Russia: Oil Firms Producing at Loss Due to Lower Crude Prices

The country’s oil companies are losing money on crude production after a decline in prices pushed the market value of a barrel of the Urals blend below the cost of getting the fuel to consumers and paying taxes, UBS said Tuesday.

A Russian company shipping crude from the Siberian city of Nizhnevartovsk would post an operating loss of $13 per barrel after costs and taxes are taken into account, analysts Dmitry Lukashov and Maria Radina said a note to investors.


“Every company in Russia is losing money on crude oil export deliveries or crude oil domestic deliveries,” Lukashov said later by telephone. “If you don’t have a refinery, you’re losing money.”

Russia revises export taxes on crude and oil products every two months based on the average cost of its benchmark export blend, meaning a sharp change in oil prices can affect company earnings before regulators have time to adjust the tax. Domestic crude prices are based on export netbacks, or the costs of bringing it to market, Lukashov said.

Moscow Times