Wednesday, February 21, 2024
 
 

Gazprom Neft Well-Prepared For US-EU Sanctions

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Gazprom Neft has been well prepared to face Western sanctions, a source close to the company told New Europe on October 10. The oil arm of Russian gas monopoly Gazprom expected that sanctions would put some restrictions and some limits in its operations abroad and started talking to its Eastern partners and drilling companies in late spring.

Gazprom Neft was dealt a blow earlier this month when Royal Dutch Shell suspended work on its joint venture with the Russian oil company to develop Russian shale oil, after the West imposed sanctions on Russia over Ukraine.

In September, the United States banned its firms from supporting exploration and production activities in deep water, Arctic offshore and shale projects with Gazprom, Gazprom Neft, LUKoil, Surgutneftegaz and Rosneft. The sanctions also shut out Gazprom Neft and other Russian energy companies from Europe’s long-term borrowing market.

The source noted that Gazprom Neft cannot take loans longer than 30 days right now in Europe. All of the Russian oil companies were cut off from the technologies for the offshore oil drilling. So right now Gazprom Neft is talking to China and other Asian countries, the source said.

Shell suspended the development in its joint venture with Gazprom Neft in western Siberia to develop deposits of the Bazhenov Formation in the Khanty-Mansi Autonomous Okrug.

Shell continues working on other projects that are developing conventional oil in Russia including its Salym joint venture with Gazprom Neft.

Unlike the US, Russia is yet to enjoy a shale revolution. However, Moscow had hoped that the development of Russian shale reserves would be an important driver of new production over the next five to 10 years.

Following tax breaks for shale oil projects, which came into effect in Russia a year ago, Western majors Exxon, Shell, BP, Total and Statoil signed shale joint ventures.

An estimated 75 billion barrels of technically recoverable shale oil resources may lie in the Bazhenov formation, according to the US Energy Information Administration.

The source told New Europe that Russia is really interested in these shale deposits. “But I don’t think that development of the shale oil in Russia will come to some kind of interesting moment pretty soon because we have a lot of ordinary oil and common oil reserves that we have to explore and develop at the moment. And shale oil, of course, it is interesting for us but it’s still a matter of time,” the source said.

“At the moment we actually have the opportunity to so somehow produce shale oil by ourselves. We probably have the technology. But it’s too row and too new for us. Of course, it’s always better in means of economic viability to run the projects with a partner that knows what he is really doing. But if we don’t have this partner we could run the projects by ourselves,” the source said.

The western sanctions reportedly won’t affect Gazprom Neft’s more protracted projects for oil extraction from submerged shelves, mostly the Pechora Sea shelf in the Russian Arctic.

The Arctic contains an estimated 20% of the world’s so-far undiscovered deposits of fossil fuels, and Russia itself is thought to have the world’s largest deposits of shale oil.

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Previously on Energy Insider:

US, EU Sanctions Push Iran Toward Russia, China

EU’s Cold War With Russia Worries German Business

Serbia Says Bets Off For South Stream

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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