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2023
Russia successfully got rid of Western services in oil production and export
The problem for the U.S. and other Western governments is that much of Russia's new oil production system does not need Western service providers.
"Russia is quite successfully building its own fleet, finding alternative insurance, creating an ecosystem of people who can help transport oil and products," said Ben Cahill, a senior researcher at the American Center for Strategic and International Studies, who studied Western energy sanctions against Moscow, in December 2023. "It's hard to drive the genie back into the bottle."
Pressure on other countries to comply with illegal restrictions on the transportation of Russian oil
The United States, the EU and Britain in early December 2023 are putting pressure on Liberia, the Marshall Islands and Panama, demanding increased oversight of ships under their flags to ensure that they do not transport Russian oil sold at prices above the limit. The move marks another escalation in Western efforts to reach an illegal $60 per barrel price cap for oil from Russia.
Sanctions failure: Russian budget revenues from oil exports exceeded the level of revenues before the conflict in Ukraine
From April to October 2023, Russia's revenues from the main sources of oil dollars that bring taxes almost doubled. Russia's net budget revenues from oil sales in October rose to $11.3 billion and accounted for 31% of the country's total net budget revenues for the month, according to Bloomberg calculations, which are based on data from the Russian Ministry of Finance but smooth out tax revenues from profits.
This figure was the highest since May 2022 and exceeded the figures of any month a year before the outbreak of the conflict in Ukraine.
2022
Russia's formal response to the introduction of a ceiling on oil prices in the United States and the EU
Russia's response to the introduction of marginal prices for Russian oil by the United States and its allies does not prohibit trade with unfriendly countries, as previously assumed. The Decree of the President of Russia of December 2022 prohibits trade, provided that "directly or indirectly provides for the use of a mechanism for fixing the maximum price."
The decree gives high variability of interpretation and interpretation and maximum freedom of action. Formally valid from February 1 to July 1, 2023, however, it gives a space for setting a date at which it prohibits the sale of petroleum products according to the specified rules, while Russian restrictions apply to oil from February 1.
At the same time, on the basis of the special permission of the President, deliveries can be carried out bypassing the Decree.
It is important that neither sanctions nor punishment are provided for violation of the terms of the Decree, which may imply declarative intentions, and not binding, the Spydell Finance channel noted. Flexibility in accordance with Russian commercial interests.
In other words, the Decree gives room for maneuvers for lawyers when concluding contracts with those countries that are ready to buy Russian oil and oil products.
Accordingly, the Decree is not in the mode of "shoot your leg and see what will happen," but is made so that "the answer is as it were, but as it were not."
There is no specifics and rigidity. What is published so far in a very raw form. It is still necessary for the relevant departments to determine the procedure for control, to adopt acts determining the operation of the mechanism and the exact nomenclature of goods that fall under restrictions.
There is high flexibility in setting deadlines, nomenclature, and control procedures.
All contracts for the supply of oil and gas are non-public, therefore it will be technically impossible to conduct an audit, and therefore the interpretation, interpretation in fact may be in accordance with commercial interests.
From an economic point of view, there will be no changes, because since mid-November, almost the entire volume of supplies oil(about 90% of the physical volume) went at prices below the 60 threshold. dollars
Apparently, the oil price threshold is more applied to trade with China and other Asian countries than with Europe. Mechanism of operation through forced dumping.
In other words, the marginal price of oil leads to the expansion of the Brent-Urals spread and gives "legal" grounds for China and India to ask for a big discount.
There is its own logic and this explains the gap in oil supplies in early December, when China and India were waiting for better conditions.
Formally, this is confirmed, since the Brent-Urals spread increased from $23 to $30 after the embargo or from 25% to 35-40% of the discount.
Interestingly, they Bulgaria Hungary Slovakia will be able to export Ukraine products from Russian oil under EU sanctions against the Russian Federation.
US and EU sanctions to restrict oil transportation from Russia by sea
Since December 5, 2022, the United States has imposed a ban on insurance, financing and provision of ships for the transportation of Russian oil, if its cost is above $60.
