The new tax manoeuvre suggests the same changes to key industry taxes (MET, export duties and excise taxes), as we detailed in our Russian Oils: Tax manoeuvre – Snatch, Turkish and Tommy, of 30 June, except the MET rate in 2017 which is some 3% lower than it was previously stated by the Ministry of Finance and the Ministry of Energy. This minor change does not affect our calculations significantly.
With half a dozen different proposals on the new tax regime for the oil industry, the latest shape suggests the following: substitute the export duty burden by an almost equal rise in the MET, preserve refining margins by drastically reducing the custom duties for light products, and provide partial compensation by reducing excise taxes and delaying the unification of the custom duties on crude oil and dark products.
If the final decision is to support the latest tax manoeuvre, the relative winners are likely to be Novatek and Bashneft. However, keeping tax breaks at the same level in absolute terms (although we are yet to understand how it will be implemented) would mean that Bashneft might benefit less than we previously estimated. Nevertheless, the company still enjoys MET holidays at its Trebs and Titov greenfield. In the absence of the final decision on the tax amendments, it is difficult to provide more accurate calculations.