S&P: oil companies of the Russian Federation can reduce the volume of production due to the new regulatory regime

S&P: oil companies of the Russian Federation can reduce the volume of production due to the new regulatory regime


MOSCOW, February 16. A significant increase in taxes for the oil industry by the government of the Russian Federation may entail a reduction in capital expenditure of oil companies that will lead to a reduction of volumes of extraction of raw materials. This forecast is contained in research report of international rating Agency Standard & Poor’s (s&P).

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“Significant tax increases will mean that oil companies will have to drastically reduce capital expenditure, but this measure will cause not only a decrease in production volume, but also experience problems in related industries, in particular in the oilfield services sector and metallurgy”, – stated in the message.

Analysts draw attention to the fact that after the lowering of expectations for global oil prices, the Agency has not changed the ratings of such major Russian oil companies as JSC “LUKOIL”, JSC “Gazprom”, OJSC “NK “Rosneft” and the PJSC “Gazprom oil” as if existing in the RF regime regulation of the oil industry oil companies pay to the budget is substantially less taxes.

That is why, according to S&P, the position of Russian oil companies at low oil prices significantly better than comparable Western companies.

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Thus, according to experts S&P, “potential changes to the regulatory regime of the oil industry is subjected to a Russian oil company at a higher risk than low oil prices”.

Changing the principles of taxation in the Russian oil sector have long been discussed. In December 2015, energy Minister Alexander Novak told journalists that the Ministry looks forward to working with the Ministry of Finance to prepare for the spring session of the state Duma the draft law on added tax income (JPM), which will replace the current rent tax on mineral extraction (met). But so far no decisions have been made.

At the same time, representatives of S&P believe that the government can take temporary tax measures to budget support in the short term, while the basic principles of the tax system will remain unchanged. However, analysts do not exclude that the government may revise incentives for met previously granted to many fields and projects.

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