Reported by Bloomberg News

Last year, the US sanctioned dozens of companies that produce drilling equipment and develop new production techniques, aiming “to limit Russia’s future extractive capabilities.” The European Union in 2022 imposed “comprehensive exports restriction on equipment, technology and services for the energy industry in Russia.”

Two of the world’s largest oil-service providers — Halliburton Co. and Baker Hughes Co. — sold their Russian units and withdrew. Two more giants, SLB and Weatherford International Plc, have said they continue operations in the country in compliance with sanctions.

Failed Goal

The data indicate that these restrictive measures have largely failed. 

“Only some 15% of the nation’s domestic drilling market depends on technologies from so-called unfriendly nations,” said Daria Melnik, vice-president for exploration and production at Oslo-based research firm Rystad Energy A/S.

The withdrawal of major Western oil-service companies from Russia had minimal impact because it largely left intact their local subsidiaries. These operations “were mostly sold to management, retaining the know-how built up over the years,” said Viktor Katona, lead crude analyst at Kpler.

Digging and Rigging

The drilling record is a sign of Russia’s resilience to Western energy sanctions, but the pace of activity also carries a warning.

Over the years, the rise and fall of the nation’s drilling has moved largely in sync with changes in output, historic data show. Yet in 2023, the drilling boom came alongside production cuts that Moscow is implementing in tandem with the Organization of Petroleum Exporting Countries. That suggests the high level of activity is necessary simply to maintain output. 

“The main reason for the growth in Russia’s drilling is the need to launch new wells,” said Gennadii Masakov, director of the research and insights center at Yakov & Partners. “New wells have to be launched as the currently producing fields are depleting.”

Read full report: https://www.bloomberg.com/news/articles/2024-01-10/russia-s-oil-drilling-boom-proves-moscow-s-resilience-to-western-sanctions