Gazprom expects to begin natural gas production at the Sakhalin-3 project in 2028, said Sakhalin region governor Valery Limarenko. This will mark a significant step in Russia’s strategy to boost energy exports to China and strengthen domestic gas supply for the Far East.

Valery Limarenko told delegates at the Sakhalin Oil and Gas Forum that the first gas from the Yuzhno-Kirinskoye field is slated for 2027–2028. Once the project reaches full capacity, output is projected at 10 billion cubic meters (bcm) of natural gas annually.

Sakhalin-3 encompasses the development of two major offshore fields — Kirinskoye and Yuzhno-Kirinskoye — located east of Sakhalin Island in the Sea of Okhotsk. Together, the fields hold an estimated 710 bcm of recoverable natural gas reserves and about 3.7 million tonnes of crude oil.

“The development of the Kirinskoye and Yuzhno-Kirinskoye fields is a key element of energy security in the Far East,” said Gazprom board member Sergey Menshikov. The company anticipates annual production of 5.5 bcm from the Kirinskoye field, while Yuzhno-Kirinskoye is expected to reach a design capacity of 21 bcm per year.

Gas from Sakhalin-3 will underpin the Sakhalin–Khabarovsk–Vladivostok pipeline system, a vital link for domestic supply and export flows to Asia.

Development of Yuzhno-Kirinskoye has been complicated by the U.S. energy sanctions imposed in 2015. Gazprom is deploying domestically developed subsea production modules supplied by Almaz-Antei and other Russian manufacturers to circumvent restrictions and maintain project momentum.

The ramp-up of Sakhalin-3 is viewed as a strategic boost for the region, where output from the Sakhalin-1 and Sakhalin-2 projects has been in decline in recent years.

Russian oil companies developed local alternatives for around 90% of previously imported technologies in the oil and gas sector, said Sergei Tsivilev, the Minister of Energy of Russia.

Image: RIA Novosti

Russian oil companies and service providers managed to replace around 1,800 out of 2,000 technologies in the oil and gas sector. These technologies were previously imported or provided by foreign oilfield services companies that ceased or limited their business operations in Russia after 2022, when the U.S. and the E.U. imposed sanctions on the Russian oil and gas industry. The remaining 200 technologies will be substituted by the end of 2027, according to the minister.

Sergei Tsivilev also said that Russian companies are currently developing new industry standards. These will substitute the standards of the American Petroleum Institute (API) that were widely adopted and used in Russia before. The new standards will be applied to new technological developments in the oil and gas sector.

Russia increased oil exports to the United States, United Kingdom and Turkey in 2019, reports RBC news agency. According to Russian Customs Service (FTS), in 2019 Russia exported two times more crude oil to the U.S. and the U.K., while oil exports to Turkey increased four times.

In 2019 Russia exported to the U.S. 4.7 million tonnes of crude oil, a 2.6 times increase compared to 2018 (1.8 million tonnes). The value of the oil supplies to the United States increased 2.4 times, reaching 2.2 billion U.S. dollars. According to the U.S. Ministry of Trade, Russia supplied to the U.S. 51.5 million barrels of oil (over 7 million tonnes) of the total value of 3.4 billion dollars, a 66% increase compared to 2018. The difference can be explained by the fact that Russian Customs Service only counts oil supplied directly to the United States, while the U.S. Ministry of Trade counts all the oil of Russian origin, even supplied via third countries.

Image: Depositphotos

In 2019 the average price of Russian oil supplied to the U.S. decreased. While in 2018 American customers paid on average 70.5 dollars per barrel, in 2019 the average price of Russian crude decreased to 62.8 dollars per barrel.

The United Kingdom imported 2.4 million tonnes of Russian oil in 2019, a 240% increase compared to 2018 (0.98 million tonnes). The total value of oil imports from Russia increased from 493 million to 1.2 billion dollars. However, according to the U.K. Office for National Statistics, the total value of Russian oil exports increased by 57% only, from 0.99 billion to 1.55 billion pounds. Russian oil replaced supplies from Nigeria and Algeria, imports from these countries fell in 2019 by 48% and 13% respectively.

In 2019 Russia supplied to Turkey 8.2 million tonnes of oil, almost four times more than in 2018 (2.1 million tonnes). The total value of these supplies increased from 1 billion to 3.7 billion dollars. At the same time, the average price of Russian oil exported to Turkey also decreased from 68.2 dollars to 62 dollars per barrel.

According to FTS, the total value of oil exported by Russia in 2019 reached 121 billion dollars. The largest importers of Russian oil were China, Germany and the Netherlands.

