GlobalData: US/EU sanctions could lead to restructuring of Russian oil and gas industry

While Russia is continuing to pump crude oil at record levels, producing on average 10.685 million barrels per day in 2015, the continuous pressure from US/EU sanctions is having an impact on the strategic course of Russian oil and gas industry, says an analyst with research and consulting firm GlobalData.

(Shutterstock/ded pixto)

According to Anna Belova, PhD, GlobalData's senior upstream analyst covering the Former Soviet Union, Russia's response to the sanctions is centered on addressing the issues it faces without affecting its strong production numbers.

Beolva explains: "In addition to strengthening and extending geopolitical ties on the international stage, Russia's oil and gas industry is actively seeking foreign participation in the domestic sector and lobbying for legal incentives to foreign investments.

"While domestic and foreign entities could provide capital inflow for the Russian upstream sector, both would require regulatory changes, and the sanctions could provide the impetus for a restructuring of the subsoil law."

GlobalData states that an amendment to the subsoil law being discussed in the Russian government would ensure that foreign investors discovering fields with a federally significant reserve base will be guaranteed a mechanism to secure a production license.

Belova comments: "The proposed legal warranty is expected to incentivize both exploration and production of Russian reserves by foreign investors, and the participation limit in federally important projects by foreign investors might increase upward to 49% of equity as advocated by some lobbying interests.

"Aside from the subsoil law changes, some modifications to the Russian tax code were also recently proposed by the country's Ministry of Finance. However, the modifications were aimed at increasing tax revenues, not incentivizing investments. The Russian oil and gas industry succeeded in resolutely pushing back against the higher tax burden, predicting a fall in production in response."

The analyst also notes that with the decade-long expansion by Russian oil and gas companies into international projects intensifying over the past year, many of the new international partnerships are building on established relationships from Soviet-era involvement in global upstream and downstream projects.

Beolva continues: "Many of the recent alliances targeted exploration and production of crude oil and gas, as well as refining and processing of hydrocarbons.

"The latest partnership has Mr. Sechin, the executive chairman of Rosneft, returning to Mozambique, the country that began his career, where Rosneft has filed bids jointly with ExxonMobil to participate in Mozambique's fifth licensing round," Belova concludes.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


Making DDoS Mitigation Part of Your Incident Response Plan: Critical Steps and Best Practices

Like a new virulent strain of flu, the impact of a distributed denial of service (DDoS) attack is...

The Multi-Tax Challenge of Managing Excise Tax and Sales Tax

To be able to accurately calculate multiple tax types, companies must be prepared to continually ...

Operational Analytics in the Power Industry

Cloud computing, smart grids, and other technologies are changing transmission and distribution. ...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...