17 Mar 2020 16:16

MinFin proposing pegging concessions for Priobskoye to investment, production levels, payment in full when oil price is higher than baseline

MOSCOW. March 17 (Interfax) - The Finance Ministry has proposed that concessions for the Priobskoye deposit to be developed by Rosneft and Gazprom Neft be tied to the level of production and investment, with payments to be made in full only if the world oil price exceeds the baseline price set down in the budget, Deputy Finance Minister Alexei Sazanov told reporters.

The text of the draft bill proposed by the Finance Ministry still includes the possibility of offering concessions "only when oil prices exceed the baseline price." It was reported earlier that the base price is $42-$44 per barrel, the price on the basis of which the federal budget for 2020-2022 has been drawn up.

At the same time, the ministry has also proposed "pegging concessions to investment obligations for production levels, and thus to investment levels," he said.

"The final decision, however, lies with the government," Sazanov said.

If oil prices exceed the baseline, deductions will be issued in full [earlier proposals had called for a linear dependence of the deduction volume depending on oil prices], he said.

"In current conditions - at the price right now, this is a zero [deduction]. If the price exceeds the baseline, it will be around 46 billion rubles annually for Rosneft and 12-14 billion rubles for Gazprom Neft. Right now we're formulated it such that when the price exceeds the baseline, the deduction will be provided in full [regardless of how much the price exceeds the baseline]. If it's lower than the baseline, then there will be no deduction," Sazanov said.