With S&P facing billion-dollar fines for defying the narrative, Goldman Sachs just dared to go even further against the US government by suggesting that the new oil order may be a blessing in disguise for Russia’s oil industry. Simply put, the impact of the lower oil price and sanctions on the Russian economy increase the importance of oil industry tax reform, which could provide stimulus for upstream investments and commercialisation of the country’s vast oil reserves. An acceleration of upstream/downstream tax rebalancing could incentivise the development of substantial new basins in Russia, leading to a production capacity increase and a reduction in refining volumes to levels necessary to supply the domestic market. As a result, in Goldman’s view, Russian crude exports would increase, improving the country’s current account, government revenues would grow, and upstream would attract material incremental investments.
Via Goldman Sachs,
The new oil price environment, the impact of sanctions on upstream developments, and the emergence of the Eurasian Economic Union (Kazakhstan, Belarus and Russia) are likely to lead to a major tax reshuffle in the Russian oil industry, in our view. Russia’s dependence on the oil market makes the country’s economy highly vulnerable to the new oil price reality. Consequently, we believe Russia might need to create a stimulus for new upstream developments to go ahead, otherwise it could see falling oil revenues and further deterioration in the economy. In addition to this, the formation of the Eurasian Economic Union requires the gradual unification of export duties. All these suggest a tax overhaul in the Russian oil industry might not be far off.
