Russian Oil & Gas Service Boom

Tuesday, June 26, 2007
While the recent high-profile problems of the western oil majors’ adventures in Russia have occupied the attention of politicians, the giant Russian oilfield services industry continues to work delivering the products and services that produce the oil. Speaking at conferences in both London and St. Petersburg, executives from energy analysts Douglas-Westwood (DWL) outlined the scale of the opportunities available to investors.

John Westwood, DWL managing director speaking at the SubseaTECH 2007 Conference in St. Petersburg stressed the importance of Russia as an oil and gas producer, “Russian oil production at over 9 million barrels per day is on a par with Saudi Arabia and Russian gas used in power generation is keeping many of the lights on in Western Europe.”

Addressing members of the Energy Institute in London, DWL’s assistant director Steve Robertson stated that, “the oilfield services industry has evolved rapidly in recent years, driven by operators’ increasing use of outsourced services and a move to Western business models. However, the market remains fragmented and further consolidation is expected in the coming years, with independent indigenous companies and western providers playing an increasingly important role.” Analyst Rod Westwood explained that major changes were underway as some of the existing producing regions decline, whilst growth in Eastern Siberia will soar 43% in the next five years.

“Opportunities abound as aging infrastructure such as drilling rigs are overdue for replacement, whilst on the demand-side activity is expected to grow as the new regions prove a far tougher challenge than the ‘easy oil’ previously developed in Western Siberia.

“Onshore oilfield services of seismic, well drilling and workover sectors were a market valued at $11.4 billion in 2006 and we forecast this will reach $22.5 billion by 2011.” Back in St Petersburg, John Westwood told delegates that the new offshore developments in Russia’s arctic waters will stretch the limits of available know-how and will probably need to make use of Norwegian experience of such conditions.

“However,” he said, “this is not all a one-way street and Russia has a considerable track record of leading technological developments for military applications that could well be applied in offshore oil & gas applications.”

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