Russia removes extra export duty for some petrochemical products, feedstocks

The Russian government has removed the extra Rb50,000/mt ($541.7/mt) export duty for some petrochemical products and feedstocks for the petrochemical industry, the energy ministry said late April 5.

The measure, which the government approved and published April 5 and will be enforced within seven days after its publication, will give producers the incentive to increase output, the energy ministry said.

The removal of additional export duty is aimed at stimulating less complex refineries, local media said.

Among products, for which the duty -- introduced as a punitive measure against so-called "gray exports" -- has been canceled are lubricants, paraffins and waxes. Products, which typically meet some of the naphtha specifications, such as stable gas gasoline, are also exempt from the tax. Fuel oil will also be exempt.

In early October, as part of measures to tackle shortages and surging oil product prices inside Russia, the government introduced a Rb50,000/mt export duty aimed at stopping gray market exports, whereby product earmarked for domestic consumption and for which compensation has been paid to producers under the government's road fuel price-damping mechanism, is subsequently exported. It applied to companies not involved in processing and refineries that processed less than 1 million mt in 2022.

At the time, the extra duty was applied on top of the regular export duty levied on exports of Russian oil products. However, in January, Russia went ahead with previous plans to bring the export duties on crude and oil products to zero, but left the Rb50,000/mt tax in force.

There have been calls to ease the duty for refineries as it has affected small and medium-sized ones that typically produce feedstocks such as naphtha, VGO and fuel oil, which they cannot sell in the domestic market and rely on export outlets.

The removal of the tax could boost naphtha exports at a time when gasoline exports are banned(opens in a new tab), some market sources said.

However, the product for which the duty has been lifted represents only a small portion of naphtha output. Furthermore, the energy ministry recently asked refineries to ramp up gasoline output, which would leave less naphtha available for export, according to other sources. In addition, refineries that suffered CDU outages (opens in a new tab)following drone attacks have reduced their naphtha production.

Russian naphtha exports returned to normal levels recently after Novatek restarted its Ust-Luga stable gas condensate processing facility around early March. The plant was partially shut in late January due to a fire from a suspected Ukrainian drone attack. Firmer naphtha export prices have also resulted in those producers who have previously cut output due to low prices to increase production.