The Presidential Commission on the Energy Industry might be held in October, according to Vedomosti, with the following items potentially on the agenda.
Amendments to the tax manoeuvre
Potential access of independent oil companies to offshore deposits
Liberalisation of LNG exports
Increasing the depth of refining in Russia
Sustaining crude production growth
Chinese exports of oil and gas
Independent gas producers’ access to exports via the Power of Siberia pipeline
Russian oil & gas taxation (tax on financial results, effect of the tax manoeuvre)
Possible delay of prohibition on selling Euro-4 fuel in Russia
All these items have been discussed lately. We suggest watching the newsflow and do not expect any immediate market reaction to the news. As we have noted before, the potential change in the industry taxation is negative for long-term planning.
In April it was announced that independent oil companies might get access to offshore oil deposits via consortiums. Consortiums are to be approved by the government and state companies are not required to participate. However, the companies must have experience of offshore development and sufficient technical and financial resources. The developments in this sphere are of a long-term nature and will not have any immediate effect on the stocks’ performance, in our view.
Also in April, the Russian broadsheets reported that the planned ban on selling Euro-4 fuel from 2016 might be pushed back because of a potential deficit of fuel. The potential delay in introducing a ban on selling Euro-4 fuel could have a significant negative effect on the economics of modernisation projects which have already been completed, we believe.
In June, the government supported the implementation of the tax on financial results (TFR) for pilot projects. The government is to make comments on the draft law for the second reading. The draft law might be passed by 1 December 2015. We are cautious on this potential tax reform, as it could lead to inefficiency in the oil industry and increase the costs of crude production as a result of fewer incentives for companies to decrease capital and operating expenditures.