Page 7 - FSUOGM Week 08 2020

FSUOGM COMMENTARY FSUOGM
made of steel, whereas a plastic alternative is half the cost and more durable. Sibur is already in talks with several Russian regions to explore sim- ilar solutions of their urban development plans.
Negative excise tax and Amur
One of the concrete consequence of the launch of the national projects is the tax system has had a total overhaul. The government is on the hunt for new revenues and has started to reengineer the system to help remodel the economy for growth.
One of the big changes in the last year has been the so called “tax manoeuvre” where export duties have been shifted from sales to costs. “However those who process naphtha will be entitled to receive not only the excise tax that had been paid but also a 70% incentive fee from the government to encourage conversion of naphtha to higher value added petrochemicals. A simi- lar approach will be extended to other feedstock products – ethane and LPG though the rate will be lower,” says Konov.
The tax manoeuvre caused a problem for the petrochemical producers. Although the duties on exports were reduced, that caused prices for raw materials to rise on the domestic mar- ket as prices moved to align with international prices. In effect the duties protected domestic petrochemical producer but following the tax manoeuvre they were punished.
The government stepped up to the plate and
provided relief by introducing “negative excise duties” – effectively a subsidy to negate the impact of the change on prices caused by the tax manoeuvre.
The subsidy has already been introduced to the production of naphtha but the same negative duty is supposed to be introduced to a broader group of LPG hydrocarbons – things like butane, ethane and propane -- which make up a much larger part of Sibur’s business. The government was supposed to reach a decision last Septem- ber but missed the deadline and the details of the decision will be key to Sibur in its plans to built a new petrochemical complex in the Amur region.
The next big investment project will be the Amur petrochemical complex in Russia’s Far East. However, the final investment decision has not been made yet and depends on the details of the government’s decision to extend the negative excise duties.
Work on planning is well advanced. Komy- shan says that designs have been more or less completed, contractors chosen for the key tech- nical components and a preliminary feedstock supply agreement signed with Gazprom. Sibur could partner with Sinopec to build the plant in a 60/40 joint venture that will export its produc- tion mainly to Asia.
“If it goes ahead then Amur will be largest site of its type in the world. We are only now wait- ing on the government decision on the negative excise duties,” says Komyshan.™
PIPELINES & TRANSPORT
US sanctions Rosneft trading unit over Venezuela links
VENEZUELA
The Rosneft trading unit has been helping Venezuela export its crude.
THE US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on Rosneft Trading, the trading unit of Russian state-controlled oil major Rosneft, and placed its vice president Didier Casimiro on the Specially Designated Nationals and Blocked Persons (SDN) list.
As reported by bne IntelliNews, Venezuela was said to secretly export millions of barrels of oil to Rosneft. It is estimated that since 2006 Rus- sia and Rosneft have granted Venezuela $17bn of loans, which is being repaid by state oil company PDVSA.
Previously in February shares in Rosneft dipped on reports that the US is considering additional sanctions against the Russian oil giant for maintaining ties with Venezuela.
But the blocking sanctions do not apply to Rosneft itself and the OFAC gave a deadline of 20
May to counterparties to close operations with Rosneft Trading.
“Business of the sanctioned trader accounts for just circa 1% of Ebitda,” BCS Global Markets com- mented on February 19, adding that the “trading business is not in top-5 off takers of Rosneft and was mainly focused on buying oil from the market including Venezuela for further resale.
“Still, Rosneft may switch some USD based contracts to EUR and incorporate new trading entity, transferring all contracts to it,” BCS GM warned, but given remaining time till the dead- line, the analysts assume Rosneft has enough time to settle all technical issues with trading to avoid any negative impact from the new sanctions.
“Therefore, new sanctions are unlikely to pro- vide a significant negative impact on Rosneft,” BCS GM concluded. ™
Week 08 26•February•2020 w w w. N E W S B A S E . c o m P7