The share of oil and gas revenues in the 2024 budget is growing beyond the planned levels.

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Russia's 2024 Budget: Oil and Gas Revenues Exceed Plans
30.10.2024
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The share of oil and gas revenues in Russia's federal budget for January–September 2024 reached 31.7%, up from 28.3% during the same period last year, according to data from the Ministry of Finance. This exceeds the planned figure for the year, set at 31.3%.

In previous years, there was a trend toward a declining share of oil and gas revenues. In 2014, their share exceeded 50%, fell to 36–46.4% in 2015–2019, and dropped to 28% in 2020. Subsequently, the figure rebounded to 35.8% in 2021 and 41.6% in 2022, before returning to 30% last year, reaching 30.3%.

The federal budget's revenue for January–September 2024 amounted to 26.3 trillion rubles, up 33.1% compared to the same period in 2023. Oil and gas revenues increased 1.5 times to exceed 8.3 trillion rubles over nine months. The Ministry of Finance expects sustained growth in oil and gas revenues above their baseline level in the coming months. Non-oil and gas revenues also grew by 26.9%, reaching 18 trillion rubles.

Sources of Oil and Gas Revenues
Oil and gas revenues are derived from mineral extraction tax (MET), additional income tax (AIT), and export duties. However, these are reduced by the amount of reverse excise payments to oil companies, factoring in damping and investment premiums.

The largest share of oil and gas revenues comes from MET collections. In 2022, MET accounted for 71.7% of oil and gas revenues (excluding reverse excise payments), rising to 80.7% in 2023 and 83.5% for January–September 2024.

Traditionally, the second-largest source of oil and gas revenues was export duties. In 2022, these accounted for 21.6% of oil and gas revenues (excluding reverse excise payments). However, the share dropped to 11% in 2023 due to the gradual phaseout of export duties on oil and petroleum products as part of a tax maneuver in the oil sector (2019–2024). By January–September 2024, their share had further declined to 2.5%.

The role of AIT in the budget is growing. AIT's share of oil and gas revenues increased from 11.4% in 2022 to 13.9% for January–September 2024.

Most oil and gas revenues come from oil production, processing, and exports. In 2022, the oil sector accounted for 66.5% of total oil and gas revenues, increasing to 77.7% for January–September 2024. Gas extraction and export taxes contributed 30.2% in 2022, falling to 16.3% for January–September 2024. Contributions from gas condensate extraction rose to 6% over the same period.

Reverse excise payments, particularly under the damping mechanism aimed at stabilizing domestic fuel prices, reduce oil and gas revenues. In 2022, these payments amounted to 3.2 trillion rubles against revenues of 14.8 trillion. In 2023, they totaled 2.9 trillion rubles out of 11.7 trillion in revenues.

Oil Production Drives Budget Growth
The oil sector is the primary driver of increased oil and gas revenues in 2024. Oil revenues (including reverse excise payments) rose 1.6 times year-on-year to 6.5 trillion rubles for January–September 2024. MET collections from oil production increased 1.5 times to 9.3 trillion rubles, and AIT revenues grew 2.2 times to 1.6 trillion rubles.

In the gas sector, MET and export duty revenues increased by only 8.6% to 1.4 trillion rubles, with MET collections growing 22.3% to 1.1 trillion rubles, while export duty revenues fell by 23.2% to 290.2 billion rubles due to declining export gas prices.

Future Trends in Oil and Gas Revenues
For 2024, the share of oil and gas revenues in the budget may exceed the planned level due to narrowing price discounts on Russian oil compared to global benchmarks. Experts estimate that the share could reach 32% by year-end. However, the draft budget for 2025–2027 projects a gradual decline in oil and gas revenues, from 11.3 trillion rubles in 2024 to 9.8 trillion rubles in 2027. At the same time, total budget revenues are expected to grow, driven by non-oil and gas revenues.

This decline is partly attributed to a tax reform in 2025, including an increase in corporate profit tax from 20% to 25%. While this will bring additional revenue, it also imposes a higher tax burden on oil and gas companies. Additionally, the phaseout of a surcharge on MET for Gazprom and risks of lower oil prices may further reduce revenues.

Despite these trends, MET will remain a key component of oil and gas revenues, with OPEC+ agreements expected to allow Russia to increase oil production in the coming years. However, the role of export duties will diminish due to their elimination for oil and petroleum products from 2024 onward.

The real contribution of the oil and gas sector to the budget may be higher than reported, as other taxes and dividends from these companies are not classified as oil and gas revenues by the Ministry of Finance.


Translated using ChatGPT.


Source: https://www.vedomosti.ru/analytics/krupnyy_plan/articles/2024/10/30/1071779-dolya-neftegazovih-dohod.






#Russian Economy #2024 Budget #Energy Sector #Economic Analysis #Budget Planning #Fiscal Policy #Global Energy Market #Natural Resources #Energy Exports
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