Russian oil companies receive 103.5 bln rubles from budget for fuel damper in May vs 107.2 bln rubles in April - Finance Ministry

MOSCOW. June 5 (Interfax) - Payments from the Russian budget to oil companies for the fuel damper totaled 103.5 billion rubles in May 2023 against payments of 107.2 billion rubles in April, the Finance Ministry said in materials on forming and utilizing additional oil and gas revenues from the federal budget, as posted on ministry's website.

Consequently, payments to oil companies from the budget were again higher than before the damper was adjusted effective from the beginning of April 2023. Similar payments to oil companies totaled 96.7 billion rubles in March 2023.

Damper payments were 464 billion rubles in January-May 2023, down from 1.062 trillion rubles in the same period of last year.

The price differential used to calculate the gasoline damper rose from $20 to $25 per barrel on April 1, when a price differential was also introduced for calculating the diesel fuel damper, setting a limit of $10 per barrel.

The fact that the April damper adjustment did not result in big savings for the budget has prompted a discussion about a more radical change to the mechanism.

Finance Minister Anton Siluanov said at the end of April that the fuel damper in Russia was only bolstering refining margins at present; to remedy this, the Finance Ministry is proposing the damper be halved between July 2023 and July 2024. As a result of such an adjustment, payments to oil producers from the budget on the damper will decrease by 30 billion rubles a month. At the same time, it will be important for the Federal Antimonopoly Service to make sure that oil producers do not try to raise prices for petroleum products after the change to the damper.

But sources told Interfax that Russia would probably postpone changes to the so-called fuel damper that will slash government payments to oil companies by half from July until September. The bill to change the damper for oil products has not even been submitted to the State Duma yet. Talks on revising the parameters of the damper have dragged on and procedurally government agencies will not have enough time to agree on the bill and submit it to the Duma within a timeframe that would allow it to go into effect on July 1 as planned, the sources said.

Fuel damper payouts rose to 2.16 trillion rubles in 2022 from 674.5 billion rubles paid in 2021. Oil companies paid 356.6 billion rubles to the budget in 2020, due to market conditions. The budget paid 282.2 billion rubles to oil companies in 2019.

The fuel damper has been in effect in Russia since 2019 and is the difference between the export price of fuel and the indicative domestic price, specified by law. The state pays oil companies if this difference is positive, and exports become more profitable than deliveries to the domestic market, while oil companies pay the state if the difference is negative. However, the sanctions against Russia resulted in the export value of Russian petroleum products being miscalculated and Russian Urals oil starting to trade at a discount. The Finance Ministry is looking for an optimal fuel damper formula to increase savings for the budget while not drastically worsening the finances of oil refineries or the fuel market in general.