According to a new report by Bloomberg Tuesday, Russian oil companies hit ten-year drilling records last year, indicating that neither the departure of Western firms, nor international sanctions have harmed the upstream petroleum operations in the country.
Last week Russia had announced it would be cutting its oil production by 500,000 barrels per day in March, as retaliation for Western sanctions which have sought to reduce the country’s energy profits amid the war in Ukraine. Skeptics in the West had claimed Moscow had made the move to hide the fact that Western sanctions had reduced its ability to sell its oil, however the new analysis would indicate otherwise.
Bloomberg found industry records indicated that in 2022, oil companies in Russia had drilled more than 28,000 km in total depth. which was the most drilling in over a decade. In addition there was an almost 7% rise in the number of wells, bringing the total number of wells to more than 7,800, with most of the key oil firms seeing their results from the previous year beaten.
All of these gains occurred despite the fact that most of the West’s energy majors, such as BP, Shell, and Exxon Mobil, as well as international service providers, withdrew from the nation following the onset of the war in Ukraine, often leaving behind multi-billion projects.
Vitaly Mikhalchuk, an analyst from the former Russian unit of consulting firm Deloitte & Touche, said that despite “comprehensive exports restriction on equipment, technology, and services for the energy industry” which had been imposed through sanctions by the West, the oil industry in Russia “largely continues working just like before,” the head of the research center at Business Solutions and Technologies, said. The added that “Russia has been able to retain most oil-service competencies, assets and technologies.”
Data from Vygon Consulting shows major international service companies never comprised more than 15% of Russia’s total oil service sector in 2021, with units of the domestic energy majors like Rosneft, Gazprom, and Surgutneftegas comprising the majority of the market.
One crude analyst at Kpler, Viktor Katona, pointed out that the Russian companies have also now developed their own expertise in upstream operations, something which has allowed Gazprom Neft to perform even more drilling in a major shale formation being developed in Western Siberia.
The report notes that some Western oil-service providers, such as SLB and Weatherford International, continue to operate in Russia. SLB CEO Olivier Le Peuch has noted “a unique corporate structure” has allowed his firm to continue to operate in Russia without running afoul of US or EU sanctions.
At the end of last year, total Russian oil production came in at 10.9 million barrels per day. It remained close to that level throughout January, indicating the December EU ban on crude imports had produced little, if any effect.
Analysts say it is still too early to tell if the new EU embargo on Russian petroleum products will have any effect. However despite the fact the EU was once the largest market for such Russian products, preliminary figures show Russian refinery processing rates had actually risen 2% month to month, in the beginning of February.
