The West has taken a very careful approach to sanctioning Russia’s energy sector in the wake of the conflict in Ukraine, as Europe has wanted to avoid anything that might endanger Gazprom gas supplies, on which the continent relies for some 30 percent of its needs. Sanctions that hit Russia’s short-term energy prospects would likely also hurt Europe, so the West endeavored to hurt Moscow on a longer time scale by going after its nascent shale industry.
By withholding the Western technology that has unlocked oil and gas trapped in American shale, these sanctions have hit an extraordinarily important component of Moscow’s energy portfolio going forward. Oil and gas sales account for more than half of the Kremlin’s budget, but its conventional fields are maturing and output is coming down. Siberian shale is the next frontier to explore, and as production continues to come down elsewhere in the massive country it will become an increasingly important national priority.
Defying the sanctions on shale, Gazprom seems to think it can tap shale with or without the expertise and know-how being employed in the U.S., as Bloomberg reports:
“Foreign companies are stronger in this type of drilling so it’s faster to do it with western help,” said Alexei Vashkevich, head of geological exploration and resource base development at Gazprom Neft. “Can they be excluded? Yes, they can. Can we do it without them? Yes, we can. It will be a little harder and will take a little longer, but it’s possible.’
It’s hard to read this as anything more than Gazprom trying to put a brave face on a very uncomfortable situation. Remember, no country in the world has been able to replicate U.S. shale success. It’s hard to believe that Russia will be able to pull that off in one of the world’s most unforgiving environments, without Western assistance.