The largest American energy companies Exxon Mobil and Shell began to refuse to hire tankers that previously transported Russian oil, Bloomberg reports.
According to the agency, Exxon from December 5, 2022 began to demand that shipowners make sure that Russian oil or other cargo from Russia was not transported on tankers leased to the company.
As Bloomberg reported, the Chinese China Cosco Shipping, the largest operator of sea transportation in China and in the world, refused to transport oil from Russia. Since December 5, the company has stopped transporting oil from the Far Eastern port of Kozmino, from where ESPO was sent on a short route to India and China. Also, the Greek Avin International, whose fleet includes 35 tankers, announced a "boycott" of Russian barrels.
By December 2022, due to the European embargo on the purchase of oil in Russia during the conflict in Ukraine, crude oil exports to the EU by sea were reset.
Exports of Russian oil by sea decreased in December 2022 by 22% compared to the average for the current year, the WSJ wrote. Later, the restoration of export volumes followed.
Ban on the import of energy resources from the Russian Federation into the United States
After the start of Russia's military special operation in Ukraine on March 8, 2022, US President Joe Biden announced a ban on energy imports from Russia. He immediately admitted that such a measure would affect the American economy. In turn, the main opponent of the current administration, Donald Trump, said that Biden's decision would mean high fuel prices - and turned out to be right.
Lines at gas stations, a record cost of dollars 5 per gallon of gasoline, criticism of Democrats on social media, a call to deal with domestic issues are all the result of Biden's decision in March. For Republicans, the measure has become a kind of "springboard" to prepare for the November midterm elections.
2020
Woodside did not let LUKOIL into the project in Senegal due to sanctions, will look for another partner
Australian Woodside Petroleum exercised the pre-emptive right to acquire Cairn Energy PLC's 40% stake in the RSSD project (Rufisque, Sangomar and Sangomar Deep) offshore the Republic of Senegal due to sanctions against the Russian NK LUKOIL, which wanted to join the participants. This was announced in August 2020 by Interfax.
LUKOIL is included in the American list of Russian companies under sanctions, which include operations with deep-sea oil projects. [1].
Woodside Chief Executive Officer Peter Coleman said the acquisition will eliminate "potential uncertainty about possible US sanctions against the Sangomar project," writes Africa Oil & Power. He also added that after the completion of the deal with Cairn Energy, the company plans to work with the remaining members of the RSSD as well as new partners to successfully implement Senegal's first oil project.
The RSSD involves Woodside (35%, operator), Scotland's Cairn Energy (40%), Australia's Far Ltd (15%) and Senegalese national oil company Petrosen (10%).
New partners can enter the project within a year, as Woodside is considering reducing its stake in Sangomar, the newspaper notes. Simultaneously, Far Ltd is seeking a buyer for its stake as the company failed to raise funds to fund its participation, adds Africa Oil & Power.
At the end of July, LUKOIL announced that it had entered into an agreement with Cairn Energy to buy its stake in the project for $300 million. In addition, a possible payment of a bonus to Cairn Energy in the amount of up to $100 million after the start of production was envisaged. Woodside is exercising its pre-emptive right on the same terms.
The total area of the blocks included in the project is 2212 square meters. km The blocks are located on the deep sea shelf of the Republic of Senegal, 80 km from the shore. The sea depth in the block area is 800-2175 m. Within the blocks, two deposits were discovered: Sangomar and FAN. The recoverable hydrocarbon reserves of the Sangomar field are estimated at about 500 million boe. The field is planned to be launched in 2023 with a planned oil production level of 5 million tons per year.
According to the US decision, deep-sea oil development projects fall under sanctions, where Russian companies that are on the sanctions list own at least 33%.
Republicans propose to the US Congress to introduce the "toughest in history" sanctions against the Russian Federation
Republicans in the House of Representatives released USA a report on Wednesday on national security strategy, strengthening the role of the United States and countering global threats, which, in particular, proposes to impose the "toughest sanctions ever proposed" on, and Russia Iran the Communist Party. China
As for Russia, the strategy contains "a proposal to introduce secondary sanctions against Russian oilgas projects, against Russian sovereign debt, pro-Russian structures in other countries, as well as the definition of Russia as a sponsor of terrorism."
