TOPIC IN FOCUS: Oil majors lobby for lower gasoline export duty
Moscow, Feb 11, 2013 (Menafn - RosBusinessConsulting via COMTEX) --Russian oil majors, except state-owned Rosneft, have proposed the government commission on the fuel and energy complex, which is to hold a meeting today, to lower the export duty on gasoline, arguing that otherwise the country would face a fuel deficit in five to seven years. However, the Finance Ministry opposes such an initiative, claiming that not only the budget would lose revenue, but also the price of gasoline would go up. In a letter addressed to Prime Minister Dmitry Medvedev, which RBC Daily was able to peruse, a number of heads of oil companies claim that the protective duty on gasoline exports set at 90% of the oil export rate is counter-productive and call on the government to reinstate the 66% duty. According to industry players, the current rate has been having an adverse effect on the production of crude products that are not intended for the domestic market. Russian gasoline exports are dominated by straight-run petrol and Euro-2 class gasoline, which is banned in Russia effective January 1, 2013. In addition, in line with a four-party agreement to construct and upgrade refineries, the industry has increased output of high-octane gasoline, which rose 8% in 2011. The same year gasoline exports were slapped with a protective duty to fight deficits on the domestic market.The letter warns the government against sticking with the 60/66/90 taxation system, whereby the export duty on light and heavy petroleum products is set at 66% of the oil export duty, which is equal to 60%, while the gasoline export duty is set at 90%. In the long run, this regime could force companies to switch to other segments instead of investing in gasoline production, the oil majors noted. "This could lead to a supply-demand imbalance on the gasoline market and shortages within five to seven years," the letter claims.This document was signed by heads of six oil companies: Lukoil's Vagit Alekperov, Vladimir Bogdanov from Surgutneftegas, Gazprom Neft's CEO Alexander Dyukov, Bashenft's Alexander Korsik, Tatneft's CEO Shafagat Takhautdinov, and TNK-BP's Executive Director German Khan. Rosneft's CEO Igor Sechin was the only head of a major oil company who did not sign the letter, although Rosneft's public relations department claimed that he would outline his position during today's meeting on the oil and gas industry.Rosneft is certain to benefit from a lower gasoline export duty, since exports of straight-run petrol totaled 3.6m tons in 2011 or 14% of its exports, Dmitry Alexandrov, head of the research department at Univer Capital investment company, said. However, Sechin does not expect the government to give in to the demand for a lower export duty and decided not to cosign the letter, the expert went on to say, adding that Rosneft could be focused on lobbying for tax breaks in other segments.The letter is unlikely to set the stage for lower export duties. A source in the Finance Ministry told RBC Daily that the ministry does not support this initiative. In fact, should the 90% gasoline export duty be repealed, the budget could lose over USD 1bn in revenue, while the price of gasoline would go up by 2.5 (approx. USD 0.08) on top of a hike of 13%-14% or by up to RUB 4 (approx. USD 0.13) under a forecast by the Energy Ministry.The Energy Ministry does not intend to support any cuts for the gasoline export duty either and proposes to focus on fine-tuning duties in the long-term, one source told RBC Daily without elaborating on the proposal. "Companies should be provided with adequate economic incentives in the years to come so that they can invest in gasoline production capacities instead of diesel fuel, which is currently abundant on the market," Deputy Energy Minister Pavel Fyodorov told RBC Daily.By raising the gasoline export duty from 66% to 90% in May 2011 the government sought to reduce exports amid severe shortages on the domestic market. However, this move did not prompt oil companies to reduce exports. Deliveries on the domestic market totaled 32.3m tons in 2011, flat compared to the previous year, while exports rose from 3.2m tons in 2010 to 4.1m tons in 2011. Canceling the export duty would be a controversial move for the government, Pavel Strokov, managing director of the St. Petersburg International Mercantile Exchange, pointed out. For instance, the recent ban on Euro-2 class gasoline could lead to shortages on the domestic market, and around 2m tons of gasoline are expected to be imported from Belarus. "Operating without protective duties is possible only if supply and demand are well-balanced on the market," Strokov said.The government is expected to talk oil companies into expanding gasoline output and producing higher-class fuels by promising to reduce export duties within the next three or four year, Gazprombank analyst Alexander Nazarov noted.
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