Deputy Minister of Energy of the Russian Federation Pavel Sorokin, in an interview with Reuters in March 2020, said that the cost of production in Russia, including operating (OPEX) and capital (CAPEX) costs, is between $9 – $20 per barrel, depending on the project.
“OPEX is between $3 - $8 per barrel on average in most of the fields. CAPEX per barrel is between $4 – $8. On average, OPEX + CAPEX is about from $ 9 – $20 (per barrel) plus transport, ”Sorokin quoted Reuters as saying.
According to Bloomberg calculations based on the IFRS financial statements for 2019, the cost of producing a barrel of oil from the three largest Russian oil companies does not exceed $ 12 per barrel. For Rosneft, this figure is $ 11.3 per barrel ($3.8 OPEX and $7.5 CAPEX), for Lukoil it is $10.2 per barrel ($3.7 OPEX and $6.5 CAPEX), for Gazprom Neft it is $9.8 per barrel ($3.8 OPEX and $6 CAPEX).
Bloomberg experts also pointed out the advantages of Russian companies over Saudi production, is that the Russian companies have a flexible tax policy and a floating ruble exchange rate. The main expenses of the oil companies are in rubles, while revenue is in dollars. In a period of low oil prices, the weakening ruble allows companies to maintain the minimum necessary level of capital costs. In Saudi Arabia, by contrast, the national currency is still tightly tied to the dollar.
The amount of tax burden directly depends on oil prices. This means that when oil prices fall, the state assumes a significant share of risks - at prices below $15–$20 per barrel of Urals, the tax burden can be reduced to almost zero. At the same time, with rising prices, the tax burden is growing at a faster pace, which does not allow companies to fully get the positive effect of favorable market conditions.
At the same time, a protracted period of low oil prices stimulates the Russian government to revise its tax policy in favour of tightening, which could negatively affect the profitability of Russian companies.
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