Page 6 - GLNG Week 50 2022

GLNG COMMENTARY GLNG

Russia set for plunge in upstream

investment this year: Rystad

COMMENTARY Tougher-than-ever Western sanctions and the on the Baltic Sea. Meanwhile, Novatek was push-
mass withdrawal of foreign partners from Rus- ing ahead with its Arctic LNG-2 project.
sia’s oil and gas industry are starting to show an Both Gazprom and Novatek say their respec-
impact, with upstream investment in the country tive LNG plans remain on track. Novatek said
set to plunge to $35bn this year, versus a predic- this month that Arctic LNG-2 was still scheduled
tion of close to $50bn prior to the war, Norwe- to launch its first train in 2023 as planned.
gian consultancy Rystad Energy has estimated. “The war in Ukraine has cost the Russian oil
For comparison, investments in Russia’s and gas sector dearly, with project investments
upstream came to $45bn last year, up from a taking a significant hit,” Rystad Energy senior
coronavirus (COVID-19) caused low of $40bn analyst Swapnil Babele commented. “COV-
in the previous year. But with Russia increasingly ID-related disruptions in 2020 dragged down
cut off from energy and financial markets, future spending, but this year looks set to be the start
investments are set to remain subdued until at of a multi-year slump that will make the COVID
least the middle of the decade, according to Rys- years pale in comparison.”
tad. That will mean fewer final investment deci- The biggest hit to spending will happen at
sions (FIDs) made, and operators being forced to greenfields, according to Rystad, because of
make tough decisions on spending. Rystad notes the sharp drop in approvals. Investment in new
that while leading Russian oil and gas companies Russian projects are forecast to drop by 40%
Gazprom and Rosneft will be able to maintain from last year, to only $8bn. Russia greenlit the
expenditure, other players will see investment development of only 2bn barrels of oil equivalent
get sapped. (boe) of resources last year, and almost all of this
A key factor behind the slump has been the volume related to the Baltic LNG project.
delay of several large-scale LNG projects, which “In light of Russia’s invasion of Ukraine,
are now struggling with technological and fund- however, financing the project will be a struggle
ing constraints as Western partners leave. Prior for Gazprom,” Rystad said. “Service companies
to Moscow’s invasion of Ukraine, investments have already started leaving Russia, while Linde,
had been set to rise on the back of several large- which is providing its proprietary LNG technol-
scale gas field projects Gazprom had in the Yamal ogy for the project, has also exited the country.”
region, partly to feed its planned LNG complex While no major projects are expected to be

P6 www. NEWSBASE .com Week 50 15•December•2022