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MET relief extended for East Siberia and offshore projects


According to Interfax, the government has decided to extend MET relief for greenfields in Yakutsk, the Irkutsk and Krasnoyarsk regions, the Nenets Autonomous District, Yamal and for some offshore projects. The timeframe for MET relief on these projects has been extended from 1 January 2017 to 1 January 2023. In order to be eligible for relief, projects must be no more than 5% depleted and have at least 5-10mnt of reserves.

The government has also decided to decrease the export duty for greenfields in East Siberia, as well as for projects in other regions which have more than 10mnt of reserves and are less than 5% depleted. The discounted export duty rate is to be set at 45% when oil prices are above USD 50/bbl (which assumes a drop of roughly half). The target IRR of the projects is set at of 16.3%. The government is also to introduce a specific law defining crude export duty. Additionally, Minister of Energy Alexander Novak said that the ministry would make its suggestions for tax reliefs for offshore projects by 1 October. 

The government’s intention to grant additional relief is supportive for the entire Russian oil sector. We are reiterating our assumption that all greenfields being developed in Russia are to be provided with tax holidays (this has been the case for all greenfields launched over the last ten years), as the government is to support an increase in oil production. This is in line with our view that greenfield developments in Russia create value for Russian oil companies. We believe the news is positive for the sector in the longer term.
Dmitry Loukashov, Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova, Mikhail Zarkhi
VTB Capital analyst

Russia, oil, dollar

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