Russian Finance Ministry Seeks Gas-Tax Link to Local Prices

Russia’s Finance Ministry proposed linking natural-gas extraction taxes to the domestic price for the fuel, while sticking with rates near those it sought in May.

So-called independent gas producers, which include oil companies and OAO Novatek, would pay tax at a different rate to state-run OAO Gazprom, which owns the country’s pipelines, according to draft amendments published on the ministry’s website. Under the May proposals, the gap between the smaller competitors’ lower rate would almost close by mid-2015.

The ministry revisited its plans, which would have doubled Gazprom’s rate and raised that for independents fourfold, after producers’ opposition. It aims to cut a deficit to 0.1 percent of gross domestic product by 2015 from as much as 1.5 percent next year. Oil and gas contribute half of revenue. Novatek Chief Executive Officer Leonid Mikhelson said the May proposals were “shocking” and Gazprom lobbied for a local price link.

The rates for Gazprom and independents will be similar to those outlined in May, a ministry official who declined to be identified in line with the authority’s policy, said by phone today. The main change was the introduction of a formula linked to the government’s indexation of the gas price, the official said. The proposal covers the next three years.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net