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Foreign players to tap 50% of Russia’s oilfield services if local firms receive no support

Currently, foreign companies account for 18% of Russia’s oil services market, according to the energy minister
Russian Energy Minister Alexander Novak Sergei Bobylev/TASS
Russian Energy Minister Alexander Novak
© Sergei Bobylev/TASS

MOSCOW, September 8. /TASS/. The lack of measures to support Russian oilfield service companies may result in the share of foreign players on the country’s market rising to more than 50% by 2022 from the current 18%, Energy Minister Alexander Novak said in an article in the Energy Policy magazine published on Tuesday.

"According to the Russian Energy Ministry’s estimations, if no systemic measures are taken to support the sector, the market share of foreign oilfield service companies may rise to over 50% by 2022," he said.

Russia’s market of oilfield services is currently estimated at 1.5 trillion rubles ($19.7 bln) per year. Russian independent enterprises account for roughly 46% of the market, oilfield service units of large Russian oil companies - for 36%, and foreign corporations - for another 18%.

Russia’s oilfield service sector faces a threat of losing key high-tech competences, including such strategically important ones as geophysical and seismic well logging, as well as productivity software, due to an increase in the share of foreign companies, the minister said, adding that the minimum utilization level required for keeping the oilfield service segment competitive stands at around 80% of the level of 2019.

Due to that the energy ministry has drafted measures to support the sector. Particularly, 12 oilfield service organizations have already been added to the list of backbone enterprises of the Russian economy, and another five are under consideration. Moreover, creation of conditions for formation of the fund of uncompleted wells is being addressed as requested by the Russian president.

Support program expansion through gas companies

The Russian Energy Ministry proposes expanding the program of support for oilfield service companies to include gas production enterprises and gas production projects, Energy Minister Alexander Novak said.

"Currently, the possibility of expanding the program to include gas production enterprises and gas production projects is being discussed. This proposal is dictated by the continued low economic activity in the main markets - gas consumers - which is associated with the coronavirus pandemic, lack of storage space in Europe after the winter season, as well as a high supply base," he said.

According to Novak, the cost of gas in the European and Asian markets sees historic lows, which is why a number of gas projects has been postponed. "The fall in investment programs for drilling is estimated at 40%, which also directly affects oilfield service contractors working on gas projects. In our opinion, the inclusion of gas facilities in the support program will help preserve the potential of domestic gas producers and Russia's share in world markets," Novak said.