While the introduction of the 60-66 tax regime was a positive development for the oil industry, encouraging companies to invest in refining and increase production, the amendments to the initial plans of increasing export duties on dark products to 100% in 2015 has completely the opposite effect, in our view. We believe that the market will perceive the news negatively, as the increase in export duty for fuel oil to 75% in 2014 alone would reduce the EBITDA of major oil companies by some USD 2.5bn. The introduction of a higher MET rate would also squeeze the sector’s EBITDA by 1-5%, according to our calculations. Finally, we highlight the risk of a corresponding decline in production in the medium to long term.
Overall we believe that the news is strictly negative for Russian oil companies and that any development along this path would worsen the economics of the sector.