BAKU, Azerbaijan, July 12. Russia’s government could lose as much as $85 billion in oil and gas tax income this year due to the significant discount In Urals blend crude, Trend reports with reference to Rystad Energy.
The company analysts note that the Urals blend – Russia’s key oil reference blend - has been trading at around $30-40 per barrel lower than Brent – the global benchmark price for oil - since April, this year. The steep discount on Urals shows that some of the sanctions imposed on Russia are having an impact and are reducing potential oil and gas income to the Russian government.
For Russia, Rystad Energy estimates that the total government income for 2022 would be around $295 billion if all oil assets realized the Brent oil price.
By using an average fixed spread of $40 per barrel between the realized price and Brent, the company estimates that the tax income is reduced by $85 billion over the whole year, an almost 30 percent reduction compared to the “no spread” case. Rystad Energy estimates that the Russian government will earn around $210 billion in oil and gas tax income this year.
“We are starting to see the potential impacts of Western sanctions on Russian oil and gas revenues. The steep discount on Urals is costing the Russian government, while providing cheaper energy to some Asian economies. While the sanctions are likely to hit revenues, oil production has remained higher than expected demonstrating that Russia’s upstream sector has adapted quickly to sanctions on sales,” says Daria Melnik, senior analyst at Rystad Energy.
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