Foreign Technologies Are of Critical Importance for the Development of Continental Shelf Oil Fields

The recently introduced economic sanctions may potentially result in serious constraints on the future development of Russia's oil and gas sector. At the same time, the resulting negative effect on the oil and gas sector's prospects will be determined by the actual length of the period of their realization.

If the period of sanctions turns out to be short – for example, up to one year, their negative effect will be rather limited, and it will mainly take the form of postponement, until a later date, of the launch of those new projects that will involve the use of foreign equipment and technologies. The denied access to foreign loans may initially be compensated largely by funding from other sources - for example, targeted allocations from the National Welfare Fund (in fact, Rosneft and NOVATEK have already applied for funding from the NWF).
However, if sanctions are introduced for a long period - for example, 5 or more years – their negative impact on the development of Russia's oil and gas sector may be quite serious. In the long run, while the currently exploited oil fields are being exhausted, the projects aimed at developing unconventional oil reserves will gain in importance – among them those involving the development of continental shelf oil fields and less easily recoverable oil reserves, including shale oil analogues. Foreign technologies are vital for successful implementation of such projects, and sanctions are designed to disrupt the flow of such products into Russia. And the creation of Russia's own technological base for these projects will take a very long time.

As a result, the declining oil extraction rate in the currently exploited oil fields caused by the effect of natural factors will not be compensated by new oil fields being put in operation, and so the overall oil extraction volume in this country will plummet, thus bringing down government revenue.

Yuri Bobylev - Candidate of Economic Sciences, Head of the Mineral Sector Economics Department