Russian oil producer Tatneft has released an optimistic report on the results of the resumption of production in 2021, but higher international energy prices may not be enough to protect the company from a possible decline in investment and of production due to the loss of tax privileges.
Speaking on a conference call earlier this week, Tatneft deputy executive director Vasily Mozgovoy said the producer expects its oil and condensate production to reach 27.8 million tonnes, i.e. an average of 543,000 barrels per day, for 2021 against 26 million tonnes in 2020.
The company had established a plan to produce some 28.3 million tonnes of oil (553,000 bpd) by 2022, with a focus on increasing recovery from its old depleted conventional fields in its region of origin of Tatarstan.
However, with Russian authorities showing no sign of restoring lost tax privileges for unconventional high viscosity Tatneft developments in Tatarstan, the company expects the production of this oil to decline slightly in 2022 as less investments will be available to drill injection and steam production. wells in heavy viscous oil tanks, according to Mozgovoy.
Tatneft’s higher oil production in 2021 coincided with better international oil prices, and the company reported a 57% increase in gross revenues to 911 billion rubles ($ 12.4 billion) and an increase from 84% of its net profit to more than 144 billion rubles for the period from January to September of this year, compared to the same period in 2020.
Tatneft recorded gross revenues of 326 billion rubles in the third quarter of this year compared to 206 billion rubles in the same period of 2020, with net profit ending at 52 billion rubles, up from 36 billion rubles during from the corresponding period of last year.
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Production costs of 264 rubles per barrel in the third quarter were only slightly higher from the second quarter of this year and remained lower than the production costs reported in the first quarter of 2021 and the fourth quarter of 2020.
Revenues from oil exports and sales outside of Russia, mainly to Poland and Slovakia, nearly doubled to 433 billion rubles in the first nine months of this year.
Taxes are increasing
However, with the removal of unconventional tax breaks last year, total government direct taxes on the producer, including taxes on oil production and exports, but excluding corporate tax , almost tripled to 368 billion rubles, or about 40% of its gross income.
According to Moscow-based independent stock analyst Danil Kolyako, Tatneft remains under “higher tax burden” after the cancellation of tax privileges last year, “with better alternatives such as Lukoil, currently seen among Russian oils.”