Oil and Gas Sector Regulation in 2022 and Prospects for 2023

2022 The year 2022 was very tough for the Russian oil and gas industry. After February 24, the industry was subjected to the most severe sanctions. However, their influence was quite different.

The oil industry even managed to increase annual production and find options for redirection of crude oil exports to other markets. On the other side, there was a serious drop in exports of pipeline gas, though in financial terms, this decrease was fully compensated by the rise in gas prices, which even allowed the government to collect additional taxes from Gazprom. In the meantime, LNG production and exports grew significantly.

Nevertheless, the industry is entering the year 2023 with anxiety. An embargo on petroleum products is being prepared.

The EU intends to continue to reduce purchases of Russian gas, which will inevitably affect Russian revenues. The launch of new LNG plants is in question due to technological sanctions.

There was a tough debate in Russia throughout the year about priorities of the state energy policy: whether it should focus on maintaining national revenues, which implies supporting national oil and gas exports, or it should inflict the maximal tangible damage on opponents, including the EU.

The latter option implied fast termination of hydrocarbon supplies to Europe. After the price cap was introduced, the discussion revived and focused on the question of how Russia should properly react to this step.

Another question is about the green agenda, because regulators assumed earlier that Russia should be within this global trend that was actually formed by the Europeans. Thus, it is a big question whether it is reasonable to keep insisting on accelerated energy transition in Russia.

The report elaborates on the following topics:

Preliminary production results in 2022

• Domestic production of crude oil, natural gas and LNG

The reaction of the oil industry to the toughest sanctions. Exports of Russian oil and petroleum products in 2022

• Adjustment to the EU embargo and price cap
• New customers, new logistics
• Expectations of exports of diesel and other petroleum products in 2023

Economic pragmatism vs. mobilization

• Decisions of Russian regulators to support the oil and gas sector
• Political decisions on counter-sanctions; their influence on the sector

The state fiscal policy

• The government’s disinclination to sacrifice budget revenues for current support to the oil and gas industry

The green agenda after February 24

• Development of the climate topic, promotion of carbon regulation, and the current status of the hydrogen hype

Prospects of developments

Contents of the report: