The Russian government on Wednesday slapped higher taxes on gas firms, hitting state export monopoly Gazprom and shocking independent producers led by Novatek with a bigger-than-expected hike.
Shares in Novatek, co-owned by commodity trader Gennady Timchenko, slumped by more than 10 per cent on the news it would eventually pay almost the same rate of mineral extraction tax as Gazprom.
Gazprom will pay about 1,000 rubles per 1,000 cubic metres, and independents will pay almost the same - a rise of four times from current levels.
Gazprom shares fell by 1 per cent, having already suffered losses of around 15 per cent since it became clear in March that the state-controlled market leader would face a major tax hit.
"This is a negative move for the whole gas industry, especially for the independents. Gazprom can afford (tax hikes), it has flexible capex," Oleg Maximov, oil and gas analyst with Troika Dialog brokerage said.
Fixing a hole
Russia's government is seeking to replenish state coffers after Prime Minister Vladimir Putin embarked on a spending spree ahead of his election in March as president. Putin, president from 2000 to 2008, will be sworn in as Kremlin chief on May 7.
London-based consultancy Capital Economics estimates that the total bill for election-related promises will reach 4.8-trillion rubles ($163-billion U.S.) per annum, or 4-5 per cent of gross domestic product, by 2018.
Gas producers have traditionally paid lower taxes than the oil industry, which many analysts say cannot shoulder further tax hikes without constraining output from the world's largest crude producer.
Under the gas tax plan, the state would capture 80 per cent of the upside of planned hikes in regulated prices. Oil and gas revenues account for half of Russia's federal revenues.
The case for tightening the screws on Gazprom was bolstered last week after the company announced almost $45-billion in 2011 earnings - the largest among the world's publicly traded companies.
Russia will gradually increase MET - the single largest tax for gas companies - for Gazprom to 582 rubles ($19.82) per 1,000 cubic metres starting from 2013, Deputy Finance Minister Sergei Shatalov said.
The tax will reach 1,062 rubles in July 2015.
For other producers of natural gas, MET will be set at 265 rubles in 2013 and will total 1,049 rubles starting in July 2015.
The increase may negatively affect Novatek's plans to double gas production by 2020 to more than 110 billion cubic metres.
"We find the proposal surprising when considering the recent efforts by the government to support independent gas producers, as such a measure will mean a much bigger hit for the independent gas segment," Alfa bank said in a note.