Russia Ramps up Production Drilling to 10-year High in 2022 Despite Sanctions
Bloomberg unexpectedly entered into a controversy with European Commissioner for Energy K. Simson, who recently stated that the voluntary reduction in oil production by 500 thousand barrels per day announced by Russia in March 2023 was actually a forced step due to the lack of its own technologies.
Russian oil companies in 2022 increased the volume of development drilling to a record level over the past 10 years, despite the sanctions. On February 14, 2023 Bloomberg reported about it.
There are currently few indications that Western sanctions or the withdrawal of some major Western companies from Russia have directly harmed oil exploration and production operations.
This also explains the recovery in Russian oil production in 2H 2022, even despite the introduction of additional restrictions on its export.
Estimates are based on data from Russian sources:
– Institute of Petroleum Geology and Geophysics. A.A. Trofimuk;
– Slavneft-Megionneftegaz;
– Interfax report based on data from CDU TEK.
According to the data, the volume of development drilling in Russia and the number of oil wells commissioned in Russia in 2022 increased markedly.
– the total volume of development drilling in Russia in 2022 amounted to 28.4 thousand km, which is 8.8% more than in 2021 and is the highest figure in more than 10 years;
– the number of wells commissioned increased by 6.8% and exceeded 7.8 thousand, while most of the key oil companies exceeded the figures for 2021 (only Rosneft showed a decrease, it amounted to 9.7%).
According to V. Mikhalchuk, head of the research center of Business Solutions and Technologies (formerly part of the Russian division of the consulting company Deloitte & Touche):
– oil and gas industry of the Russian Federation basically continues to operate in the same way as before;
– Russia was able to retain most of the competencies, assets and technologies in oilfield services.
Russia was able to increase the volume of well drilling in the face of sanctions pressure due to 3 key factors:
– large foreign companies accounted for only 15% of the oilfield services segment in Russia in 2021 (according to Vygon Consulting);
– the main part of this market is occupied by Russian companies, in particular, their own divisions of Rosneft, Surgutneftegaz and Gazprom, so the withdrawal of several Western oilfield service companies from Russia did not have a critical impact on drilling volumes,
– a number of large Western oilfield service providers continue to operate in Russia, incl. SLB (formerly Schlumberger) and Weatherford International;
– 2 large oilfield service companies – Halliburton and Baker Hughes – sold Russian assets to local management:
– – this allowed to save staff and accumulated experience,
– – and the problem of the lack of Western high-tech equipment is being solved, incl. due to gray imports through friendly states.
With these data, Bloomberg enters into a debate with the European Commissioner for Energy K. Simson. She, speaking at the 6th International Exhibition EGYPS (Egypt Petroleum Show) in Cairo, said:
– the voluntary reduction in oil production by 500 thousand barrels per day announced by Russia in March 2023 was in fact a forced step;
– Russia does not have the ability to maintain production volumes, because they do not have access to the necessary technologies.
Bloomberg believes that the data from Russia says otherwise.
