Russian oil industry and petroleum product market

In the Russian Federation, active government support for the national economy and relatively mild restrictions have mitigated the pandemic’s negative economic consequences.

Russian GDP fell 3% in 2020. Although this was the largest drop since 2009, it was still much less than the declines seen in other major economies. The budgetary rule mechanism limited exchange rate fluctuations during a period of hydrocarbon price volatility. Brent price in roubles averaged ₽3,000/bbl, which is comparable to prices between 2015–2017. Consumer inflation stood at 4.9%, which is slightly above target.

Russia’s domestic petroleum product market proved to be more stable than the European market. In 2020, demand for motor gasolines and diesel fuel decreased 5%–6%. The decline in demand for jet fuel was much steeper, primarily due to restricted international air travel. International air passenger traffic tumbled by 74%; domestic passenger traffic fell 22%.Federal Air Transport Agency In December 2020, international and domestic air passenger traffic dropped by 86% and 13% year-on-year, respectively. Therefore, the further recovery of the jet fuel market will mainly depend on the resumption of international air travel.

Crude oil and gas condensate production in Russia slipped 8.6% to 512.7 million tonnes in 2020 following the OPEC+ agreement. Oil exports stood at 232.5 million tonnes, down 12.7% year-on-year.RBC Refinery distillation totalled 270 million tonnes (–5.2%). In line with market conditions, jet fuel production fell steeper than other products (–16.8%). Gasoline production shrank 4.5%, while diesel fuel output remained almost flat.

The industry taxation changes in 2020 mostly tweaked existing mechanisms, with one goal being to boost budget revenues. In oil production, changes mostly applied to the parameters of the additional income tax, effective from 2021:

  • a limit on tax-base reduction by loss carryforward;
  • an increase in the geological complexity coefficient applied to the period from commercial production startup;
  • reductions in historical loss indexation coefficients for Group 2 fields in some regions (excluding blocks in the Arctic Zone); and
  • a cancellation of MET incentives for mature fields and preferential export duties for blocks that have not transitioned to the additional income tax.

Oil refining and petrochemicals support packages, including an investment premium to reverse excise tax on feedstock for refineries implementing major upgrade projects and reverse excise on ethane and LPG processing.

Russia’s oil production and exports, million tonnes