The Russian Finance Ministry said it would boost taxes on natural gas extraction by 61% as it works toward balancing the budget, a blow to the powerful Kremlin-connected industry and OAO Gazprom (GAZP.RS), the world's biggest gas producer.
The Russian Finance Ministry said it would boost taxes on natural gas
extraction by 61% as it works toward balancing the budget, a blow to the
powerful Kremlin-connected industry and OAO Gazprom (GAZP.RS), the world's
biggest gas producer.
An increase in the extraction tax on gas could hamper Gazprom's ability to
realize an ambitious investment plan that includes the Nord Stream pipeline
through the
Baltic Sea
and development of the
Arctic
Yamal
Peninsula
--projects
considered of strategic importance by the state.
The mineral extraction tax on natural gas may be increased by 61% in 2011, and
by another 6% and 5.4% in 2012 and 2013, respectively, Deputy Finance Minister
Ilya Trunin said. The hike, which would be the first since 2005, has been
agreed by all involved ministries and will be discussed in the government next
week, he said.
Gazprom, which produces around 80% of
Russia
's gas
output, has so far been able to fight off tax hikes, arguing it needs cash to
fund its investment plan. Gazprom said its board had considered a possible tax
increase at a meeting Tuesday, but declined to give details.
At 1212 GMT, Gazprom's stock was trading 2.3% higher at RUB159 on
Moscow
's
Micex index, in line with the overall market.
Analysts at UralSib said a tax increase may already be priced in by investors. A
61% hike would result in a 3% decrease in Gazprom's earnings before interest,
taxes, depreciation and amortization, or Ebitda, which is expected around $45
billion, UralSib said.
"But I still think the actual increase will be lower, possibly in the range
of 15% to 25%," said UralSib analyst Viktor Mishnyakov.
Russia
is
struggling to close a budget deficit that reached 5.9% of gross domestic
product last year, amid the country's first recession in more than a decade.
Last month, the government reinstated an export duty on East Siberian crude
oil, following pressure from the finance ministry to find additional funds for
the budget. Oil produced in the region had been exempt from export duties since
the beginning of 2010 in order to stimulate investments in the region.
The proposal to hike taxes for the gas industry has been discussed in the
government for several years, but has met resistance due Gazprom's high capital
spending requirements.
Finance Minister Alexei Kudrin said last month that
Russia
may
raise the equivalent of 0.5% of gross domestic product from the gas industry.
Should the higher tax become reality, Gazprom could also seek to raise debt as
it looks to fund a 2010 investment program of around $28 billion, UralSib's
Mishnyakov said.
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