Russian State Duma Budget Committee approves change in calculation of Urals oil price, measures to support oil refining
MOSCOW. Nov 21 (Interfax) - The State Duma's Budget Committee has approved amendments to the Tax Code proposed by the Finance Ministry involving changes to the methodology for calculating the Urals crude oil price used for oil tax purposes, as well as adjustments to the fuel damper mechanism and the reverse excise tax on crude oil, ethane and liquefied petroleum gas (LPG).
According to ministry's initiative, the new methodology proposes including the price of ESPO (Eastern Siberia-Pacific Ocean) crude exported from the Far Eastern port of Kozmino in the calculation of the Urals tax quotation. Currently, the price of this premium grade of Russian oil is not used for tax calculations. Under the proposed scheme, the Urals quotation will be the sum of the daily average price for the previous tax period at the ports of Primorsk and Novorossiysk multiplied by a coefficient of 0.78 and the average price of ESPO crude in Kozmino multiplied by a coefficient of 0.22. The final price will be calculated as the average of the three FOB quotations from Primorsk, Novorossiysk, and Kozmino, with the weighted average of the first two contributing 78% and the third 22%.
The proposed package also includes modifications to the fuel damper mechanism used to stabilize fuel prices; specifically, zeroing the damper for each type of motor fuel. Currently, damper payments are reduced to zero if the price of at least one type of fuel (gasoline or diesel) exceeds the indicative level on the exchange.
Due to sanctions affecting Russia's oil refining and petrochemical sectors, companies have faced delays in commissioning facilities under investment agreements with the Energy Ministry, which entitle them to reverse excise tax benefits. Missing deadlines or targets under these agreements risked their termination and the forfeiture of the reverse excise tax, as well as the investment premium tied to the reverse excise tax for certain projects (KINV).
In response to companies' proposals, the Finance Ministry has suggested legislative amendments permitting changes to investment agreements and the continuation of payments.
For agreements requiring an increase in class 5 gasoline production to 10% of refining output, the deadline for amending agreements is extended by one year, to July 1, 2025. Such agreements may be terminated if class 5 gasoline output does not reach 10% during 2029-2031 instead of 2026-2028 as currently stipulated. The reverse excise tax will continue to be paid until 2028. For companies obligated to increasing AI-95 production, excise rates will be 66% in 2026, 33% in 2027 and 100% in 2028 if they fail to meet the target.
The ministry has also proposed changes to the calculation of the investment premium tied to the reverse excise tax under oil refinery modernization agreements (KINV). Under current legislation, if a company does not invest 50 billion rubles between 2020 and the end of 2026, it is canceled unless initial fixed asset costs exceed 130 billion rubles by the end of 2026.
According to the ministry's proposals, if investor expenses from January 2019 fall below the minimum of the two values - 50 billion or the total KINV accrued in all preceding tax periods - the KINV will not be granted during 2025-2028. However, it can be claimed starting in 2031 for the same number of periods during which it was withheld. Companies investing 100 billion rubles and which commission capacities by the end of 2028 may continue receiving the KINV through 2033.
The Finance Ministry also proposes extending for one year the possibility to amend agreements on upgrading refineries that process ethane and liquefied petroleum gases (LPG). Amending may currently be done until January 1, 2026, and the need to invest 65 billion rubles is also extended for one year until the end of 2028, which determines the receipt of a reverse excise tax.