June 4, 2023

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Index – Economy – No matter how much oil the Russians have, it will be underground without Western companies

The activities of foreign companies in Russia and its closure are clearly linked to the sanctions imposed by key governing bodies such as the United States and the European Union. It is clear that as the situation in Ukraine worsens, many companies may be forced to abandon their Russian operations. Moreover, sectoral restrictions such as allowing the Russian financial system are not the only problem: on March 21, various oligarchy groups such as Alexei Miller and Igor Seksind were targeted, but this already had an indirect effect on Western institutions.

Meanwhile, European gas and oil companies have found themselves in a difficult position with the loss of their allies: stricter rules on Russian exports – for example, President Vladimir Putin Mandatory CospromYou can only accept rubles for gas exports – this causes them logistics problems.

It is clear that these sanctions could have the same or greater impact than the withdrawal of foreign oil companies from Russia, and both factors must be considered together.

– Start Analysis Oxford Institute of Energy in the Russian and European Energy Department.

Although the situation is not yet easy for Western companies, according to a study focusing mainly on the activities of foreign companies, the actions of European governments against Russia in the future will be significantly affected by the exit from the Russian market. As they write, although the situation is changing rapidly and new results may worsen the situation, by the end of March 2022, some initial findings may already have been made.

With regard to piped gas supply, little change is expected. Restrictions on Russian gas exports have not been imposed by the European Union or major importers (other than the UK), and the withdrawal of Western companies from joint ventures with Gosprom will not have a major impact on traffic. The Russian state gas company can produce in the gas fields of western Siberia, from which European supplies are supplied. Despite the introduction of a technical ban on exports to Russia, domestic or Chinese service companies can do exactly this, even if Western companies do not help with maintenance.

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The key to Russia’s gas production is whether the EU can actually meet its strategy of reducing imports by two-thirds (101.5 billion cubic meters) by the end of 2022. If successful, Russian gas production could be halted because there is currently no alternative export market for West Siberian gas. No matter how many people believe that gas will be sold to China, there is no established transport route, so they will either stop extraction or resume supply to Europe.

Russia’s insistence on paying for gas sales in rubles could lead to further problems, which could lead to a review of contracts or disputes. In the case of Russian liquefied natural gas, the story is somewhat subtle: Shell deviates from Sakhalin 2 project and has little experience in the major partner Gazprom LNG industry. At the same time, it has been a key partner for the past fifteen years, so it undoubtedly has enough knowledge to continue production under major issues.

However, the departure of one of the most experienced international oil companies in the LNG industry could increase the risk of disruptions and remove key technical equipment and software that could undermine the shell medium-term performance and upgrade.

In addition, the development of LNG projects is not possible without Western actors and technology. The development of Casprom’s new liquefaction plants (such as Baltic LNG) has been delayed for many years, so deliveries will not start here soon.

Jamal LNG, another flagship project in Russia, is operated by Novotech Duty to pay rubles – A company that has proven over the past five years to have extensive expertise in executing large projects. However, as the major foreign partner, French Total Energy, was also forced to exit, it was certain that the company would not invest in new projects. The actual departure of the French will not force Yamal, but it will force the Arctic to stop LNG, there will be a shortage of Western technology.

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However, in the absence of European buyers it is doubtful that money will be spent on development. Although funding is found in Asia and perhaps the Middle East, some delays in the development agenda can still be expected.

In addition, Novatek’s target of producing 55-70 million tonnes of LNG from the Yamal region by 2030 remains in question. Resources are certainly available, but the LNG market is already limited, and the lack of Western liquefaction technology will certainly undermine growth opportunities because domestic Arctic gasket technology is currently limited to small exports (approximately 1 million tons).

Finally, the prospects for Rosnefty’s Far East LNG project now look hopeless. It is unknown at this time what he will do after leaving the post Rosni And its partners were left without a company with sufficient LNG experience to develop a new large project.

Without Western money it would not go into oil

As far as oil extraction is concerned, it varies from place to place and from time to time. Like Gazprom, Rosnefty and other major Russian oil companies, it is able to maintain production in traditional Russian oil fields in central Russia and in western Siberia in Europe.

Similarly, the domestic oil service sector can carry out drilling, extraction and other field operations required to maintain the production of conventional fields at current levels. As a result, the biggest threat to short-term Russian oil production is the lack of a market for Russian crude oil and petroleum products.

Let’s not forget that as they are already enjoying, if they offer the right discount, they will find alternative buyers in the liquid global market, analysts at Oxford believe.

On the other hand, the lack of technology for European companies can be a huge problem because the growing proportion of Russian oil production comes from hard-to-extract reservoirs, marine fields or shale oil areas. This is an area where production is likely to suffer in the medium term as new developments move further and further away and sophisticated technology cannot compensate for these developments. Russia or Asia do not have the necessary expertise and assets.

This suggests that Russian oil production is not technically at risk in the short term, but a medium-term outlook.

It is no coincidence that medium-term production sustainability is a priority for the Russian government, but the negative risks have now increased as the availability of complex software and hardware has been curtailed by the withdrawal of Western oil companies and service providers.

Production will be preserved until 2024/25, and domestic and Asian companies and entrepreneurs may fill the gap of Western companies to some extent, but there are opportunities for full oil production as Russian companies have to develop higher rates in distant and complex sectors. Begins to decline.

According to an analysis by the Oxford Institute of Energy Studies, the decline in production is unpredictable and the short-term decline will be driven by market forces rather than technical problems, but the reactions of the current war in Ukraine have increased the risk of Russian oil. Production is declining in 2030. Significantly decreases.

(Cover image: Andrei Rudakov / Bloomberg / Getty Images)