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Russian Oil Companies in an Evolving World: The Challenge of Change

Authors:
  • Primakov Institute of World Economy and International Relations; ENERPO Center of the European University at St.Petersburg

Abstract and Figures

This book examines Russia’s capacity to respond to a changing world, and it does so through the lens of the country’s oil industry. The reasons for this choice of topic are the place of the petroleum sector in Russian society, the place of Russian oil and gas in the world’s energy supply and the rapid pace of change in the global energy industry. Against a backdrop of dramatic social and political change, this book presents a systematic analysis of how modern energy developments in the form of shale oil and renewable energy, for example, are being handled by Russia’s five largest oil companies: Rosneft, LUKOIL, Gazprom Neft, Surgutneftegas and Tatneft. With a combined value of over USD 180 billion and wide-ranging political connections, not only are these companies vital channels for much of Russia’s income, but they also constitute the backbone of the Russian economy.
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... The Arctic continental shelf presents considerable challenges for offshore oil and gas exploration, where those proposing to do so face harsh environmental conditions with extremely low temperatures, icebergs, icing, the lack of infrastructure or advanced technologies and, related to those, the need for considerable investment. A number of analyses of oil and gas company operations on the Arctic shelf have been prepared in recent years, focusing on commercial and legal issues, risks and opportunities as well as on the impacts of western economic sanctions (Henderson & Loe, 2014;Koivurova, 2017;Mitrova et al., 2018;Nikitina, 2018;Shapovalova & Stephen, 2019;Overland & Poussenkova, 2020). Sidortsov (2016Sidortsov ( , 2017 reviewed Russian policy, specifically the legal and regulatory frameworks, on the access to offshore oil and gas resources and the conditions of their development. ...
... In general, the Gazprom Neft strategy aims to adapt swiftly to external challenges in the upstream segment, focusing on cost control, import-substitution, development of new technologies, and implementation of major onshore and offshore projects in the Arctic (Overland & Poussenkova, 2020). According to Gazprom Neft Sustainable Development Report (2021), one of the company's primary targets today is improving transport safety and logistics in its Arctic operations. ...
Article
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The development of its Arctic offshore oil and gas resources remains one of Russia’s strategic priorities, both in terms of ensuring national energy security and cementing its presence in the region. As existing fields in West Siberia mature and become less productive, Russia needs to bring new sources on stream, with these being primarily located in the country’s Arctic region, including its continental shelf, even though this presents considerable challenges to the industry. Some steps have already been taken to initiate and encourage this development, such as the process of adoption of a federal law liberalizing continental shelf access for private oil and gas companies and ongoing domestic development of offshore technologies that can be applied in the Arctic. This article analyses Russia’s contemporary strategies in the energy sector in terms of future offshore oil and gas development in the Arctic. It provides relevant updates on Arctic offshore oil and gas activities in Russia since 2014, illustrates the challenges Russian companies face in operating in this region, and outlines commercial agreements underlying long-term Arctic offshore interests. This analysis also helps to better understand future risk-sharing strategies for the Russian oil and gas companies in the Arctic that will need to be developed.
... The Arctic continental shelf presents considerable challenges for offshore oil and gas exploration, where those proposing to do so face harsh environmental conditions with extremely low temperatures, icebergs, icing, the lack of infrastructure or advanced technologies and, related to those, the need for considerable investment. A number of analyses of oil and gas company operations on the Arctic shelf have been prepared in recent years, focusing on commercial and legal issues, risks and opportunities as well as on the impacts of western economic sanctions (Henderson & Loe, 2014;Koivurova, 2017;Mitrova et al., 2018;Nikitina, 2018;Shapovalova & Stephen, 2019;Overland & Poussenkova, 2020). Sidortsov (2016Sidortsov ( , 2017 reviewed Russian policy, specifically the legal and regulatory frameworks, on the access to offshore oil and gas resources and the conditions of their development. ...
... In general, the Gazprom Neft strategy aims to adapt swiftly to external challenges in the upstream segment, focusing on cost control, import-substitution, development of new technologies, and implementation of major onshore and offshore projects in the Arctic (Overland & Poussenkova, 2020). According to Gazprom Neft Sustainable Development Report (2021), one of the company's primary targets today is improving transport safety and logistics in its Arctic operations. ...
Chapter
Full-text available
The development of its Arctic offshore oil and gas resources remains one of Russia’s strategic priorities, both in terms of ensuring national energy security and cementing its presence in the region. As existing fields in West Siberia mature and become less productive, Russia needs to bring new sources on stream, with these being primarily located in the country’s Arctic region, including its continental shelf, even though this presents considerable challenges to the industry. Some steps have already been taken to initiate and encourage this development, such as the process of adoption of a federal law liberalizing continental shelf access for private oil and gas companies and ongoing domestic development of offshore technologies that can be applied in the Arctic. This article analyses Russia’s contemporary strategies in the energy sector in terms of future offshore oil and gas development in the Arctic. It provides relevant updates on Arctic offshore oil and gas activities in Russia since 2014, illustrates the challenges Russian companies face in operating in this region, and outlines commercial agreements underlying long-term Arctic offshore interests. This analysis also helps to better understand future risk-sharing strategies for the Russian oil and gas companies in the Arctic that will need to be developed.
Article
This book is a geopolitical examination of five Russian oil companies ability for change given social, political and environmental contexts. Specific attention is given to how these five companies have evolved over time, their transparency or lack thereof, and how they have handled the energy transitions of shale oil revolution, offshore oil and energy markets. On the surface this book appears to be an energy policy and business management book, but energy companies around the world are major drivers impacting climate, energy consumption as well as geopolitics (Considine and Paik 2018; Katusa 2014; Yergin 2009, 2012). This is particularly true for Russia (Gustafson 2017; Rossbach 2018) and the US (Katusa 2014).
Article
