The new tax regime law for the oil industry was passed at the first reading in the State Duma, according to Interfax. The following parameters have been approved.
Additionally, the gas export to Turkey via Blue Stream is subject to a 30% excise tax, according to the law.
Our View: The parameters of the proposed new tax law are close to the draft law which was proposed by the Ministry of Finance in August. The overall impetus is similar to what has been widely discussed since March (a decrease in export duties and excise, coupled with an increase in MET).
Based on the above numbers, we estimate that the EBITDA of the top seven oil majors (accounting for affiliates and subsidiaries) will increase USD 8.8bn (+11%), USD 6.9bn (+8%) and USD 8.1bn (+12%) in 2015-17, compared with our current forecasts. Based on our company models (all macro and operating assumptions remain intact), we calculate that the proposed changes to oil sector taxation (excluding income tax) amount to USD 2.0bn incremental additions to the budget in 2016, while tax collections to remain flat in 2015 and 2017. This surprising contradiction – the simultaneous increase in sector profitability and growth in tax collection – can be explained by the fact that these tax changes are to be sponsored by third parties. That is, in our view, first and foremost Belarus, independent refineries, other buyers of crude oil condensate and, of course, the consumers of gas oil in Russia, as well as independent bunkering and jet fuellers, etc.
We note that the government is yet to announce the final tax rates or clear mechanics for implementing tax holidays under the suggested new tax regime. We understand the idea of keeping current tax breaks for the oil companies in the absolute amount, but we are still unclear on how it is to be implemented (on a company-by-company, region-by-region or field-by-field basis).
We calculate that Gazprom, due to the Blue stream excise, might be obliged to pay as much as USD 1.6bn of additional taxes on gas exports to Turkey from 2015, or some 3-4% of forecasted EBITDA in that year.