Russia’s energy sector made a juicy target for Western sanctions. Roughly half of the country’s budget revenues are tied up in oil and gas, which makes any attack on that industry especially painful to Moscow. Not wanting to endanger Europe’s short-term energy supply (the continent sources roughly a third of its gas from Russia), most sanctions were aimed at Russia’s ability to plumb its unconventional reserves in Siberian shale formations and offshore Arctic plays. That plan seems to be working, as Russian oil production seems to be relatively unchanged, according to recent Russian data. Reuters reports:
Russia pumped an average 10.6 million barrels per day (bpd) last month, producing a monthly total of 44.838 million tonnes, which includes gas condensates, the data published on Sunday showed. The figure was little changed from September’s 10.61 million bpd and a touch under the post-Soviet record high of 10.63 million bpd reached in December.
But stable Russian oil production doesn’t mean sanctions aren’t having an effect. Reuters continues:
[Sanctions] have mostly affected future Russian oil production in areas such as the Arctic, deep water and shale. But some Russian companies have already warned they would make spending cuts. […]Lukoil, Russia’s second-biggest oil producer, warned last month Russia was under risk to lose 25 million to 70 million tonnes in production by 2017 due to underinvestment and a lower number of wells being drilled.
Russian oil production has long relied on mature, conventional fields whose output is on the decline. If Moscow wants to keep up with, say, North America’s energy renaissance, it will need to develop its own unconventional reserves. For now, only the West can claim the technical expertise and technologies necessary to unlock these new kinds of plays, and as long as these sanctions are in place, Russia will find it very difficult to ensure its own long-term energy security.