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Petroleum industry

Rosneft Faces $750 Million Loss as Vankor Oil Field Tax Break Ends

Strategic Insights

— 1 min read

Russian oil giant Rosneft is set to lose approximately $750 million by the end of the year due to the abolition of the zero mineral extraction tax (MET) on its Vankor oil field in East Siberia. Vankor, which started production two years ago, was granted a tax break until cumulative production reached 25 million metric tons. With output nearing that level, the tax break could end as early as September. Analysts anticipate Rosneft's losses to increase to $2.4 billion this year, with a projected $6.5 billion in losses for next year.

Key Takeaways:

  • Rosneft is expected to lose $750 million by the end of 2023 due to the abolition of the zero MET on its Vankor oil field.
  • Vankor's internal rate of return of 20% will still exceed Russia's 12% average, despite the tax break ending.
  • The combined effects of the MET abolition and the removal of Vankor from the list of East Siberian fields with zero export duties could total $2.4 billion in losses for Rosneft this year.
  • Analysts expect Rosneft's losses to reach $6.5 billion next year.
  • Russia's top independent gas producer, Novatek, is expected to benefit from tax breaks for oil and gas production on the Yamal Peninsula.
  • Novatek's South Tambei field, a resource base for its future 15 million metric ton per year LNG plant, is expected to be a significant beneficiary of the tax breaks.

Statistics:

  • $750 million: estimated loss for Rosneft by the end of 2023 due to the abolition of the zero MET on Vankor oil field.
  • 20%: internal rate of return of Vankor, exceeding the 12% average return in Russia.
  • 25 million metric tons: cumulative production threshold for the Vankor oil field to reach the zero MET break.
  • $2.4 billion: projected losses for Rosneft this year due to the MET abolition and removal of Vankor from the list of East Siberian fields with zero export duties.
  • $6.5 billion: projected losses for Rosneft next year.
  • 10 years: duration of the zero MET tax break for oil fields on the Yamal Peninsula.
  • 12 years: duration of the zero MET tax break for natural gas production on the Yamal Peninsula.

Sources:

  • Denis Borisov, Bank of Moscow analyst, quoted in [Russia reports](https://russia-ic.com/presscenter/18138/)
  • [NC Jun.2'11](https://www.naturalgaspipelines.com/press-release/novatek-signs-intergovernmental-agreement-for-development-of-yamal-nenets-kenesis/)

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