04:04 GMT +323 June 2018
Listen Live
    Business

    Economy minister: Oil quality bank to help raise budget revenues

    Business
    Get short URL
    0 11

    MOSCOW, August 18 (RIA Novosti) - German Gref, Russia's economic development and trade minister, has proposed that Russia set up an oil quality bank to increase budget revenues, a respected daily reported Thursday.

    According to Izvestia, the crux of the matter is that heavy and light crude produced in Russia is currently mixed in pipelines and exported as Urals oil, which costs less than Brent.

    This led President Putin to instruct the government to find a way of dealing with what he viewed as an injustice.

    Oil majors like Sibneft, LUKoil and TNK-BP mostly produce light crude, containing a low level of sulfur. Two regional producers, Tatneft and Bashneft, conversely, develop fields with crude oil that is more expensive to refine.

    But experts told Izvestia that companies producing heavy crude stood in the way of separate oil shipments.

    Gref said an oil quality bank could "reduce the spread between Brent and Urals oil prices." However, his ministry has not found the way of doing this yet. "It is still unclear what needs to be done with high-sulfur oil and its producers," he said at a meeting this week.

    Russia has already developed technologies for separate oil shipment but crude oil producers are blocking their use in practice. Tatneft and Bashneft extract less than 8% of Russia's oil but they are the main sources of budget revenues for the Russian republics of Tatarstan and Bashkortostan respectively. Therefore, it will not be easy to cut them out of the pipeline, the paper said.

    Sergei Suverov, an analyst of Gazprombank, a subsidiary of Russian natural gas monopoly Gazprom, said the oil quality bank would not immediately increase Urals oil prices. "It is a very time-consuming and expensive project," he said before adding that the oil quality bank would accelerate the redistribution of cash flows in the sector.

    Rosneft, Russia's state-owned oil producer, and its unit Yuganskneftegaz, which it bought from embattled oil major Yukos last year, LUKoil, Sibneft and TNK-BP will immediately feel the effect of the move: their revenues will increase by at least 8-10%, the expert said.

    Community standardsDiscussion
    Comment via FacebookComment via Sputnik
    • Сomment