On Sunday, the CEO of Russia’s major oil producer Lukoil Vagit Alekperov said that a harsh tax policy in Russia could harm the company from the coronavirus pandemic impact.
Russia’s policy to increase taxes on oil and mining firms was signed earlier this month. It would replace an existing mineral extraction tax with a profit-based tax in a major overhaul of the system, aims to fill the void left by the slump in oil prices and the pandemic. The policy has been challenged by the country’s industry players.
Alekperov expressed his understanding of the country’s need for support in the hard economic time, and that the oil sector should provide support. However, the policy could hurt Lukoil’s financial result, moreover without some resolution to the taxation debate.
“Lukoil may not see key indicators return to pre-crisis levels even by 2023,” he commented. He added that in 2021, the company would commit to discussing the tax policy with the government.
Furthermore, Alekperov said that the current oil prices at around USD40/barrel are low, which will cut Lukoil’s investment. However, the lack of investment activity would prop up prices in the future.
He estimated in the first quarter of 2021, oil prices could climb to roughly USD50/barrel.
