HomeMediaLatest NewsWhen will the oil and gas revenues of the Russian budget be recovered

When will the oil and gas revenues of the Russian budget be recovered

19 July 2023

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy studies of the Institute for Energy and Finance, gave a comment to the Oil and Capital Internet portal about the prospects for restoring oil and gas revenues of the Russian budget.

What should Russia expect from oil and gas revenues by the end of the year? Will there be a serious decline or not?

— We will be close to receiving comparable incomes with previous years, if we do not take into account the anomalous 2022. The peak of problems for the Russian oil and gas industry was this winter. Steps have been taken in the country to maximize the monetization of oil and gas revenues in favor of the state. The mechanism for calculating the tax component has been adjusted. There was even a decision of the Ministry of Finance not to calculate the marginal discounts of Urals from the Brent variety. Now there is a new idea — to calculate taxes and damper rates from linking Russian oil to the Dubai grade. After all, we are now trading more in Asia. Starting next year, the quotes will not be calculated by the Argus agency.

However, the policy on the damper mechanism is being tightened, i.e., in relation to last year, the actual level of the damper is reduced by 2 times. This, of course, is an influx of money into the country's budget, but also an increase in prices at gas stations.

In general, in terms of revenues from oil and gas, we may well return to the average figures of the last 5 years, maybe even slightly exceed them if all budget initiatives are fully implemented.

To what extent does the new logistics reduce revenues for the Russian oil and gas industry, hence taxes from this industry?

— For oil suppliers from Russia, the costs of new routes have certainly increased. But there are factors that can reduce them. We have already "run-in" new directions, provided ship insurance. This reduces costs. If the price of oil on the world market stays below $80 per barrel, there will be fewer risks of falling under secondary sanctions. That is, until the cap set by the G7 is reached on, there is even competition between the "shadow" fleet and the legal fleet for the supply of Russian oil. In general, it is beneficial for us that the price of oil is in the corridor of $75-85, then trade participants will not worry about sanctions, and there are fewer risks of revising the ceiling itself (the maximum value is assigned by the G7 every second month).

Can we say that the price cap has fulfilled its goal? Russia's oil exports have not disappeared, but it has reduced revenues, hasn't it?

— From the point of view of reducing profitability, the idea of a price cap has justified itself. You can't argue with the numbers. Last year, for 4 months, the income from oil in the budget of the Russian Federation was 4 trillion rubles, and this year — 2 trillion rubles.

But it is important to note here that the Russian Federation does not need extremely high oil prices on the world market (in order to quickly increase revenues). If the cost jumps into the sky, we will have to increase the discount on Russian oil so that it fits into the ceiling. If it does not fit, there is a risk of changing the maximum limit of this cap, which can be changed every second month.

So far, we are moving too carefully in the direction of creating an autonomous trading circuit. But we need to do this, including even our own price benchmark (we have large sales volumes and corresponding transport hubs). If we bring the matter to the end, then sanctions will really be indifferent to us.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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