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2011 Russian Oil & Gas Outlook Survey


PDF fileAs a new year begins, we may conclude that 2010 was quite a successful year for the Russian oil and gas industry. The recovery of raw material markets provides a confidence boost to industry participants and allows them to start planning long-term activities once again. 

In any industry, an exchange of views, plans and forecasts is necessary to secure smooth development. The greater the transparency of information that companies provide, the higher the confidence of investors and business partners will be. Therefore, we have prepared this survey with a wide range of readers in mind, and we will attempt to present a picture of how oil and gas company executives regard their business development opportunities in today’s increasingly favorable market conditions.

Industry indicators for 2010 (oil prices and production) have demonstrated positive dynamics. Due to the gradual recovery from the global financial crisis throughout 2010, oil prices stabilized at a level of USD 75-90 per barrel. The oil production growth rate in Russia is returning to pre-crisis levels of between 2 and 2.4%, while oil and gas companies have been reporting increased profits and revenue. By the end of the year, the capacity of Russian oil refineries was set to return to 2008 levels.

One of the most significant global events for the oil and gas industry was the accident on the BP-leased Deepwater Horizon rig. Direct damage to the company as a result of the disaster amounted to USD 8 billion, while it will take years, or even decades, to deal with the environmental consequences. This incident has forced all oil and gas companies to reconsider their security and labor protection policies.

Today, companies are planning to increase investments in areas that have suffered reductions in previous years, such as innovative solutions, research and capital projects. Respondents said that the aim behind these investments was to raise the profile of their business in terms of both quantity and quality, which will require the implementation of new technologies. Due to the difficulties associated with oil production and the implementation of new state regulations (requirements regarding the utilization of associated gas and Euro 4 technical regulations, among others), oil and gas companies will need additional sources of capital in the near future.

Respondents say that, to date, credit (a very unreliable source of funding just a year ago) is still the main source of financing. In order to raise funds internally, companies plan to enhance cost control measures and increase efficiency by implementing strategic initiatives.

In short then, the overriding conclusion from this survey is that oil and gas companies have significantly recovered from the crisis and are prepared for the rapid growth ahead. The readiness of companies to take on new debt and develop new projects strongly suggests that this year will be very important for the industry.

The details of our survey can be found below.

We would like to thank everyone who took part and wish all oil and gas industry participants success in 2011!

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