OREANDA-NEWS. August 11, 2009. The government expects that domestic crude oil production to decrease 0.8% YoY to 485m tons (9.7m bpd) in 2009, perhaps rising to 490m tons (9.79m bpd) in 2010, it was wired, citing Deputy Prime Minister Igor Sechin. In addition, Sechin said that the government could abolish the export duty for Eastern Siberian oil in the upcoming weeks, reported the press-centre of OTKRITIE FC.

View: The government’s oil production guidance is in line with our estimates. We forecast that in 2009 oil production could fall 0.4% YoY to 487m tons (9.73m bpd), and rise 0.8% YoY to 491m tons (9.82m bpd) in 2010. We believe that the main leaders of domestic crude output in 2009-2010 will be Rosneft, Lukoil and TNK-BP.

The abolishing of export duties for Eastern Siberian oil could trigger production growth for Rosneft and TNK-BP, while Lukoil is gradually ramping up oil production at greenfields in the Timan-Pechora region. A more favorable tax environment could help the entire industry overcome production declines anticipated for this year (as well as for the next few years). We are anticipating further steps from the government aimed at encouraging oil production growth.

Valuation: The average P/E for Russian oil corporations amounts to 9.7x. Russian oil stocks trade on P/E at a 16% discount to emerging market peers, and at a 25% discount to international majors.

Action: This news could be positive for all Russian oil stocks in the short-run.