Exports of the oil refinery products from Russia increased to the U.S. only. Russian exports increased by around 150% by volume but only by 10% by value. In November 2019 Russian companies exported to the United States 17 million barrels of refinery products, reaching historic highs and covering around 25% of the American imports. At the same time, exports of Russian refinery products to the U.K. and Turkey in 2019 decreased 1.3 times by volume and 1.4 times by value.

Image: Depositphotos

According to Russian industry experts, the main reason for such dramatic increase in Russian oil exports to the U.S., U.K. and Turkey are attractive oil prices: Russian oil was more profitable in these markets due to relatively low transportation costs and its refinery products composition.

Another reason is the U.S. sanctions against Venezuela and Iran. Russian Urals blend was the most affordable and the best available substitute to heavy and sour crude blends from Venezuela. American refineries prefer heavy Russian crude to relatively light and sweet domestic shale oil because its product composition offers higher profit margins. At the same time, Russian oil export to Turkey increased because of the U.S. sanctions against Iran, one of the major oil suppliers to Turkey.

Gazprom Neft, a Russian oil company, invited Shell, a global oil and gas major, to join its offshore projects “Triton” and “Neptune” on the Sakhalin island shelf, said Vadim Yakovlev, deputy CEO of Gazprom Neft. He also noted that Shell can join the project for the development of Achimov strata at the Yamburgskoye oil and gas condensate field in Western Siberia.

“The data we collected on the fields’ resources allows us to discuss cooperation opportunities with our partners who are interested in joining this project. We made a respective offer to Shell. We are cooperating and I think we can say that the company is interested,” said Vadim Yakovlev cited by TASS news agency.

Drilling platform in the Sea of Okhotsk. Image credit: Gazprom Neft

Gazprom Neft is interested in Shell’s assets in the Middle East and North Africa. “Shell allows us to assess its assets, and that’s what we are doing. It will depend on how attractive the options are. Will this project be attractive, the most important, the most competitive in our portfolio? We are currently assessing a range of assets in the Middle East and North Africa,” said Vadim Yakovlev.

Vadim Yakovlev also noted that Gazprom Neft is not particularly interested in the asset swap deals because of their complexity. Currently, Gazprom Neft has a strong portfolio of high-margin projects in Russia, which helps to ensure the company’s stable growth in the long-term perspective. “It is hard to find a suitable project abroad, which would comply with the company’s profit margin requirements,” said Mr Yakovlev.

Cederic Cremers, country chair for Russia at Shell, said that the company is interested in the oil and gas projects in Russia. “Obviously, we are interested in both. Oil and gas. We are increasing our presence in Western Siberia and we plan to grow further,” said Cederic Cremers cited by RIA Novosti news agency.

The Ayashsky licence block. Image credit: Gazprom Neft

The “Neptune” field was discovered by Gazprom Neft Shelf LLC in October 2017, following the drilling and testing of an appraisal well at the Ayashsky licence block, located in the Sea of Okhotsk, 55 kilometres offshore from Sakhalin Island. Its geological reserves are provisionally estimated at 255 mtoe, of which 70–80 mtoe are recoverable. Another hydrocarbon deposit named “Triton” was discovered at the Ayashsky block in 2018, during drilling of an appraisal well at the Bautinsky formation. Its reserves are estimated at more than 137 mtoe, reports Gazprom Neft.

The Russian government will invest over 30 billion rubles (approx. 500 million U.S. dollars) in the development of oil and gas technologies and equipment until 2024, said Denis Manturov, Minister of Industry and Trade of Russia. The funds will be spent on subsidising companies’ R&D programmes, developing new technologies for the LNG industry, manufacturing of the hydraulic fracturing equipment, as well as on improving Russian oil and gas equipment manufacturers’ competitiveness in the international markets.

Denis Manturov, Minister of Industry and Trade of Russia. Image credit: Ministry of Industry and Trade

The Ministry of Industry and Trade expects that by the end of 2020, Russia’s overall dependence on imported oil and gas technologies and equipment will decrease to 43%, compared to around 60% in 2014. According to Mr Manturov, Russia currently imports around 45% of the horizontal drilling equipment, 43% of the oil refinery equipment, 50% of the LNG production equipment, 50% of the subsea equipment, and 30% of the geological exploration equipment.

The most challenging sectors for the Russian oil and gas industry are offshore geological exploration and field development. However, Russian E&P companies and service providers are actively looking to decrease their dependence on imported technologies in these sectors. For example, the new seabed sensors that can be used for the geological exploration in the Arctic have been recently developed. The prototype sensors were successfully tested by Russian E&P and oilfield services companies, including Gazprom Neft, Sovkomflot Geo, MAGE, and Rosgeologia. Mr Manturov didn’t specify the product, however, he was most likely talking about new CRAB seabed sensors tested by Gazprom Neft in 2019. “We expect that by 2021 we will complete all the tests in the Arctic conditions and we will get fully developed and competitive systems,” says Denis Manturov.