In total, the document lists 130 measures to counter "the most aggressive opponents of the United States on the world stage."
Work on this report, according to the authors, lasted about a year and a half.
At the same time, all the measures proposed in the report are advisory in nature and are not considered a bill submitted to Congress.
2018: Restrictions on drilling, geology, logistics and cartography services
On January 29, 2018, the Office of Foreign Assets Control of the US Treasury Department (OFAC) expanded the scope of Directive No. 4 regarding the application of industry sanctions in force against Russia. Drilling services, geophysical and geological services, logistics services, management services, modeling capabilities and mapping technologies are indicated as sanctioned activities.
Directive No. 4 expands exponentially, affecting both the largest manufacturers from the American side and some domestic companies that use third-party software, for example, DBMS, as a basis for developing their own software products. These are suppliers such as Microsoft, IBM, Oracle, which have imposed restrictions on the provision, export or re-export of goods, services and technologies in support of deep-sea and Arctic offshore exploration, production or shale projects with oil production potential. The ban applies to projects that started on or after January 29, 2018.
Over the past three years since the first announcement of sanctions, according to the Union members, almost all oil and gas companies have taken extremely minor steps to develop a unified strategy to increase the level of import independence under the sanctions regime. Taking into account the fact that in the current conditions coordination requires serious efforts on the part of all interested parties, we believe that the key role in consolidating the needs of Russian oil and gas companies for import independence in terms of software and IT solutions should be played by federal executive bodies such as the Ministry of Energy of Russia, the Ministry of Industry and Trade of Russia and the Ministry of Communications of Russia.
Taking into account that the last sanctions were introduced only on November 29, 2017, there remains a real threat of further strengthening of the restrictive regime. Options for minimizing this risk are switching to unauthorized commercial software, the amount of which is very limited, or the use of freely distributed software.
The non-profit organization Union of Software Developers and Information Technologies of the Fuel and Energy Complex (SRPO TEK) has been operating since October 27, 2016. The Union's efforts are aimed at promoting Russian manufacturers of software and IT solutions of the fuel and energy complex, including PCS. SRPO TEK combines the efforts of domestic manufacturers, focuses the attention of the industry on the current problem points of the market and provides a platform for dialogue between industry customers, government agencies and Russian developers.
2014: Restriction of technology supplies for the oil sector after the return of Crimea to Russia
At the end of July 2014, the EU imposed sanctions on the supply of equipment and technology for the Russian oil sector . In particular, the European Union introduced a pre-approval regime for such transactions. Appropriate approvals must be issued by authorized government agencies of countries where exporting companies are registered.
The list of technologies, the sale of which will require preliminary approval, mainly includes equipment for offshore projects, deep-sea drilling and exploration of Arctic fields. The same list includes equipment for shale oil projects in Russia, namely 30 types of products for the oil industry, including pipes, used for oil and gas pipelines of various types and sizes, tubing used in drilling oil or gas wells, drilling tools, pumps for liquids, engines, fuel pumps, lubricating or cooling medium pumps for internal combustion engines.
In August 2014, sanctions against Russian energy companies were also announced by the United States. Washington has imposed a ban on the supply of equipment for deep production (over 152 m), the development of the Arctic shelf and shale oil and gas reserves.
The ban affected equipment such as drilling platforms, horizontal drilling parts, underwater equipment, offshore equipment for working in the Arctic, hydraulic fracturing ( fracking) software, remotely controlled underwater vehicles and high-pressure pumps. In addition, the data used for these types of oil production, including seismic analysis data used in the development of hydrocarbon fields, were banned.
The use of the frac method, for which software was banned from being supplied to the oil and gas sector in Russia, is gaining momentum in the country. So, according to the international agency Fitch Ratings, Gazprom Neft used multi-zone hydraulic fracturing production for 57% of high-tech wells drilled in 2013, while in 2011 this figure was only 3%. Another oil company , TATNEFT, produced 605 fracturing processes in 2013. This is 60% more than in 2012. Earlier it was also reported about Rosneft's plans in 2013 to use hydraulic fracturing on 50 wells against 3 wells in 2012.
