13 Feb 2023 10:35

Russian oil cos had input on tax changes

MOSCOW. Feb 13 (Interfax) - The Russian government's planned changes to oil industry taxation were discussed with senior executives from oil companies at a meeting with Deputy Prime Minister Alexander Novak on Saturday that was also attended by Finance Minister Anton Siluanov, several sources familiar with the situation told Interfax.

An agreement was reached at this meeting to limit the discount of the Urals crude price against Brent in the calculation of the mineral extraction tax (MET) and excess profit tax (EPT), as well as the reverse excise on oil.

Following this discussion, the government submitted a bill to amend the second part of the Tax Code to the State Duma on Saturday evening.

For the purposes of taxation, the maximum discount in the price of Urals crude compared to Brent will be $34 per barrel in April, $31 per barrel for May, $28 for June and $25 for July.

"Such a transition period for the application of discounts to the Brent price will allow oil companies to adapt to the application of the new procedure for calculating taxes based on Urals quotes," the Finance Ministry told reporters.

The government also proposes to increase the discount used for calculating the damper for gasoline from $20 per barrel to $25, and to include a discount in the calculation of the damper for diesel fuel, which will be limited to $10 per barrel from April 1 to December 31, 2023.

At present, the Urals price calculated by the Argus agency is used for taxation purposes. After the imposition of the European Union embargo on purchases of Russian oil in December, the price of Urals crude has been about $35-$40 per barrel lower than that of Brent crude.

The government is thus trying to offset the effect that the drop in prices for Urals crude compared to Brent is having on budget revenues. However, oil companies expect that the discount on Urals crude will decrease as logistics chains are established and demand for oil grows in China.

The budget for 2023 assumes an Urals price of $70.10 per barrel, but the last time that the actual price of Russia's main crude blend was slightly above this threshold was from October 15 to November 14, when it was $71.10. At the end of January it was $49.48, while Brent was trading at $84; the discount increased compared to December, but it stopped growing by the end of the month.