Page 4 - FSUOGM Week 50 2022

FSUOGM COMMENTARY FSUOGM

Russia set for plunge in upstream

investment this year: Rystad

The impact of sanctions and an exodus of Western partners is now starting to be felt.

RUSSIA TOUGHER-THAN-EVER Western sanctions A key factor behind the slump has been the
and the mass withdrawal of foreign partners delay of several large-scale LNG projects, which
WHAT: from Russia’s oil and gas industry are starting are now struggling with technological and fund-
Russian upstream to show an impact, with upstream investment ing constraints as Western partners leave. Prior
investment is expected in the country set to plunge to $35bn this year, to Moscow’s invasion of Ukraine, investments
to fall to $35bn this year, versus a prediction of close to $50bn prior to the had been set to rise on the back of several large-
versus a $50bn pre-war war, Norwegian consultancy Rystad Energy has scale gas field projects Gazprom had in the Yamal
projection, according to estimated. region, partly to feed its planned LNG complex
Rystad Energy. For comparison, investments in Russia’s on the Baltic Sea. Meanwhile, Novatek was push-
upstream came to $45bn last year, up from a ing ahead with its Arctic LNG-2 project.
WHY: coronavirus (COVID-19) caused low of $40bn Both Gazprom and Novatek say their respec-
Western investors, in the previous year. But with Russia increasingly tive LNG plans remain on track. Novatek said
operators, contractors cut off from energy and financial markets, future this month that Arctic LNG-2 was still scheduled
and suppliers have left investments are set to remain subdued until at to launch its first train in 2023 as planned.
and projects are being least the middle of the decade, according to Rys- “The war in Ukraine has cost the Russian oil
delayed. tad. That will mean fewer final investment deci- and gas sector dearly, with project investments
sions (FIDs) made, and operators being forced to taking a significant hit,” Rystad Energy senior
WHAT NEXT: make tough decisions on spending. Rystad notes analyst Swapnil Babele commented. “COV-
Investment is expected that while leading Russian oil and gas companies ID-related disruptions in 2020 dragged down
to remain subdued until Gazprom and Rosneft will be able to maintain spending, but this year looks set to be the start
2025. expenditure, other players will see investment of a multi-year slump that will make the COVID
get sapped. years pale in comparison.”

P4 www. NEWSBASE .com Week 50 15•December•2022