Page 6 - FSUOGM Week 02 2020

FSUOGM COMMENTARY FSUOGM
Russia presses on with import substitution drive
Russia is continuing efforts to replace imported oil and gas equipment with local content, to safeguard against potential new sanctions
RUSSIA
WHAT:
Imports now account for only 45% of equipment and technology in Russia’s oil industry, down from 60% in 2014.
WHY:
Russia has invested in expanding domestic manufacturing because of the risk of increased Western sanctions pressure.
WHAT NEXT:
Moscow’s focus moving forward is primarily on localising LNG production and shipbuilding.
RUSSIA has made headway in expanding the domestic manufacturing of oil and gas equip- ment, but plans to provide $490mn in state support over the next five years to keep up the momentum, Industry Minister Denis Manturov said on January 10.
In an interview with the Energy Ministry’s inhouse magazine Energy Policy, Manturov said the share of imported equipment and technol- ogy in ithe oil industry came to 45% last year, down from 60% in 2014. The target for this year is a further reduction to 43%, he said.
Import substitution has been a cornerstone of Russian economic policy since Western pow- ers began imposing sanctions on the country’s oil sector in response to Moscow’s annexation of Crimea in early 2014. These sanctions only restrict the supply of Western technology and equipment to offshore Arctic, deepwater and shale oil and gas projects – many of which are on hold anyway because of low oil prices. But with relations with the US still sour, Russian authorities are fearful they could be expanded to other, more strategically important sectors such as LNG production, jeopardising Russia’s ambi- tion of becoming a world-leading exporter of the super-cooled gas.
Russia’s dependence on foreign oil and gas equipment varies. The share of imports in enhanced oil recovery (EOR) work, including horizontal drilling, is currently at 45%, accord- ing to Manturov. The share in oil refining is 43%, whereas in exploration, it is only 30%. As
for LNG and offshore oil and gas production, the share is estimated at 50%, and Moscow sees bringing this down as a priority.
Between now and 2024, the government intends to commit more than RUB30bn ($490mn) in state support to develop its domestic oil and gas manufacturing base. This support will include loans from the Industrial Development Fund, research and development subsidies and grants for developing equip- ment. A key focus will be the local production of equipment for mid and large-sized LNG production trains, as well as for hydraulic frac- turing – a very common technique for boost- ing recovery in Russia.
LNG
Russia’s top independent gas company Novatek is at the forefront of Russia’s LNG drive. The company brought on stream Russia’s first new LNG export project in almost a decade, the 16.5mn tonne per year Yamal LNG plant, in late 2017, and plans to commission a larger plant on the Gydan Peninsula further east, the 19.8mn tpy Arctic LNG-2, in 2023.
Both of these projects rely heavily on foreign equipment and technology. But Novatek intends to rely on the domestic market to build another new plant, the 5mn tpy Obsk LNG, also due to start up in 2023. Obsk LNG is to showcase Novatek’s own liquefaction technology, known as Arctic Cascade. But the company intends to trial Arctic Cascade’s use on a smaller scale
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w w w. N E W S B A S E . c o m Week 02 15•January•2020