The Ministry of Finance will reduce the damper until 2027

“Kommersant” got acquainted with the amendments prepared by the Ministry of Finance on adjusting the parameters of taxes in the oil industry. The project involves a two-fold reduction in damper subsidies for three years – until the end of 2026, and not for a year, as originally planned. In addition, extra-viscous oil fields that have lost benefits from 2021 will be able to switch to the AIT regime, which Tatneft and LUKOIL have been trying to achieve for two years. The government will also shift the timing of tax breaks for depleted fields and reduce the discount between Urals and Brent for tax purposes from September to $20 per barrel.

According to Kommersant’s information, the government intends to introduce amendments to the draft on the main directions of tax policy (ONNP), which was adopted in the first reading on June 20, to adjust the parameters of taxation of the oil industry for the second reading. The project is in the final stage of approval (see Kommersant of June 29). The Ministry of Finance did not respond to Kommersant’s request.

The government was supposed to submit the appropriate amendments to the State Duma by July 4, but it did not have time to fully approve them. It is important for the Ministry of Finance that the law be signed by the president in July, otherwise its provisions will not be able to come into effect from September. The Ministry of Finance hoped that the project would be submitted to the State Duma in June, but then the deadline was postponed. Most likely, the commission on legislative activities of the government on July 10 will agree on the amendments to the draft on ONNIP, and then they will be promptly adopted by the State Duma.

According to the oil part of this bill, oil companies will receive halved damper payments for gasoline and diesel fuel from September until the end of 2026. Initially, the measure was designed for only a year. According to Reuters calculations, damper payments for June will amount to about 120 billion rubles. Thus, while maintaining this level of payments in September, the budget can save about 60 billion rubles. per month.

Oil companies receive budgetary damper payments for fuel supplies to the domestic market, so that in the face of a high export alternative, they can keep prices inside the Russian Federation. The project assumes the indexation of indicative prices for gasoline and diesel fuel in the damper formula by 3% in 2026, as well as an increase in excise taxes on gasoline and diesel fuel by 4% annually until 2026.

As expected, the government has postponed from next year to 2027 a tax deduction of 20% of the MET rate for depleted deposits, which are included in the perimeter of the third group of additional income tax. Such a delay will allow the budget to save about 100 billion rubles. in year. Nevertheless, instead of the promised benefits for depleted fields, it is envisaged that extra-viscous oil fields will be transferred to the third group of AIT.

Recall that from 2021, privileges for the production of extra-viscous oil were canceled. LUKOIL and Tatneft suffered more than other companies. If Tatneft then managed to get a three-year MET tax deduction for its largest Romashkinskoye field, then LUKOIL did not receive any compensation. Since that moment, LUKOIL has been asking Russian President Vladimir Putin and the government to provide tax incentives for extra-viscous oil fields, primarily Yaregskoye in Komi, but so far this has not been successful. In 2021, the then head of LUKOIL, Vagit Alekperov, stated that as a result of the abolition of benefits, the tax burden on viscous and extra-viscous oil increased by 25 times (see Kommersant dated March 11, 2021).

Now areas where at least 70% of production is accounted for by oil with a viscosity of at least 10 thousand millipascal-seconds will be able to enter the third group of AIT. As a result, such fields will be able to pay tax on the financial result, that is, on the proceeds from the sale of oil minus expenses. At the same time, for extra-viscous oil, the maximum amount of deductible expenses when calculating AIT was increased by 1 thousand rubles. per ton (currently for other deposits it is 7.14 thousand rubles), which will reduce the tax burden.

In 2021, about 6 million tons of oil with a viscosity of more than 10 thousand millipascal-seconds were produced in reservoir conditions, Sergey Yezhov from Vygon Consulting noted. Increase in marginal expenses for AIT by 1 thousand rubles. per ton gives oilmen an additional 400 rubles. per ton of tax savings, the expert calculated. In general, the transfer to AIT will increase the cash flow in the production of extra-viscous oil by 3.3 thousand rubles. per ton.

In his opinion, if the benefits had not been provided, oil companies would have continued to reduce the production of such oil, so it is incorrect to consider this a budget loss.

In addition, the Ministry of Finance has provided for the extension until the end of 2026 of the increased MET on oil (due to the Knv coefficient of 1.3, which was originally introduced only for 2023–2025). Last year, the Ministry of Finance estimated the growth in income from the introduction of this coefficient at more than 200 billion rubles. in year.

According to the new amendments, the authorities will improve the methodology for determining the price of oil used to calculate taxes. Thus, since April, the Brent quotation (determined by the Argus pricing agency) minus a fixed discount has been one of the methods for calculating the oil production tax and export duty on it. It is applied if the Urals quote (also calculated using the Argus method) is lower than the discounted Brent quote. At the same time, according to the Ministry of Finance, in July the Urals discount to Brent amounted to $19.4 per barrel against $22.2 per barrel in May. And from September, the MET, AIT and export duty, according to the draft amendments, will be calculated based on the maximum discount of Urals to Brent at $20 per barrel.

Also, from 2024, a new price indicator from the SPIMEX exchange will be introduced to calculate taxes based on average export prices for oil for deliveries to the ports of the North-West and South of the Russian Federation: it will be measured in barrels and increase by $4. Accordingly, from now on, the price for calculating taxes will be determined based on what is higher – the price of SPIMEX, Brent minus the discount, or the Urals quotation itself.

Dmitry Kozlov