Page 4 - FSUOGM Week 11 2022

FSUOGM COMMENTARY FSUOGM

Who will replace Western

IOCs in Russia?

The assets could be nationalised, and meanwhile Chinese and Indian

investors could be waiting in the wings

RUSSIA WESTERN international oil companies (IOCs) may prevail in the short to medium term.”
that have been working in Russia for decades “If the ban is imposed, the exodus of for-
WHAT: have announced plans to either scale back or eign companies from Russia may be stalled for
All Western majors withdraw entirely from the country in the wake a while, but the bigger sales will most likely go
involved in Russia have of Moscow’s invasion of Ukraine. This raises the ahead, opening opportunities for other foreign
announced plans to exit question of who will step in to replace them. investors.”
or scale back in the BP, Equinor, Eni, ExxonMobil and Shell have Rystad warns that these foreign-owned stakes
country. all said in the last few weeks they will leave Rus- will almost all be sold off at a huge discount to
sia, while others like OMV, TotalEnergies and their real value, and some may be nationalised by
WHY: Wintershall Dea have said they will refrain from the state through acquisition. The Kremlin has
IOCs face mounting further investments in the country. warned that it could seize assets, although Rystad
pressure to quit ties with “The exodus of international majors from sees this as a less likely scenario.
Moscow over its invasion Russia appears to have taken their partners and “This measure may be taken in response to
in Ukraine. the Russian state itself by surprise,” Norwegian similar actions taken in countries that the Krem-
consultancy Rystad Energy notes in a research lin views as ‘unfriendly’, if it is taken at all,” Rys-
WHAT NEXT: note. tad says. “BP’s near 20% stake in Rosneft is the
Chinese and Indian Russia’s government has responded by most likely candidate due to the magnitude of
investors are seen as imposing a temporary ban on any merger and the stake and the existing presence of the state
favourites to replace acquisition activity to prevent the companies in the company’s ownership. A similar scenario
them. from leaving too quickly. It has done so to avoid could materialise for the Sakhalin-1 and Sakha-
any operational disruptions as a result of their lin-2 projects.”
departure, and give companies and business
owners time to assess the current market land- Enter the dragon
scape and weigh up their decisions, which the The next question is who these replacements will
Kremlin views as political in nature. be. And an obvious choice would be China.
“Predicting the actions of oil and gas industry Several weeks before Moscow began
players in the current geopolitical and commer- waging war in Ukraine, Russian President
cial environment is particularly challenging,” Vladimir Putin was in Beijing for talks with
Rystad notes, yet the consultancy assumes that his Chinese counterpart, Xi Jinping. Both
those that desire to leave will do so eventually, sides were keen to stress their unity in the
“as increased geopolitical and reputational risks face of heightened tensions with the West.

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