Russia Raises Oil Export Duty

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Russia is raising the export duty on petrochemicals, including lubricants, Oct. 1. However, industry insiders dont expect higher international market prices for Russian base oil.

The decree, recently signed by Russia’s prime minister Vladimir Putin, sets the flat export duty rate for lubricants, black oil, rerefined products, petroleum ointments and paraffins at 66 percent of the crude oil export duty, up from the current 47 percent.

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We dont expect any international markets price increases of the base oils produced in Russia, Natalia Kuznetsova, base oil trader at Litasco SA, told Lube Report last week. These petrochemical products duty tweaks are common in Russia, and the government relies on them to regulate the supply-demand trends on the domestic market. Litasco is Russian oil major Lukoils international trading and supply company based in Geneva, Switzerland.

The petrochemical products export duty rate will be even higher after three years, according to the decree. By 2015, the export duty for these products will be equal to the crude oil export duty.

Russia’s crude oil export duty rate is $29 plus 65 percent of the difference between the current crude oil price and $25 per barrel of crude oil (average weighted market price). The decree cuts the crude oil export duty to 60 percent of the average weighted market price, from the current 65 percent, RIA Novosti reported.

One of the reasons why the government imposes these petrochemical products export duties is to prevent gasoline deficits in the country. The export duty increases are primarily prompted by the gasoline supply crises in Russia this past spring, said Dmitry Ksyunin, head of the Gazpromneft-Lubricants export department. He also confirmed that Gazprom doesnt expect any price increases for base oils produced in Russia.

Some observers believe that these measures aim to encourage refiners to complete long-promised modernization plans.

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