This project addresses the response of the Russian oil and gas sector and Russian petroleum policy to changes in the resource base and in the markets.
Broad geological assessments indicate that Russia has the biggest unconventional resource base in the world, but what is the potential for unconventional oil production? The question is not if the Russian oil industry is able to produce oil from unconventional sources, like shale oil. The real question is if sustainable, profitable production of unconventional oil is possible in Russia. Our study, which draws comparisons with the ?shale revolution? in the USA argues that many conditions are not in place. Exploiting resources effectively and keeping costs down requires constant learning and adaptation to a highly heterogeneous resource base. This is a weak point in Russia. On a fundamental level there is a lack of institutions able to handle geological, technological and economic risks involved. Russia will undoubtedly continue to access the unconventional resource base, but without fundamental reforms of institutions and framework conditions the potential will be limited.
Russia has had big expectations for development of new large-scale projects in the Arctic, particularly offshore. Our project shows that upstream projects in the Russian Arctic are not profitable under the current taxation system and that they need tax breaks to be implemented. This means reduced income for the state and sub-optimal investment decisions. The Russian state could earn more by introducing a profit-based taxation system, but there is still strong resistance against a fundamental tax reform. The main reason is that finance authorities fear that a profit-based system will be easy to manipulate and that tax revenues may fall in the short term, while today?s system based on gross revenues is simple to administer and gives predictable revenues.
In an analysis of Russia?s five largest oil companies two main questions are addressed: First: How are Russian oil companies tackling a changing global context, oil price collapse, shale oil, climate policy. Secondly: How are the companies themselves changing? We find that Russian oil companies are not so bad at handling change ? but due to the Russian corporate culture of discipline and obedience to superiors they end up depending on a narrow band of powerful, middle-aged, male figures at the top, and therefore sometimes fail to see change coming.
Following decades of abundant low-cost supply of natural gas from field developed in the Soviet period and stable market conditions, the Russian state-controlled gas company Gazprom has over the last years faced new commercial realities. The organization of the core EU market has changed, scrapping the old pricing models, and introducing new contract arrangements. Gazprom has to a certain degree adapted to the changing conditions in the export markets, but reluctantly, and arguably less than what would have been expected if it would maximize economic performance. Can some of Gazprom´s behaviour result from ideas and a particular self-understanding rather than interests?
Our study shows that the ideas of Gazprom have remained the same even if the material conditions have changed. Due to its social-political role during the Soviet Union, and the continuity in fulfilling tasks and obligation of a state agency until today, it makes sense to talk about a corporate-political identity rather than a corporate identity. By introducing the ideational perspective and connecting it to the Russian institutional-cultural context, a more complex picture of Gazprom´s behaviour emerges.
Gazprom has dominated the Russian gas sector in the post-Soviet era, particularly because of its monopoly over gas exports which have generated the lion?s share of its revenues. However, alleged inefficiency and the company?s failure to respond to the emergence of LNG as a globalizing force in the industry has led to its position being challenged in Russia, and in 2013 the company?s monopoly over gas exports was partly lifted. The so-called independent producers Novatek and Rosneft are pushing for further liberalization of exports as well as the domestic market, vigorously resisted by Gazprom. Gazprom?s general position internally in Russia has nevertheless not been weakened to the extent we had anticipated. An important explanation is that the desire for larger reforms in the gas sector has been reduced because of the complicated economic situation. Gazprom continues to play an important role as provider of relatively cheap energy to a large share of the population. Reforms which in a transition phase might endanger stability of supplies are not attractive. The gas industry will continue to be a prism for broader economic and political developments in Russia.
Prosjektet har videreutviklet forskergruppens kompetanse på russisk petroleumspolitikk og petroleumssektor, dels ved å gå dypere inn i kjente temaer, dels ved å bringe inn nye aspekter som ukonvensjonell olje, beskatning, LNG. Dette gjør gruppen enda mer relevant som en samtalepartner for norske aktører med interesser i sektoren. Direkte effekter av prosjektet kan ikke dokumenteres, og det var heller ikke forventet.
The Russian petroleum industry is facing alarming trends. Upstream, decreasing size of discoveries and a falling recovery rate challenges Russia's ability to maintain its petroleum production. For Russia's gas sector, the structure and politics in core ex port markets represent an additional challenge. In order to secure vital revenue for the state, Russia faces a triple challenge of replacing current production capacity, making production more cost-efficient, and being more flexible in its gas export stra tegy. The Russian institutional framework, however, has yet to change in accordance with new realities.
This project focuses on how Russia´s oil and gas sector responds to current upstream and downstream challenges. Will there be institutional adaption o r resistance?
This question is addressed through four work packages on institutional change covering unconventional oil, Arctic offshore petroleum, the business climate for IOCs and gas exports. The project will also include a PhD with the preliminary t itle: "The Russian Gas Sector in a Changing World: Gazprom´s Response to Export Market and Upstream Challenges".
Knowledge about these issues is of importance to the Norwegian authorities and industrial players who need to relate to Russia as both a neig hbour, business partner and a competitor in the petroleum sector. Succeeding in these three roles requires an understanding of the Russian institutional framework.
Research on these themes is demanding, involving time-consuming data collection. But the broader challenge is to interpret data correctly, beyond superficial reporting, requiring insights in the informal as well as formal aspects of Russian economy and politics.
Results will be disseminated scientifically through peer-reviewed articles, one monograph and one edited book volume. Popular science dissemination includes op-eds and media appearances. The user group will be involved through on site dedicated briefings.