Investment in the upstream oil and gas industry in Russia could decline by $15 billion this year as a result of Western sanctions, Rystad Energy has calculated, saying the total for the year could end up around $35 billion.
The analytical firm noted that Russian upstream investments stood at $45 billion last year, increasing from $40 billion in 2020. Before Russia’s invasion of Ukraine, upstream investments in the country were expected to rise to $50 billion in 2022, but sanctions have begun to bite and investment is set to decline substantially amid the exodus of Western oil companies from the country.
According to Rystad, investments would remain lower than normal until at least 2025 but this would likely affect smaller oil companies, while Gazprom and Rosneft will be able to continue spending as they were spending until this year, the company said.
The situation appears to be particularly worrying for the LNG industry, where several large-scale projects have been delayed because of sanction-related problems with technology and funding.
“The war in Ukraine has cost the Russian oil and gas sector dearly, with project investments taking a significant hit. Covid-related disruptions in 2020 dragged down spending but this year looks set to be the start of a multi-year slump that will make the Covid years pale in comparison,” said Swapnil Babele, a senior analyst with Rystad.
The worst affected projects will be Greenfield ones, the analytical firm also said, with investment in new field development set to decline by 40 percent this year from last, to $8 billion from $13.7 billion.
Next year Rystad does not expect any significant new oil and gas projects to receive approval amid the lingering effects of Western sanctions. In 2024, however, there will be a boost in production as Gazprom begins extraction from one new field and Rosneft launches production at one of the fields comprising the giant Vostok Oil project.