Russia experiences surge in oil well drilling adapting to sanctions, says Bloomberg
Photo: Boom in oil well drilling in Russia (Getty Images)
In 2023, Russia demonstrated record-breaking volumes of oil well drilling, serving as further evidence of the country's resilience against Western sanctions, writes Bloomberg.
The surge in activity coincided with the restoration of Russian oil export volumes and prices, vividly illustrating that fossil fuel has become a crucial source of funds for Russia's war against Ukraine.
Ronald Smith, an oil and gas analyst at the Moscow-based BCS Global Markets, stated that Russia is much more independent in the oil service sector than commonly believed.
According to industry data from Bloomberg, in the first 11 months of 2023, Russia drilled oil wells with a total depth of 28,100 kilometers. This figure surpassed the previous year's record within the post-Soviet space.
Challenges Russia likely to face
The article suggests that the frenetic pace of drilling amid a relatively static level of extraction also points to some long-term problems that may arise in the Russian oil sector due to international isolation.
The industry is making every effort to sustain production from its existing wells, while new projects supporting extraction in the coming decades must adapt to the changed conditions in the country.
Insufficient sanction pressure on Russia
Increased extraction is occurring despite the Western countries' pressure on the energy sector, a key source of funds for Russia's war against Ukraine.
"The sector has been the target of sanctions ranging from import bans and price caps, to prohibitions on the export of technology," the article notes.
Last year, the U.S. imposed sanctions on dozens of companies producing drilling equipment and developing new extraction technologies to "limit Russia’s future extractive capabilities."
In 2022, the European Union implemented comprehensive restrictions on the export of equipment, technologies, and services for Russia's energy sector. However, according to Bloomberg, these restrictive measures largely did not yield the expected results.
Embargo on western import of Russian oil
In March 2022, the U.S. imposed a complete ban on the import of Russian oil due to Russia's full-scale invasion of Ukraine. In December 2022, the European Union made a similar decision.
Western sanctions led to half of Russia's oil and oil product exports in 2023 going to China, while India's share increased to 40% over two years. Europe's share in Russian oil exports plummeted tenfold, from approximately 40-45% to around 4-5%.
The price ceiling imposed on Russian oil in December 2023 at $60 per barrel reduced Kremlin's revenues by 14%.
