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16th MOSCOW INTERNATIONAL OIL AND GAS EXHIBITION MIOGE 2019
23-26 April 2019 • Moscow • Crocus Expo

How much investment is going into Russian oil & gas?

News
Russia’s energy resilience has been something of a shock to global observers. Its determination to continue pumping out oil & gas at record levels is something to behold, keeping investment levels very high.
How much investment is going into Russian oil & gas?

Russian investment in oil & gas 

 

Higher output puts more cash in Russian energy companies’ pockets


Russian major's oil & gas output is at an all-time high
 
Russian majors’ ability to deal with sanctions has proved very effective. Leading energy companies, like Rosneft, Lukoil and Gazprom, have all been pushing ahead with extensive production activity. This is Russia after all, a nation not known for bowing to international pressures.
 
 
Oil output in 2018 broke yet another post-Soviet record. At that time, production reached over 555.8m tons – several million tons more than the 547m tons recorded in 2017. December 2018 saw all Russian oil majors up their production game.
 
According to the Russian Energy Ministry, gas production is also not slowing. 2018 proved another bumper year for Russian gas producers. Although growth was slow compared with oil at 1.3%, that still puts output over 700bn cubic metres. 
 
These production figures tell us two things. Firstly, Russian energy firms are determined to push on with increased production activity. And because they are doing so, they will end up with more money to invest in new or existing operations in the immediate future.
 

Over $200bn in Russian oil & gas investment is coming


Gazprom is the world's largest investor in oil & gas Capex
 
Those increased revenues mean Russia’s various oil & gas companies are some of the highest energy investors in the world.
 
Look at Gazprom. It alone leads the global rankings for oil & gas spenders, putting rivals like ExxonMobil in the shade with its massive spending plans. From now until 2025, Russia’s gas giant will be ploughing $160bn into its Russian and global projects, 84 of which are in the pipeline. 
 
Its capex is almost double the next largest rival, China’s Sinopec, which has investment plans worth $87bn spread over 74 developments.
 
It isn’t just Gazprom that has money to invest. NOC Rosneft has outlined an extensive spending plan targeted at the Far East and Arctic regions. Each of these territories are resource gold mines, sitting on enormous quantities of oil and natural gas.
 
“The plan to 2022 includes drilling 10 exploration wells, as well as a slew of geological surveys,” Rosneft said in a company statement. “Proposed exploration and prospecting on the Eastern Arctic and Far East shelves is estimated to cost 140bn roubles ($2.5bn).”
 
At present, Rosneft’s portfolio includes 28 Arctic licenced areas, holding estimated reserves of 34bn tons of oil.
 
In total, Rosneft will be devoting $50bn to new activity from now until 2025.
 
Despite its frigid temperatures the Arctic is probably Russia’s hottest E&P region. Spending on developments throughout the region is typically massive. The Yamal Arctic LNG 2 Plant, pioneered by Novatek, is a $25bn project, while its older brother, Yamal Arctic LNG 1, already cost over $27bn.

The pair are amongst Russia’s largest oil & gas projects.
 

Lukoil plans long-term muiti-billion capex schemes

Lukoil plans on soending $80bn over the next 8 years.

A look at long-term planning from Lukoil also reveals the ambition fuelling Russian oil & gas spending. 
 
In March 2018, Lukoil CFO said the firm plans to spend $24bn over the next three years. Including that figure, Lukoil’s investment plans until 2027 will total $80bn.
 
“We will try to balance the investment programme as much as possible in order to invest evenly approximately $8bn a year,” Alexander Matytsyn said in March 2018. “This budget is lower than our capex in recent years, mainly due to completion of large-scale projects in our refining segments.”
 
According to a report from Kallanish Energy, 80% of the above revenue will be deployed in Russia. 85% will go to upstream projects with the remaining 15% focussed on downstream development.
 

Russian oil & gas companies look beyond Russia’s borders


Iran is a target for Russian oil & gas investment
 
Russian activity is not limited by its own, admittedly impressive, geography. A number of companies are exploring tie-in and development deals in countries around the globe.
 
Perhaps the most significant of these is Iran. Various reports say that as much as $50bn is coming from Russian firms looking to develop Iran’s abundant natural resources. 
 
Of course, it’s the usual suspects lining up to do business with Iranian partners. Gazprom and Rosneft have started talks with Iran’s Oil Ministry to ink deals worth a potential $10bn. 
 
That is a low-ball estimate for the potential Russia sees in Iran. An unnamed Russian government official confirmed to FT Russia that there is as much as $50bn coming from Russian firms to Iranian developments.
 
Lukoil is not far behind its contemporaries. After meeting with Iran’s Oil Minister Bijan Zanganeh in Moscow in October 2018, Lukoil Chief Executive Vagit Alekperov said the company is now discussing the joint development of the Abe Timer and Mansuri fields with the National Iranian Oil Company.
 
There are also further efforts at play to increase the reach of Russia’s energy exports. For instance, the TurkStream pipeline Gazprom is currently building in the Black Sea region, connecting gas fields with transmission terminals in Turkey, is expected to come online in 2019.
 
Further afield, India is receiving Russian attention. Rosneft, for example, acquired 49% of India’s Essar Oil in 2017, giving Russia’s NOC access to Indian refinement capacity. In short, more Russian oil will be winding its way into India over the next few years. 
 

What is the future of Russian oil & gas investment?

 
The answer to the above? Bright. Very bright. Russia, as the world’s largest country, rarely does things on a small scale, and oil & gas spending certainly is not a small-time operation. 
More than $200bn is being spent by just three companies over the next six years. 
 
Of course, this is will be affected by any fluctuations in the global oil price. Wall Street currently forecasts a global average price of up to $73 per barrel. While prices could dip to $59 per barrel, most of Russia’s largest energy companies have based budgets around a $50 oil price. 
 
Therefore, the optimistic outlook in oil prices worldwide means Russian spending can stay high into the future.
 
With those impressive investment plans will come an increased demand for oil & gas equipment. And, as Russia relies on imports of said equipment, the export opportunities for international companies catering to this demand will rise too.
 
MIOGE, the Moscow International Oil & Gas Exhibition, is the place to discover them.
 

MIOGE 2019: Russia’s no.1 international oil & gas equipment exhibition 

 
Over 560 companies from around the world trust MIOGE to put them in front of, and do business, with representatives from across the oil & gas value chain.
 
Here, you’ll meet the players behind the Russian oil & gas projects listed above, as well as getting details on Russia’s project landscape from to 2025 and beyond. 
 
Find procurement, engineering and purchasing specialists exclusively at MIOGE. 
 
Russian majors, including Gazprom, Tatneft, Rosneft and Lukoil, attend the show every year. Why? To meet new partners and suppliers of in-demand oil & gas equipment and technology. 
 
To reserve a stand, click here.
 
Want more information on how MIOGE can help grow your business in Russia’s enormous oil & gas industry? Contact our team today.