The challenges of financing Russia's upstream

As of Q1 2016, Russian upstream players have accumulated around US$140 billion of long-term debt. In the last two years, EU/US sanctions have prohibited access to Western long-term debt markets to certain operators. This pushed Russian upstream companies to find alternative ways of financing. Relying on domestic and Asian banks, oil supply prepayments, and REPO loans, operators have diversified their sources of funding and kept increasing liquids production. However, not having access to cheap Western capital and facing higher premiums, Russian companies face a difficult choice between increasing their interest burden, selling assets, or delaying some investment programmes which could make sustaining the current levels of output challenging in the long term.