The Ministry of Finance has published modifications to the MET law on its website, according to which relief is to be provided to oil reservoirs with different reservoir effectiveness. With an effectiveness of less than 10m, the MET will be 20% of the standard rate, while if it is more than 10m, the relief is 40% of the standard rate. Relief can be provided for up to ten years.
It is difficult to quantify how much oil with these characteristics is produced, or is available to be produced. We treat the news as supportive for the entire sector and expect it to be approved by the government in the near future. This chimes with yesterday’s comment by Deputy Prime Minister Arkady Arkady Dvorkovich at our Russian Calling! Investment Forum that tax relief for Russian oils is an investment by the Russian government into future tax inflows, and that this support for oil producers needs to be provided now. This further supports our long-standing preference for the oil sector over gas.
Dmitry Loukashov, Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova, Mikhail Zarkhi
VTB Capital analyst
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