According to Interfax, the Ministry of Energy has proposed new regulations concerning the export duty benefits for Russian oil companies. Under the suggested scheme, oil companies would need to submit detailed plans of field exploration and development, audited statements of actual expenses and independent analysis of project capex to the regulator. Once a benefit has been approved, the discounted export duty rate lasts until the project reaches 16% IRR.
The Ministry of Finance has criticised the suggestion as being too individualistic and difficult to implement. According to the Ministry, there might not be enough resources to consider all applications and monitor those companies to which benefits have been granted. The MinFin is insisting on introducing a universal scheme instead.
We consider the Ministry of Energy’s intention to support the upstream projects, securing profitability at 16%, to be positive for sentiment. However, we see the suggested scheme as technically difficult and unlikely to be implemented. At this stage, we do not expect any market reaction to the news.