FSUOGM: Russia's Komi region faces tax losses after Lukoil closes down offices

Russia’s north-east Komi region stands to lose significant tax income as a result of Lukoil’s decision to merge its production unit based there with another subsidiary in the Perm region, Russian news site ura.ru reported on October 17.

Rich in natural resources but with a population of only 720,000, the Komi region relied on Lukoil-Komi for 88% of its budget revenues. In July last year, though, Lukoil announced it would merge Lukoil-Komi with Lukoil-Perm, which operates in the neighbouring Perm region further south. The Russian oil producer will close its office in the Komi town of Usinsk, and relocate key specialists to either its Lukoil-Perm or Moscow offices, and dismiss other employees.

Lukoil-Komi held rights to 65 oil fields, which produce roughly 300,000 barrels per day of crude, and had over 7,000 employees. It earned RUB551bn ($5.72bn) in revenue in 2022, but posted a net loss of RUB54.1mn that year. Such losses were one reason why Lukoil chose to combine it with Lukoil-Perm, which is profitable.

Ura.ru reported that a personal conflict between the Komi governor Vladimir Uyba and Lukoil’s biggest shareholder and former president Vagit Alekperov was behind the company’s decision to leave the region.

“Relations with Lukoil, due to Uyba’s impulsive nature, have been strained for the past two years,” a source told the news agency. “But the calling off of a meeting with Alekperov was the breaking point.

Alekperov waited over an hour to meet Uyba, who did not show up. He then flew from Komi and gave the orders to close down the company’s offices there.

The Komi government denied any such conflict, with a representative telling ura.ru that “the republic and Lukoil are working in full understanding of the joint tasks of developing the region. There is no conflict, the interaction continues.”

Despite Lukoil-Komi’s merger with Lukoil-Permi, the company’s production activities in Komi continue and it should contribute even more in budget revenue in 2024 than in the previous year, the representative said. 

However Ilya Bogdanov, a member of Komi’s committee on budget and taxes, told ura.ru that the consequences of the closure of Lukoil’s office in Usinsk would become noticeable as early as 2025. He also warned of reduced projects at hard-to-recover fields, potentially curtailing production.

Political experts told ura.ru that the region regularly faces problems as a result of Uyba’s character, describing him as an unbalanced person without a strategy. They said he could step down next spring, ahead of the end of his term later in 2025.

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