Ukraine to boost taxes for state gas producers, may revise for private

The Ukrainian government is ready to consider revising the production tax rate for private natural gas producers (raised to 55% of the gas price in August 2014, up from 28% before), Finance Minister Natalie Jaresko told journalists at her Feb. 16 press conference. She promised to seek a tax rate that will satisfy both fiscal needs and stimulate private investment into gas production in Ukraine.



The government is also initiating an increase of the gas production tax for state companies (accounting for 83% of Ukraine’s total output) to 70% from the current level of 20%, according to Jaresko. Gas prices for state gas producers will also be revised upward, she said, without specifying the amount. The price hike and higher tax rate will enable the government to boost the collected gas production tax by about UAH 9.1 bln in 2015, according to estimates approved by the Cabinet on Feb. 14, as part of its revised 2015 budget draft. The new revenue will finance subsidies for households to relieve higher energy costs.



Currently, the gas mined by state companies is sold at a price of UAH 349/tcm, or USD 13/tcm (at the current exchange rate), which is roughly 20 times less than the price of imported gas. The CEO of the biggest state gas producer, Ukrgazvydobuvannia, told journalists on Feb. 13 that he will pursue at least a threefold gas price increase, according to the Interfax-Ukrayina news agency. The company has been proposing to increase gas rates starting 2Q15.



Alexander Paraschiy: Jaresko’s intention to revise gas production taxes might look encouraging for the shareholders of JKX Oil & Gas (JKX LN), Serinus Energy (SEN PW) and Regal Petroleum (RPT LN). Nonetheless, we remain skeptical of the government’s intention to fulfill its plans to lighten the tax burden for private producers. Faced with a choice between satisfying fiscal needs (which are increasingly high) and other, less tangible matters like “investment climate” or “energy security,” the government without hesitation will chose the first option, we believe, and may still opt to do so



The current situation with low gas prices for state producers is the best illustration of the “stimulus” that the government is creating for the Ukrainian gas production industry. State producers are selling gas at a price below their costs to directly subsidize households, while the state partially compensates their losses later. A possible increase in gas rates for state producers (even if it will be 4x) will be fully eaten away by the higher production tax, we estimate, which will neither allow state companies to increase their bottom lines nor give them any stimulus to produce more gas.

Источник: Конкорд Капитал