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Russia is estimated to hold the world's largest technically recoverable shale-oil resources. The conventional oil resource base is still very large, but there are doubts about how much is economically recoverable. Increasing attention is given to unconventional oil. The purpose of the article is to assess whether fundamental conditions for sustainable, profitable production of unconventional oil are in place. Compared to the successful development of unconventional oil in the USA, Russia has several disadvantages. The Russian oil sector is dominated by big companies without the flexibility in methods and decision-making required in very heterogeneous unconventional projects. Infrastructure is less accessible in Russia than in most American projects. On a more fundamental level the relatively poor condition of geological data collections is a serious cost increasing factor, and the system for development and dispersion of new technologies has critical shortcomings. Russia lacks appreciation of risk taking and a corresponding regulatory framework, as well as relevant financial mechanisms. Nevertheless, government documents almost exclusively focus on technology as such as well as on taxation and tax benefits as preconditions for successful development. Without addressing the fundamental institutional problems, the potential for exploiting the resources base will be limited.
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This chapter analyses bilateral Chinese–Russian energy relations , pre-and post Crimea. The signing of the Power of Siberia megapro-ject in May 2014, only two months after Russia's annexation of Crimea, created the impression that China bankrolled Russia out of the crisis. To assess the veracity of this impression, the authors draw a longer timeline of Russian–Chinese cooperation, examining general economic data as well as Chinese involvement in four concrete energy projects managed by leading Russian energy companies. They find that, in general, deals made from 2014 onward are in line with trends that originated well before the current crisis in Russia's relations with the West, and that Chinese financial contributions to the sector are not as large as they sometimes appear.
Chapter
Full-text available
In Russia, civil society engagement with the petroleum sector is surprisingly rich and varied for a country that is ranked low on most democracy-related indicators. This chapter finds that there is a lively and varied public debate, with business associations, research institutes, independent experts, indigenous organizations and the few surviving independent media actively and often competently analysing and commenting on a broad range of issues related to the oil and gas sector. Russians were early users of social media, which occasionally also function as a platform for discussion of petroleum-policy issues. However, the real impact of civil society on decision-making and policy formulation in the petroleum sector is not as great as the diversity of actors and discussion might imply. One key reason is the tight government control over mainstream media outlets. The situation for free speech and civil society worsened steadily from around 2004 to 2016. As in neighbouring Kazakhstan, the Russian population puts a high premium on stability over freedom. While a central concern in this book is whether the media and civil society have any influence on the petroleum sector, in Russia the paradoxical situation is that the relationship is often reversed: the gas company Gazprom, rather than another organizational vehicle, is used by the government to control key mass media, and the oil company Yukos played a central role in promoting civil society until its main owner Mikhail Khodorkovsky was arrested and the company was carved up.
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This article explores the effect of news shocks in open economies using worldwide giant oil and gas discoveries as a directly observable measure of news shocks about future output-the delay between a discovery and production is on average four to six years. We first analyze the effects of a discovery in a two-sector small open economymodel with a resource sector.We then estimate the effects of giant oil and gas discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil or gas discovery, the current account and saving rate decline for the first five years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, whereas GDP does not increase until after five years. Employment rates fall slightly and remain low for a sustained period.
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The article analyzes preconditions, specifics, and results of the first Russian environmental rating of oil and gas companies. The Russian oil and gas industry, strategically important for the national economy, is also environmentally unfriendly and opaque. Companies lack adequate motivation to follow best international environmental standards and practices for disclosure of information about their environmental performance and impacts. Environmental responsibility of the oil and gas sector has been subject to both public scrutiny and scientific discussions for many decades; however, these issues have been rarely (if ever) explored using a reliable and equitable tool which would provide for comparison between different companies. This article attempts to analyze the application of such a tool – environmental responsibility rating of oil and gas companies in Russia. The idea behind launching the rating was to provide end consumers and financial institutions an opportunity to compare the companies’ products and services and to evaluate corporate risks (including reputation) on the basis of unbiased comparison and evaluation of the companies’ environmental responsibility and their management’s commitment. The rating’s rationale is premised on the assumption that an environmental rating based on publicly available data and information could be accepted by companies’ top management as a competitive advantage (or disadvantage) in obtaining access to better (cheaper and long-term) financial resources, and in improving market demand for their final value-added products. This study offers a complex analysis of qualitative and quantitative indicators of companies’ activities in three fields: environmental management, environmental impact, and disclosure/transparency. The rating’s results demonstrate that there are big differences among Russian oil and gas companies in their levels of environmental responsibility and transparency. Large, publicly-traded companies with a strategic focus on gas have received top ratings. Privately held, smaller oil companies are at the bottom, along with the subsidiaries of major Russian and international corporations (transparency of subsidiary companies tends to be lower than that of parent corporations). In some cases, a close relationship between the company’s management and population of the surrounding region plays a positive role in promoting environmental responsibility. Assumptions for this environmental rating have been at least partially confirmed by the positive dynamics of the associated petroleum gas (APG) utilization level by oil and gas companies in Russia. This rating is based on novel and creative approach and has already contributed to forming average quantitative impact indicators in the industry. The assumptions and conclusions of this study can also be tested by comparing the first environmental rating of oil and gas companies’ data with the data produced in the next rating.
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