A Review of the Nigerian Energy Industry

‘Russia has no plans for Gazprom tax hike’

Gazprom26 October 2013, Moscow – Russia has no plans to increase mineral extraction tax (MET) on state-controlled Gazprom , a government source said on Friday after a newspaper said the tax hike was under consideration to raise $4 billion to replenish state coffers.

Kommersant, citing unnamed sources, said the MET increase was being studied and also said the government was considering an export duty for gas shipped to Turkey via the underwater Blue Stream pipeline. Last year, Gazprom shipped 14.7 billion cubic metres of gas via Blue Stream duty-free.

Russia has introduced some tax relief measures for oil and gas extraction, including to develop offshore Arctic deposits and hard-to-recover or “tight” oil reserves, but conventional production faces higher taxes.

The newspaper quoted a government source saying the proposal to increase taxes on Gazprom came from Igor Sechin, head of state-run oil producer Rosneft.

The government source confirmed to Reuters that Sechin was seeking higher taxes for Gazprom, but added that the initiative was likely to encounter resistance following an earlier round of tax hikes.

“Such work is not under way, no changes (in taxes) are planned,” the source said.

Rosneft declined to comment.

Alfa bank said in a note: “We view the news as negative for Gazprom stock, and for the Russian oil sector in general, as it once again highlights the high volatility of the fiscal regime applied to the oil and gas companies in Russia.”

Gazprom shares fell 1.3 percent by 0833 GMT, underperforming a 0.5 percent decline in the broader market.

The government has already agreed to raise MET from Jan. 1, 2014, but a government source cited by Kommersant said it was discussing another increase of around 38 percent, or 126 billion roubles ($4 billion).

Russia’s natural gas industry is traditionally taxed on a lower basis than oil.

The Russian budget’s dependence on oil and gas is set to remain high as the country will be forced to borrow more in response to an unexpectedly severe economic slowdown.

Under a three-year budget plan, the Finance Ministry will raise borrowing to compensate for lower-than-expected tax revenue and to fund the rising cost of spending promises made by President Vladimir Putin.

Next year, the federal budget deficit is projected at 0.5 percent of gross domestic product, up from a 0.2 percent forecast in the previous budget plan.

– Reuters

In this article

Join the Conversation