Russian Finance Ministry proposes new calculation of Urals price in taxes, wants to have right to vary discount - sources

MOSCOW. Nov 3 (Interfax) - The Ministry of Finance presented the industry with a bill proposing a new calculation of the price of Russian Urals oil for calculating the mineral extraction tax (MET) on oil, sources familiar with the text of the document told Interfax.

The price of Urals oil is proposed to be calculated as the arithmetic average price for deliveries to the northwestern and southern ports of Russia, increased by the cost of transportation by sea to the Rotterdam and Mediterranean ports (although due to EU sanctions, Russian oil is not currently supplied to Europe).

However, the source used for price formation in Russian ports is not indicated. Previously, it was assumed that prices would be calculated by SPIMEX, but then the Ministry of Finance proposed to postpone the use of the SPIMEX index for a year. As the Interfax sources suggest, quotes from the Argus pricing agency, which has traditionally been used to calculate oil taxes, will continue to be used, but not on a CIF basis (in European ports), but on a FOB basis (in Russian ports).

The cost of transport to Europe will be calculated in the manner established by the Federal Antimonopoly Service. If the order is not determined or the price is not published, then it will be $2 per barrel.

It is also prescribed that the Urals price discount to the Brent benchmark will be reduced in the calculation of oil taxes in 2024 from $20 to $15 per barrel, in 2025 to $10 per barrel, and in 2026 to $6 per barrel, as is assumed in the draft Russian budget for the next three years.

The Ministry of Finance also proposed that the government retain the right to increase the Urals/Brent discount in 2024-2026, but set it at no more than $20 per barrel.