Russia's upstream under sanctions: the new normal Report

Insight 23 June 2016

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Report summary

Russia's upstream industry has shown resilience to EU/US sanctions, despite delays to over US$10 billion of IOC funded exploration activity in key supply growth areas - Arctic offshore, deepwater and shale oil projects. In spite of limited financial support from the State due to lower budget revenues, Russian energy companies have raised around US$14 billion from Chinese sources, allowing them to continue with flagship projects. Russian oil production has not been affected in the near term, and reached a post-Soviet peak of 10.91 million b/d in March 2016. We believe sanctions pose longer term risks that will impact Russian oil production post 2020.

Executive summary
- IOCs support frontier exploration before sanctions introduced
- Sanctions delay exploration of supply growth areas
- IOC commitment remains
- State companies hardest hit by financial sanctions
- Low oil prices limit State support
- Financing from Asia still available
- Rosneft's short-term outlook
- Large-scale Arctic offshore production unlikely in the near-term
- Production heartlands reach record levels
- What next?