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16-18 June 2020 • Moscow • Crocus Expo

Russia is dependent on imported oil & gas equipment

Import substitution may be the top trend in Russian oil & gas right now, but that doesn’t stop the nation being dependent on imported equipment.
Russia is dependent on imported oil & gas equipment
It’s partly why sanctions are impacting Russian production, but also why sanctions aren’t biting as hard as their implementers might have hoped. The fact of the matter is, it’s mutually beneficial to all parties to keep the flow of equipment and machinery flowing.

Up to 90% of oil & gas project equipment in Russia is imported

Offshore oil rig piping

The headline says it all. On Russia’s major oil & gas projects, foreign products cover the bulk of in-use equipment. That covers everything from the largest offshore jacks to bespoke oilfield IT solutions.
Obviously, the share of domestically versus imported equipment changes depending on its nature, as well as the type of resources being extracted.
For example, the below breakdown the share of imported equipment in Russia’s oil & gas sector, according to research from Global Risk Insights:
• Hard-to-extract reserves – 50%
• LNG – 80%
• Offshore – 80%
In total, the entire Russian oil & gas sector was 70% dependent on Western technology. Companies like Schlumberger, Baker Hughes, and Halliburton, are all key suppliers of tech, as well as a full suite of oilfield services. These are used on significant developments from Russian majors, like Gazprom and Rosneft.
In terms of extraction technology, the market share for foreign-sourced equipment doesn’t sink below 60%. Let’s take a look:
• Pumps & compressors – 60%
• Equipment for field development – 61%
• Linear & stop valves – 62%
• Catalysts for oil refinery & processing – 74%
• Software & IT services – 91%
To get an idea of how Russia’s NOCs are dependent on such goods, take a look at the breakdown below, incorporating project location, companies involved, technology and dependence levels:
• Arctic offshore – Gazprom, Rosneft – Drilling rigs – High dependency
• Black Sea - Rosneft – Subsea processing equipment – High
• Kara Sea – Rosneft – Semi-submersible platform – High
• Western Siberia – Surgutneftgaz, Rosneft, Gazprom Neft, Lukoil – Hydraulic fracturing – High
• Okhotsk Sea – Gazprom, Rosneft – Subsea processing equipment - High
We can see there is massive demand for equipment from foreign manufacturers in Russia, sanctions or no sanctions. However, where the imports are coming from has started to change. Western dominance could be slipping, leaving gaps to fill for suppliers from other geographies – particularly Asia.

Asia encroaching on Western suppliers’ market share in Russia

Oil rig in the ocean

Like many things this century, the future looks Asian. China and South Korea are positioning themselves as key exporters of equipment and machinery. 
For instance, two Chinese companies are gradually replacing European and American companies by offering oil well services and technology on key projects. For instance, China Oilfield Services is doing drilling work on Gazprom Neft’s Kara Sea acreage, providing drills, jacks and oilwell tech.
Yantai Jereh Oilfield Services Group and Shaanzi Aipu Machinery are some of the other Chinese companies taking market share.
Transportation of LNG cargoes is another area where Asian firms are benefiting. South Korea’s Hyundai Heavy Industries has been commissioned by Novatek to supply 15 ice-class LNG vessels for the Russian firm’s Yamal LNG project.
Hyundai also has an agreement with Rosneft to establish a join engineering and project management centre to develop oil tankers. 
Japan, too, has had its own flutter of activity on the Russian sector. For Instance, Japan’s MOL and COSCO, both vessel owning companies, will control 7 LNG carriers for Yamal Arctic LNG project. However, Japan is limited in its accessibility due to its close geo-political relationship with the US. The nation’s equipment providers may find themselves hamstrung by the ongoing economic tussles between Russia and the West.
Another point to make is that equipment manufactured in China and other Asian states is perceived as lower quality compared with that made by Western fabricators. There’s also the fact that many spare parts are made in the West too, making maintenance dependent on, once again, imported products from US and EU sources.
Even so, if sanctions continue, then it’s implied that Asian companies will be wanting to invest heavily ion their own R&D process. The goal? Complete takeover of current equipment supply gaps.
The landscape is changing, but the export opportunities remain high. Discover these at MIOGE.

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

The Moscow International Oil & Gas Exhibition is the meeting place for the international community and Russia’s oil & gas industry. Over 560 companies trust the show to let them meet and do business with representatives from across the 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.