Russian oil companies look to Americas to boost long-term positions: GlobalData

LONDON -- Key Russian oil companies have refocused on strengthening their international positions through the acquisition of E&P assets in geographies outside Russia, with countries in the Americas providing a number of potential partnerships in the long term, according to analysts with research and consulting firm GlobalData.

According to Anna Belova, GlobalData’s senior upstream analyst covering the Former Soviet Union (FSU), companies 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.

“With governmental support, countries not originally prioritized for international expansion are being identified as potentially strong political, trade and investment partners for Russian oil companies,” Adrian Lara, GlobalData’s senior upstream analyst covering the Americas, said. “Currently, they have their sights firmly on the Americas, having expressed interest in future gas projects in Mexico, Argentina, Venezuela, and Bolivia, among others.”

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, as Lara states, “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. 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 materialize soon, as they are in the early stages and have project economics that do not compare favorably with investment opportunities in the FSU 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.”