Oil output could fall 7-10 mln tonnes if export duty changed in 2016 - Novak
SOCHI. Oct 5 (Interfax) - Oil production in Russia in 2016 could go down by 7 million-10 million tonnes if a decision is made on changing the oil export duty, Russian Energy Minister Alexander Novak said at the international investment forum in Sochi on Saturday.
According to the Energy Ministry's estimates, if the oil export duty is changed, this would lead to the withdrawal of 278 billion rubles from the upstream sector, although part of this sum would be compensated for through oil refining in Russia, he said.
"There have been alternative proposals: don't touch the mineral extraction tax but change the decisions within the framework of the tax maneuver concerning the oil duty. We have made accurate calculations to see what effects companies would have. [They indicate] the withdrawal of 278 billion rubles from the oil extraction sector, while the oil refining industry would have an additional 70 billion rubles," he said.
"In order to sustain oil production of 525 million tonnes we need to keep investment at 1 trillion-1.2 trillion rubles. Proposals on additional taxation will result in a 20% drop in oil production due to lower investment. This would also result in a drop in orders for contractors," he said.
Novak said the oil and gas industry might be able to withstand a higher tax burden for one year, but no more. "If it's a one-off, then they might withstand the drop, but if it's for three years, then this would have an adverse effect on the subsequent revival of service providers in Russia, and that could have more far-reaching implications," he said.
"Today it is easy to estimate how many wells will not be drilled: 2,000 out of 6,500 will not be drilled next year," Novak said.
The Finance Ministry in the middle of September proposed altering the mineral extraction tax (MET) for oil and the export duty, replacing the actual ruble/dollar exchange rate with a notional rate, in order to collect more of the profits the oil companies are earning from the ruble devaluation. In all, the Finance Ministry has made proposals that would raise just over 600 billion rubles in additional budget revenue.
Prime Minister Dmitry Medvedev at a meeting on September 28 decided against adjusting the MET, but was considering the option of "reducing the export duty on oil more slowly, and adjusting several other sources to obtain additional budget revenue"
The adjustment to the oil export duty would generate roughly 200 billion rubles in additional budget revenue, sources in the financial and economic wing of the government told Interfax.
The Finance Ministry said later that for now, decisions to change taxation would apply to 2016 only.