners.
To cushion the impact on refineries from the rise in crude oil prices and the disappearance of the indirect subsidy, the Russian government will now be refunding refineries with the negative excise duty. Those excide refunds will be based on the amount of crude oil the refineries process, the light products they supply to the Russian market, and the distance to the markets.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More