New oil well drilling in Russia has accelerated to the fastest in five years despite the recent oil price decline, Bloomberg has reported, suggesting the pick-up in activity anticipates a further reversal in OPEC+ production cuts and the possibility for the removal of U.S. sanctions.
The current level of drilling activity is also some 30% higher than it was before the war in the Ukraine started, Bloomberg noted, in evidence of the resilience of Russia’s energy industry to Western sanctions. Some of these targeted specifically the oil and gas industry on the assumption that local producers would be crippled if access to Western technology and equipment was cut off.
“We can safely say that the Russian oilfield service industry has, for the most part, successfully adapted to the sanctions regime,” Ronald Smith, partner in Oil and Gas Consulting Partners, told Bloomberg. “This does not mean that a perfect replacement has been found in all cases, but that suitable substitutes exist at a broader level,” Smith added.
Thanks to this increased drilling, Russia’s production capacity for crude oil and condensates now stands at between 11 million and 11.5million barrels daily, Smith told Bloomberg. This is the same production capacity that the country had back in 2016, the report notes.
“There might be some degree of regress in drilling technologies, like shorter horizontal legs, fewer fracking stages, less precise well bore positioning,” a former Russian oil executive now turned researcher in the U.S., told Bloomberg. “In general, the impact of the sanctions and departure of the western service providers is much lower than what was predicted by many three years ago,” Sergey Vakulenko from the Carnegie Endowment for International Peace also said.
Meanwhile, the oil price rout is hurting Russia’s revenues from the commodity. For April, oil and gas revenues collectively are estimated by Reuters to book a 22% decline on the year, to come in at $11.6 billion.
By Irina Slav for Oilprice.com
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