Energy 12 April, 2018 10:00 am   

This is not yet the end of the Russian oil eldorado

The times of the oil eldorado for Russia are slowly coming to an end, but the effect of sanctions imposed on Russian companies and the budget can only be felt in 10-15 years. The condition is to keep them in power – said Dr. Szymon Kardaś, an analyst at the Center for Eastern Studies (OSW), in a comment for the

Sanction effect? Greater abstinence

The expert of the Center for Eastern Studies answered the question whether the freezing of cooperation between the Italian ENI with the Russian Rosneft in the Black Sea shows that the sanctions are starting to take effect. He said that the effects of the sanctions introduced in 2014 were already noticeable in the form of a deterioration in the cooperation climate.

– It was visible in the perspective of cooperation between Western and Russian companies. It was possible to observe greater temperance, as exemplified by Lukoil, who started selling its assets in Western European countries, motivating it with the context of the introduced sanctions. Rosneft is also not planning new expansion, apart from maintaining assets in Germany. In the West sanctions are identified as a risk as well. This is also evident from the example of Western companies on the Nord Stream 2 project in terms of financing. Contributions from Western companies in the implementation of this project took the form of loans. Abstinence concerns sanctions already introduced and those that can be introduced – Szymon Kardaś said.

The expert stressed that the consequences of sanctions will not be felt in the short-term or medium-term. – Mining projects involving Western companies providing technologies, for example in shale projects, have a long-term horizon. Their implementation will be delayed, but it should be remembered that these projects were not prioritized in the coming years – he stressed.

He reminded that the Russians still use the present raw material base, which is located on land, using simpler technologies than in the case of marine, shale and Arctic deposits. – The horizon is much longer than a few years. Mining projects, where Western companies give up or withhold their engagement, had a prospects for exploitation in the second half of the 2020s. It is difficult to assess how sanctions are severe for the Russian energy sector. One can assume that their effect is not currently felt by Russia. However, if the sanctions were maintained for the next 10-15 years, then they could affect the mining projects – he said.

He added that the level of oil extraction in Russia has remained at a similar level in recent years. – Because of tax changes introduced by the Russians, budget revenues from mining tax should be higher. There was also a price rebound in the crude oil markets, which in turn contributed to the increase in export earnings. In 2015 – 2016, there was a significant decrease in revenues from crude oil sales in relation to 2014, however, in 2017 there was an increase compared to the previous year, which was the result of the increase in raw material prices – he reminded at the end.