Russian Oil Industry Will Keep Stable Spending Plans, Fitch Says

Russian oil and gas companies will maintain stable capital spending in the next few years, while the global industry cuts back, thanks in part to advantages provided by the country’s currency, according to Fitch Ratings.

The cumulative capital expenditure in ruble terms of Russian oil companies rated by Fitch increased by 13 percent on an annual basis last year and will remain stable this year before falling by mid-single-digit percentages in 2017 and 2018, the credit-ratings company said in a statement Tuesday. They can manage this because “ruble flexibility” provides “a buffer against low oil prices,” it said.

While most international oil companies are curbing spending to withstand the slump in crude prices, Russian producers have been able to avoid cuts in ruble terms because of their currency’s depreciation against the dollar. Rosneft PJSC, Russia’s biggest oil producer, said on June 8 its capital expenditure rose 20 percent in the first quarter compared to a year ago.

A recent recovery in the exchange rate has producers monitoring currency markets closely. A downgrade to Russia’s credit rating or tax increases for producers are also potential threats to the companies’ plans, Fitch said. After an increase last year, taxes are likely to stay elevated for the next two years, it said.

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