OREANDA-NEWS. May 12, 2010. The Ministry of Energy has proposed a new export duty formula with a higher threshold level for crude oil produced at 22 Eastern Siberian oil fields earlier slated by the government for greenfield tax breaks, Vedomosti reported.

Under the new proposal, the exposed oil companies producing crude from the selected oil fields would pay no export duty for crude prices below USD76/bbl. Effectively, the export duty formula would change for them from USD 4+0.65x(P-25) currently to USD 4+0.65x(P-76) under the new proposal, reported the press-centre of OTKRITIE Financial Corporation.

View: The new formula would translate into additional tax savings for the involved companies, as opposed to the recent proposal assuming that the exposed oil companies (Rosneft, TNK-BP, and Surgutneftegaz) would have to pay 60% of the regular export duty rate from 2011. The reduced (60%) export duty formula would be USD 2.40+0.39x(P-25), where P is the average Ural price, which looks less beneficial than the USD 4+0.65x(P-76) assumed in the latest Energy Ministry’s proposal. For instance, given the Urals price of USD 80/bbl, the chosen Eastern Siberian fields would have to pay the export duty of only \\\\$6.6/bbl under the latest proposal versus USD 23.85/bbl, assuming 60% of the regular rate.

Action: We believe the Energy Ministry’s proposal would be favorable for Rosneft, TNK-BP and Surgutneftegaz, should it be supported by the government.