The Ministry of Finance has suggested decreasing the crude export duty 2-3% per year and increasing the Mineral Extraction Tax starting from 2014, Interfax reports.
We do not have any details on how the MET might be amended and the impact on oil companies will depend on how the MET rate is changed. However, the profitability of the downstream segment is set to decrease and this could lead to an increase in domestic oil and products prices. The news is positive for the upstream, as the part of the tax burden is to be shifted to the downstream. In addition, MET rate payments are more flexible. Also, this reform will be partially financed by final customers, both domestic and those within the customs union (read Belarus). All in all, we see the proposal (if properly balanced) as a step in the right direction for oil sector regulation.
Dmitry Loukashov, Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova
VTB Capital analyst
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