Before Christmas, ConocoPhillips confirmed it sold its 50% stake in the four million barrel per day Polar Lights joint venture in northwestern Russia.
It launched the project in 1992 with state-owned Russian energy giant Rosneft, but sold out to Trisonnery Asset on undisclosed terms.
Western oil firms rushed into Russia after the fall of Communism with big plans for exploring and exporting vast quantities of oil and natural gas.
Russia remains the world’s second largest oil producer and second largest oil exporter, according to the International Energy Agency.
But some energy majors have now left, or dramatically scaled back their Russian exposure, considering the investments are too risky, not only in fiscal terms, but because of their geopolitical risks.
At the same time research and consulting firm GlobalData said Russian firms such as Lukoil, Zarubezhneft, Bashneft, Rosneft, and Gazprom are all pushing international diversification, an increasingly important strategy in light of the sanctions placed on Russian companies after its involvement in Crimea, targeting future gas projects in Mexico, Argentina, Venezuela and Bolivia.
According to GlobalData’s senior upstream analyst covering the former Soviet Union, companies, Anna Belova, with governmental support, countries not originally prioritised for international expansion are being identified as potentially strong political, trade and investment partners for Russian oil companies.
GlobalData believes these countries could benefit from external help, as they are in need of financial aid and/or expertise in how to develop and explore their vast resources. Russian companies are strongly positioned to do this given their size and well-developed knowledge of the oil industry.
However, GlobalData’s senior upstream analyst covering the Americas, Adrian Lara, warned it would not be a simple pivot.
“Following the recent outcomes of elections in Argentina and Venezuela, which saw a shift towards more conservative governments, Russian companies might lose political and economic privileges, as relationships with these nations will be subject to stricter limitations,” he said.
“Involvement with Mexico would also incur obstacles, as Russian companies would have to compete with other key oil companies as shown in the second phase of round one, where Lukoil’s high bid was outperformed by Eni’s.”
Despite the fact that companies are actively strengthening their international positions, projects will not materialise soon, as they are in the early stages and have project economics that do not compare favourably with investment opportunities in the former Soviet Union region.
“Russian upstream companies are now an established presence in the Americas and, given their focus on exploration and early stage projects, are instituting long-term objectives,” Belova concluded.
“Even if limited benefits are to be gained from Americas-based projects in the near future, they do offer a foundation that should reap benefits over the coming decade if consistently matured.”