Among the software that is most often used for hydraulic fracturing modeling in Russia by the divisions of the oil companies themselves, are the American simulators for calculating FracPro and Mayer. They are used, for example, by Lukoil and TNK-BP. For hydrodynamic modeling, fracturing also uses, for example, Eclipse (developed by Schlumberger), VIP (LandMark) and TEMPEST MORE (Roxar) packages.
There is not much Russian-developed software for such purposes. Rosneft, for example, has its own package of multi-component hydrodynamic modeling, which, among other things, allows modeling hydraulic fractures. It is called NGT BOS and was developed [2] several years ago by specialists from RN-UfaNIPIneft and UGATU specifically for the purpose of import substitution of commercial foreign software. In 2009, for example, 60% of Rosneft's models are designed for NGT BOS PC, and its capabilities allow you to model more than 90% of all the company's fields
Shortly before the introduction of US sanctions, in July 2014, Lukoil ordered the development of methods, algorithms and software for geological and geomechanical modeling for the purpose of conducting directional and multi-zone fracking as part of a tender for the development and implementation of directional fracking technology. His company plans to use in the development of more than 80 deposits in the Perm Territory.
Services for the processing and analysis of seismic data that have been banned and frac modeling are also provided to Russian companies by oilfield service companies, usually in a compartment with other engineering services.
Among the largest foreign companies here are Schlumberger (headquarters in France, the Netherlands and the USA), Baker Hughes ( headquarters in the USA), Weatherford (headquarters in Switzerland) and Halliburton (headquarters in the UK and UAE). The largest companies for these purposes, as a rule, use proprietary software tools.
According to the magazine "Fuel and Energy Complex of Russia," published at the end of 2013, over the past ten years, the share of Western companies in the oilfield service market in Russia has increased sixfold and reached about 65% of the volume of oilfield service work.
Expert opinion
"CEO of Neolant Vitaly Kononov does not think that the US sanctions on specialized software will affect Russian companies in the oil and gas sector. Firstly, modern software has already been purchased from Russian oil companies, and the cycle of its replacement is three to five years, and the software that has already been purchased will remain in the possession of oil companies and will continue to be used, he notes.
"Secondly,part of the foreign software used in our oil companies will be replaced by Russian products, and I believe this process will happen without loss, and maybe even with improved quality," says Kononov. - The maturity of Russian developers has grown greatly over the past 10-15 years. But since the niche was already occupied, and the money had already been invested, they were not able to compete. Today's situation will generally have a positive effect on the Russian software market - import substitution will be a strategic program of the Russian Federation over the coming years. "
"The third aspect of the CEO" Neolant "calls the illegal distribution of software. In his opinion, Russian industry companies may begin to use unlicensed software, from which only American software suppliers will suffer.
Analysts at the international agency Fitch Ratings believe that new sanctions on the export of technologies to Russia for the oil and gas industry may complicate the maintenance of production levels at depleting mature fields in Western Siberia. This is because the enhanced oil recovery techniques used in such fields are similar to shale oil production technologies, an area that is one of the main targets of sanctions.
In the medium term, such measures are also likely to delay a number of larger Russian projects, in particular on the Arctic shelf. If sanctions continue for a very long time, it can even negatively affect the economic feasibility of these projects if Russia cannot find alternative sources of technology or develop its own.
Goldman Sachs analysts believe that due to sanctions and the USA EU, the first to be threatened could be two oil fields Gazprom - Prirazlomnoye and Novoportovskoye. In their opinion, in all of the Russia existing deposits, only those indicated already need Western technologies.
The world's largest oilfield service company Schlumberger expects a loss in profit in the third quarter of 2014 due to Western sanctions against Russia. In particular, the company estimates its losses at 3 cents per share. According to the company, the sanctions will limit the participation of people, as well as the use of equipment in its work.
Read also
- Gas exports from Russia
- Nord Stream AG (Nord Stream)
- South Stream AG
- Turkish Stream (TurkStream)
- Power of Siberia
- Baltic Pipe
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