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Russian oil industry to replace imports by 2018 — deputy minister

The sectoral sanctions imposed by the EU against Moscow prohibit the supply of equipment to Russia for exploration and production on the continental shelf, in the Arctic and at shale deposits

YUZHNO-SAKHALINSK, September 23. /ITAR-TASS/. It will take three to four years for the Russian oil and gas industry to replace equipment imports with domestic output amid Western sanctions, Deputy Energy Minister Kirill Molodtsov said on Tuesday.

The Russian authorities are taking active efforts to reduce the domestic oil and gas industry’s dependence on foreign equipment and services through the implementation of the import substitution program, Molodtsov said. “Most technologies have Russian analogues one way or another,” Molodtsov said at a conference on Sakhalin Island’s oil and gas.

The deputy energy minister said that 80% of the equipment used for extracting hard-to-access resources was produced in Russia.

The sectoral sanctions imposed by the European Union against Moscow prohibit the supply of equipment to Russia for exploration and production on the continental shelf, in the Arctic and at shale deposits, and bar foreign companies’ participation in such projects.

The US Department of Commerce announced in August that US firms were banned from selling equipment to Russia for deep-water projects, on the Arctic shelf and at shale deposits. The ban applies, in particular, to drilling platforms, horizontal drilling equipment, software for oil and gas extraction, high-pressure pumps and hardware for seismic exploration work.

Threat to cooperation in oil & gas industry

The Western sanctions have thrown into question the projects of Russian oil and gas giants with foreign companies and the activity of oil services companies performing up to 65% of all works on the Russian market.

Not a single foreign company has announced plans to quit joint projects with Russia so far. On the contrary, the US authorities allowed ExxonMobil on Monday to continue exploratory drilling of the Universitetskaya-1 well in the Arctic Kara Sea jointly with Russian oil company Rosneft.

A week earlier, Norway’s DolphinGroup engaged in the seismic analysis of geophysical data on the same shelf received similar permission from the Norwegian government.

Risks remain, however. Bloomberg news agency estimates that the anti-Russian sanctions may affect such large oil services companies as Schlumberger, Halliburton, Baker Hughes and Weatherford International.

Last week, the Russian government returned after a two-year break to the talks on establishing the oil services state corporation designed to make domestic firms more competitive with foreign companies.

Russian Natural Resources Minister Sergey Donskoy said at the time that the company integrating oil services assets would be established by the end of 2014.

Russia has been a leader in oil and gas works in permafrost conditions, but is lagging behind western countries in the development of technology for natural resources extraction on the deep-water shelf and at shale oil deposits, industry experts say.