OREANDA-NEWS. January 27, 2010. Deputy Economics Minister Andrey Slepnev told that a potential unification of export duties could be discussed by the government in conjunction with the draft 2011 budget. At present, refined product duties are differentiated by product type.

The export duty rate applied to heavy oil products is 46% lower than the rate applied to middle distillates and light products. The idea to introduce a unified export duty rate for all petroleum products has been discussed within the government for some time. The latest plan assumed that a unified export duty equal to 55% of the corresponding export duty on crude oil could be introduced from 2012.

View: From our standpoint, Slepnev’s remarks mean that Russian refiners that produce a higher proportion of heavy oil products for export will most likely be adversely affected, especially if the government enacts a unified duty earlier than 2012. The key companies we see at risk are Surgutneftegaz and Alliance Oil.

Should they fail to upgrade their refineries by the time the unified duty is introduced, their earnings and cash flows could suffer. That said, neither the timing nor the unified duty formula have been approved or made public. At this stage, the issue is simply part of a discussion within the Russian government on unified product duties. Therefore, we believe it is a premature to discuss the impact on individual oil stocks from the early introduction of unified product duties.