Prime Minister Dmitry Medvedev has requested that the ministries of Finance, Economy, Energy and Natural Resources develop a mechanism of tax breaks for Russian oil and gas companies using domestic equipment in exploration activities, according to Kommersant. The mechanism might imply deductions of exploration expenses from taxable income, starting from 2016. No further details are available yet. The ministries are due to prepare their positions by 14 July.
The news is potentially neutral to slightly positive for Russian oil and gas companies, as some of them are using domestically manufactured equipment in exploration, at least partially, so it would mean they could possibly receive some tax breaks. However, the key here is the amount, and we believe it is unlikely to be sizable. In our view, this development is in its very early stages, and given that no details are available, it is hard to assess how tax breaks might influence the industry. As a result, we deem the newsflow as neutral for now.