Russia’s oil majors ask government not to raise export duties on lubricants

Lukoil and Gazprom Neft have requested the Russian government not to raise the export duties on lubricants by 100% of the duty on oil in 2015. In a letter sent to Deputy Prime Minister Igor Sechin, the two companies explained that according to the new 60/66 system of duties on oil and oil-products, the export duties on lubricants and dark oil products before 2015 will be 66% of the duty on oil, and from then on, will be raised to 100% of the duty on oil.
Differences in technology
Lukoil and Gazprom Neft emphasized that before the 60/66 system was introduced, the export duty on lubricants was only about 47% of the duty on oil. The oil companies explained that the technology for producing lubricants is different from the process used to produce dark oil products. Lubricants production uses three or four processes, which incurs high operating costs. “Lubricant production requires substantial financial investments in laboratory research, in the development of product line, and in the development of costly technology,” the two companies said in their letter. The letter further explained, “An alternative to the production of lubricants is that of dark oil products at existing capacity, which counters the main idea of the new 60/66 system’s introduction – increasing depth of processing and the output of product with high added value.”
Russia’s lubricant producers to dominate market
Lukoil and Gazprom Neft said that for many years, the premium segment of the lubricant market in Russia had been occupied by foreign producers. “Now domestic lubricant producers, having created lines of premium product, are implementing a program of import replacement, squeezing off the Russian market lubricant materials of foreign producers or pushing them to set up their own production in Russia,” the two companies said in the letter. A representative of the Energy Ministry said it has already received instructions to consider keeping the export duty on lubricants at 66% of the duty on oil after 2015. Although no timeframe has been set, the ministry said it will prepare an analysis within a month. (April 11, 2012)