Despite recent visits by German Chancellor
Angela Merkel and US Secretary of State John Kerry to Russia, the
international community appears unlikely to soon lift sanctions imposed on Russia after its invasion of Ukraine.
Effect on Russia Exports?
Russia is one of the largest hydrocarbon producers in the world.
Although cushioned by the relative decrease in the value of the Russian Ruble
to the U.S. Dollar, the global sanctions initially imposed in March
2014 and increased afterwards may reduce future Russian oil, gas and
refined product exports to countries that have imposed sanctions.
These sanctions have not immediately restricted the export of Russian
oil and gas. In fact decreased internal Russian demand has actually increased oil exports
in recent months. Should the Russian economy resume growth despite
global sanctions, increased internal demand and discouraged future
disinvestment by global companies in Russian exploration and development
could limit its export ability.
Effect of Sanctions on Asian Pivot; Not What It Was Thought?
Russia exports approximately 5 million barrels of crude oil and
nearly 2 million barrels of refined products per day. Currently shipped
mostly to Europe, Russia has recently sought direct Chinese investment
in pipeline and oilfield infrastructure to grow its export potential
away from the European Union. China has promised significant investment,
but many of those promises remain unfulfilled.
Given the strength of the Chinese Yuan, China’s foreign reserve
advantage, and the potential size of the market, China has significant
negotiation leverage with Russia. The Chinese are driving a hard bargain
and any long-term agreement with likely leave Russia heavily dependent
on Chinese imports as a source of hard foreign currency revenue for decades to come.
The North American unconventional revolution has created a generational shift change as the industry seeks to find and train new workers.
While the post OPEC Thanksgiving 2014 meeting price downturn caused
some North American layoffs, the Russian oil and gas industry does not
have the luxury of skilled workers competing for open positions. Russia
currently lacks enough workers to maintain and grow its hydrocarbon infrastructure.
Unlike the United States, Russian does not today appear to attract
and train new workers into industry. The economic sanctions imposed last
year are now causing younger Russian entrepreneurs to leave the country. Russia does enjoy a highly educated workforce but its working-age population is declining by a million people a year. Recently the Russian death rate has begun surging.
How will Russia Meet its Oil & Gas Technology Challenges?
Russia does not currently have the technology to pursue many challenging oil and gas projects on its own. Russia needs modern downstream processes to replace its shut-down and obsolete tea pot refineries. Sanctions have discouraged
international companies from transferring this technology to Russia.
The current lower crude oil price environment and sanctions have also
caused some global companies to slow down or cancel Russian investments.
Conclusion
Current, and possibly growing, sanctions on the Russian economy, the
Asian pivot, and Russian demographics pose a long-term threat to
Russia’s ability to maintain and grow hydrocarbon exports. Absent lifted
sanctions and restored foreign direct investment, Russian decline could
reduce exportable product. Other sources of supply growth, for example
North American unconventional production and expanded petrochemical
refining capacity, will be available to meet the growing global demand
growth should Russian exports decline.
http://www.forbes.com/sites/drillinginfo/2015/05/18/russian-sanctions-effect-on-global-oil-market/2/?ss=energy