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Import Substitution in Oil and Gas Industry: Myths and Reality

Import Substitution in Oil and Gas Industry: Myths and Reality

The import substitution process was started in earnest after the imposition of sanctions in 2014. Six years is a substantial enough period to summarise interim results.

On the one hand, the figures are not that bad: the industry already depends on import by less than 50 per cent. On the other, this is a typical average, while details are all-important.

And an important question is what exactly should be deemed Russian equipment, considering active use of foreign parts and especially software.

Some import substitution examples are a success indeed, but there are also failures that are no less obvious. The latter in fact emphasise the effect of precisely aimed sanctions.

The new, and much more demanding OPEC+ deal has led to large-scale closure of old wells whose operation did not require much imported equipment. At once, however, the question arose about how Russia will withdraw from the deal in the future and whether it will be able to promptly increase production. Only new projects can compensate for the closure of the old wells. Meanwhile, dependence on import is greater there. And here is where lagging behind in offshore technology and hydraulic fracturing can have an effect.

In the gas sector, the key problems are also of an “offshore nature”; this goes for LNG production as well as the construction of offshore gas pipelines.

The completion of Nord Stream 2 by Russia on its own has become the main “hit” and a real detective story – so far without a happy end for Russia though.

From the new report you will learn:

  • What the Russian government deems national products
  • What new sanctions have been imposed on Russian oil and gas in 2020
  • The official results of import substitution by segments
  • Where the situation in terms of import substitution is most problematic
  • Why the greatest success has been achieved in the production of drilling equipment in Russia
  • How Chinese equipment manufacturers have driven out Western ones
  • What chances of import substitution are in hydraulic fracturing
  • Why geophysics is a failure in import substitution
  • What the prospects of development are for the Russian oil and gas industry on the continental shelf and offshore in general
  • Whether there is a Russian technology for large-scale LNG production
  • What problems Russian shipbuilding faces
  • How import substitution is regulated in the Russian oil and gas sector and who the main bureaucratic players are in this area
  • What special investment contracts (SPIC) 1.0 and 2.0 are

Contents of the report:

Introduction 3
1. Drivers behind Import Substitution 5
2. Criteria for Grouping Oil & Gas Sector Products under Imported Category. Official Results of Import Substitution in Russian Oil & Gas Industry 10
3. Import Substitution Success Story: National Drilling Equipment Buoys Upstream Segment 16
4. ‘Pain Points’ of Import Substitution in Russian Oilfield Services Industry Hydraulic Fracturing and Seismic Surveying 25
4.1. Hydraulic Fracturing 25
4.2. Seismic Surveying 32
5. Development Prospects for Russian Oil and Gas Industry Offshore in Context of Import Substitution 35
5.1. Pressure on Offshore Projects 35
5.2. Lack of Drilling Platforms and Subsea Production Systems 38
5.3. LNG Production: in Search of Russian Technology 43
5.4. Problems of Russian Shipbuilding 47
6. Regulation of Import Substitution in Oil and Gas Sector 52
Forecast 62
Appendix 1. Plan of Import Substitution Measures for Mechanical Engineering for the Oil and Gas Industry in the Russian Federation 65
Date of release: December 3, 2020

If you are interested to obtain please contact » Elena Kim

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After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07
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