Russia Considers Tax Breaks for Natural Gas Producers As Challenges Mount
Russia’s government is weighing the possibility of some tax relief for the giant gas firm Gazprom, which would be paid for by potentially higher taxes on other Russian natural gas producers, a source in the Russian government told Reuters on Monday.
Gazprom has been bleeding cash since it cut off most of its pipeline gas deliveries to Europe in the wake of the Russian invasion of Ukraine. While the giant is looking east to offset lost revenues from sales in Europe, it has been struggling to convince China to sign up for another huge pipeline from Russia, mostly due to disagreements over the price Beijing is willing to pay.
An earlier report by Russian news agency Interfax said that the government plans to ease the tax burden on Gazprom. Potentially lower taxes on Gazprom may be compensated “appropriating” some profit generated by other gas companies, according to the Interfax report cited by Reuters.
The Russian government has held discussions on a possible tax relief for Gazprom, but no decision has been taken yet, the Reuters’ source said.
The combined net profits of Russia’s oil and gas companies nearly halved in the first quarter from a year earlier, while petroleum revenues for the budget have been falling with the decline in oil prices in recent months, according to data from Russia’s statistics agency Rosstat.
The drop in oil prices, the tightening of Western sanctions, and the stronger Russian ruble have combined to weigh on company profitability.
Every third ruble going into Russia’s budget comes from the oil and gas companies.
The decline in oil prices has reduced Russia’s revenues from oil and gas.
Russia said at the end of April it expects 24% lower revenues from oil and gas this year compared to earlier estimates, following the oil price crash that began in early April and sank the price of its flagship Urals crude close to the $50 per barrel mark.
By Charles Kennedy for Oilprice.com