Russian Federation Oil and Gas Upstream Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)
The market is segmented by Location of Deployment (Onshore and Offshore)
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Key Market Trends
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The Russian Federation oil and gas market upstream is expected to grow at a CAGR of more than 2.5% during the forecast period of 2020-2025. Factor such as the reduction in the offshore drilling cost by 40% is expected to drive the Russian Federation oil and gas upstream market. However, the sanctions from the United States and Europe against Russia’s energy sector are likely to restrain the Russian Federation oil and gas upstream market.
The onshore segment, due to its less initial investment, is likely to dominate the Russian Federation oil and gas upstream market.
The Russian government offers a trillion-ruble tax cut and various incentives for operators in the Arctic offshore, which is likely to create several opportunities for the Russian Federation oil and gas upstream market in the future.
The increasing exploration and production activities in the offshore region are expected to drive the Russian Federation oil and gas upstream market during the forecast period.
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Key Market Trends
Onshore Segment Expected to Dominate the Market
For the past several years, Russia has been in the top three oil and gas producers of the world. Most of the country's oil and gas are exported to other countries, making oil and gas a significant revenue generation.
Russia, with the most abundant gas reserve in the world comprising 19.8% of the global gas reserve, is also the second-largest gas producer-only behind the United States. With countries around the globe trying to reduce carbon emissions by phasing out coal-based power plants, the growing electricity demand and the natural gas demand for power generation are expected to increase.
In 2019, the total crude oil production in Russia was 568.1 Million Tonnes (MT), which was higher than that of 2018, 563.3 MT. The increasing oil production in the country is likely to positively impact the Russian Federation's oil and gas upstream market.
In 2019, Equinor ASA and Rosneft PJSC took an investment decision on the first stage of the North Komsomolskoye field, an onshore oil and gas field located in Western Siberia in Russia. The North Komsomolskoye project was a part of the strategic cooperation agreement signed by Rosneft PJSC and Equinor ASA in May of 2012. Equinor holds 33.33%, and Rosneft holds 66.67% interest in the joint venture (JV) company SevKomNeftegaz that owns the license for the North Komsomolskoye field. Total recoverable volumes expected for stage one are estimated at 250 million barrels of oil and 23 billion cubic meters (bcm) of gas.
Therefore, owing to the above points, the onshore segment is likely to dominate the Russian Federation oil and gas upstream market during the forecast period.
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Increasing Offshore Activities Expected to Drive the Market
Though the country's major share of oil and gas production comes from the onshore fields, the country in the past years saw the decline in the production and reduction in onshore reserves. Recently offshore oil and gas have been adding significantly to the country’s hydrocarbon production due to increasing activities in the Arctic region.
The ban on technology purchases from the United States had made it hard for the country to develop complex shale and offshore projects; this has led to a shift from western technological partners to south and east, for assistance, and technical support. Chinese companies have been active in Russia in recent years in exploration in offshore fields, and Gazprom Neft has been actively talking with Chinese companies to develop the Chona project in Eastern Siberia.
In 2019, the total gas production in Russia was 679 Billion Cubic Meters (bcm), which was higher than that of 2018, 669.1 bcm. The increasing production of gas in the country is likely to create a positive impact on the Russian Federation oil and gas upstream market.
Rosneft, a Russian partially state-owned upstream and midstream oil and gas company, has been actively producing oil and gas from its offshore fields. The company shipped 100 million metric tons of oil from its Sakhalin-1 and North Chaivo projects in 2018 and is expected to increase this production in the forecast period.
Hence, owing to the above points, the increasing offshore activities are expected to drive the Russian Federation oil and gas upstream market during the forecast period.
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The Russian Federation oil and gas upstream market is fragmented. Some of the key players in this market include Rosneft Oil Company PJSC, PJSC Gazprom, PJSC Lukoil Oil Company, Novatek PAO, and Surgutneftegas PJSC.