Media: Russian oil firms seek government aid amid plummeting Urals prices

Russian oil producers are pressing the government for support as the price of Urals crude has fallen sharply in recent months. Lukoil has reportedly approached the Ministry of Energy, requesting a revision of the country’s “dampening” mechanism to secure higher budget payouts.

According to Izvestia, the company highlighted that the US sanctions introduced in November have pushed the discount of Urals crude against Brent to around $20 per barrel.

As a result, compensatory payments under the dampening system have declined, threatening both production efficiency and domestic fuel supply.

The proposed initiative would legislate a price gap of 10–15 dollars per barrel between Urals and Brent for tax purposes. Without such a cap, companies already facing shrinking profits could end up paying extra into the federal budget.

Russia introduced the dampening mechanism in 2018 to stabilise fuel prices. Under the system, producers receive compensation if domestic fuel sells for less than export prices, while excess profits are transferred to the state if prices rise. However, with current Urals prices, even relatively low domestic fuel costs do not trigger payments.

A source familiar with the matter said the issue was discussed on January 23 at a meeting with Deputy Prime Minister Alexander Novak. The Finance Ministry reportedly opposes any changes, citing potential revenue losses, while the Energy Ministry has suggested a moratorium on payments.

Yuri Stankevich, Deputy Chair of the State Duma Committee on Energy, confirmed discussions on the proposal but said no decision had been made. He warned that while the Finance Ministry’s position prioritises budget interests, restricting payments could threaten oil companies’ investment resources and pose strategic risks.

Dampening payments to oil producers fell to 881.8 billion roubles ($11.46 billion) in 2025, down from 1.815 trillion roubles ($23.60 billion) in 2024. Dmitry Kasatkin, managing partner at Kasatkin Consulting, noted that under current Urals prices, companies may receive nothing from the state for December and January, and could even owe 47 billion roubles ($611 million), including 13 billion ($169 million) for December.

Tamara Safonova, CEO of the Independent Analytical Agency for the Oil and Gas Sector, said both producers and the state are affected by rising Urals discounts. “It is crucial to balance the interests of both sides,” she said, adding that a full recovery is only likely once oil prices return to normal levels.

By Aghakazim Guliyev