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Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel

Russian Oil and Gas Companies Serious Problems due to Sanctions

Russia’s ability to increase its oil extraction on its current technological basis has been effectively depleted.

The West’s sanctions against Russian mining companies have been creating “serious problems” for Russian oil and gas extraction companies, who have become dependent on foreign technologies, stated Russian Security Council Secretary Nikolai Patrushev as cited by Interfax news agency.

“The financial and technological sanctions introduced by the US and their allies against Russian energy companies have highlighted the problem of domestic energy’s vulnerability and dependence on foreign capital and foreign technologies, equipment and software,” Patrushev said at a meeting with the heads of the regions of Central Russia.

“This dependence creates serious problems in a number of areas. First and foremost, it affects the oil and gas sector,” he observed. In this regard, it would be “advisable” to work on “additional mechanisms” to encourage the oil companies to transition to domestic equipment, Patrushev added.

Russian equivalents to some of the equipment simply do not exist, however.

For example, the technologies for hydraulic fracturing (“fracking”), which is used actively in the US, drastically increases well output, and can “revive” old deposits and extract hard-to-reach shale oil, do not exist in Russia at present, Russian Energy Minister Alexander Novak said in March at a meeting with President Vladimir Putin.

“Hydraulic fracturing fleets are being used increasingly actively today in the development of oil and gas fields. In Russia at present, unfortunately, these technologies do not exist, and only a trial industrial facility has been created,” Novak said.

Since the western sanctions were introduced, the technological basis of the Russian mining sector has completely halted in its development: the proportion of fundamentally new developments dropped from 30% in 2011 to 0% in 2016, calculated Valery Mironov, deputy director of the Development Center at the Higher School of Economics.

Companies’ and the government’s expenditure on science and innovation played a relatively minor role with respect to its proportion in world mining (roughly 1% of the world’s expenditure), Mironov explains. The situation seems unacceptable: the oil recovery factor for deposits being developed in Russia is roughly 25% on average, whereas for world leaders it is up to 45%, he added.

Russia’s ability to increase its oil extraction on its current technological basis has been effectively depleted, the International Energy Agency predicted in its Oil 2018 report. According to the agency’s calculations, Russian mining will reach a peak of 11.74 million barrels per day in 2021, after which the volume will start to decrease.

 

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