Russia has ramped up its oil drilling activity to the fastest pace in five years, despite recent declines in oil prices. This surge in drilling suggests that Russia is preparing for potential changes in OPEC+ production cuts and the possible lifting of U.S. sanctions, according to Bloomberg.
The current drilling activity is about 30% higher than before the Ukraine war began, showcasing the resilience of Russia’s energy sector despite Western sanctions. These sanctions specifically targeted the oil and gas industries, with the goal of crippling local producers by limiting access to Western technology and equipment.
“We can confidently say that the Russian oilfield service sector has largely adjusted to the sanctions,” said Ronald Smith, a partner at Oil and Gas Consulting Partners. “While a perfect replacement hasn’t been found in all cases, suitable substitutes are now available on a broader scale,” he added.
Thanks to this increased drilling activity, Russia’s oil production capacity is now between 11 million and 11.5 million barrels per day, the same level the country maintained in 2016, according to Smith.
“There might be some setbacks in drilling technology, such as shorter horizontal wells, fewer fracking stages, and less precise well bore placement,” noted Sergey Vakulenko, a former Russian oil executive and researcher at the Carnegie Endowment for International Peace. “However, the impact of sanctions and the exit of Western service providers has been much less significant than many had anticipated three years ago,” he added.
Despite the rise in drilling, the drop in oil prices is hurting Russia’s oil revenues. Oil and gas revenue for April is expected to fall by 22% compared to last year, reaching $11.6 billion, according to Reuters.
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