Image credit: Gazprom Neft

Another challenging sector, according to the minister, is subsea equipment for the offshore field development. “In fact, the market for the subsea equipment is controlled today by the oligopoly of three American and one Norwegian company: FMC Technologies, General Electric, OneSubsea (all from the U.S.) and Aker Solutions (Norway). However, taken into account recent sanctions cases, we must be absolutely self-sufficient and independent. The total need of Lukoil, Gazprom, and Rosneft for subsea equipment is expected to reach 300 subsea systems elements by 2035,” says Mr Manturov. In order to meet these market demands, the Ministry of Industry and Trade and Gazprom agreed to cooperate on the development of 12 technologies, the most needed by the Russian oil and gas industry. Since 2017 the Ministry invested 3.5 billion roubles (around 60 million U.S. dollars) in this project.

According to the plan for import substitution in the oil and gas industry developed by the Ministry of Industry and Trade in April 2019 (order 1329), by 2024 Russia should reduce its dependence on imports of subsea equipment for the continental shelf projects, as well as equipment for oil platforms and vessels to 50% from 75% in 2014. At the same time, import of technologies for geological, geophysical, and seismic surveys (including equipment for offshore projects) should be reduced by 2024 to 25% from around 65% in 2014. According to the Strategy of shipbuilding industry development, by 2035 the share of local equipment, works, and services should constitute at least 75% of the total costs of a vessel (used in the oil and gas industry). “Import substitution of 100% is not always economically viable and achievable in the current market conditions and international cooperation,” says Denis Manturov.

As we mentioned earlier, Western sanctions remain one of the main drivers for the Russian oil and gas industry technological development. Russian E&P and service companies actively work to reduce their dependence on technology imports from the West, first of all in the sectors affected by the sanctions: equipment for offshore field development (including subsea equipment) and hydraulic fracturing. As Western sanctions may affect Russian oil production in the mid to long term perspectives, they may also eventually lead to the loss of the Russian market by the leading oilfield services providers. In 2019, the largest OFS companies (Schlumberger, Halliburton, Baker Hughes) declared either loss or significantly reduced profits. Apart from other reasons (decreasing activities in the U.S. shale industry, focus on the cost reduction by major operators etc.), the Big 3 negative financial results can be explained by the increasing competition. Active technology development in Russia may not only make Russian oil and gas sector technologically independent but will also create strong and active competitors that would offer their services (with potentially better value proposition) in the international markets.

On 5 December 2019, Alexey Miller, CEO of Gazprom, and Ölziisaikhany Enkhtüvshin, deputy Prime Minister of Mongolia, signed a Memorandum of Understanding for joint assessment of the project viability of the new gas pipeline to China through Mongolia, reports Gazprom. Although running a longer distance, the trans-Mongolian gas pipeline would be less technically challenging compared to the existing project of the “Power of Siberia 2” pipeline through the Altai mountains via the so-called Western route.

On 3 December 2019, Ukhnaagiin Khürelsükh, the Prime Minister of Mongolia, expressed his support for this project. “We are glad that Russia supports the project of the gas pipeline through Mongolia to China. I think that today we have seen the start of this project,” said Mr Khürelsükh during the press conference after meeting with his Russian colleague Dmitriy Medvedev. Later that day Mr Khürelsükh met with Alexey Miller to discuss cooperation prospects in the field of natural gas exports.

Meeting of Gazprom Chairman Alexey Miller and Prime Minister of Mongolia Ukhnaagiin Khürelsükh. Image credit: Gazprom

The Ministry of Energy of Russia and Gazprom will create a task force to work on the project of the gas pipeline through the territory of Mongolia, confirmed Alexey Gordeev, deputy Prime Minister of Russia. “It has been announced that the task force is formed, it will work on the technical and economic assessment of the project. The main factor is the project’s viability. Russia will assess this project on the presidential level, the respective instructions were given to both the Ministry of Energy and Gazprom,” said Mr Gordeev, cited by Interfax news agency.

Construction of the “Power of Siberia” gas pipeline. Image credit: Gazprom

The pipeline through Mongolia would be an alternative to the “Power of Siberia 2” gas pipeline through the Altai mountains, which has been planned since the beginning of the 2000s. In 2015, Gazprom and CNPC signed the Heads of Agreement for pipeline deliveries of natural gas to China via the Western route. The “Power of Siberia 2” gas pipeline with the capacity of 30 billion cubic meters a year was designed to deliver natural gas from Gazprom’s largest gas fields in Western Siberia to the North West of China. Taking advantages of the shortest route between Western Siberia and China, this project would face some technical difficulties as the pipeline is supposed to cross the mountain range in the Altai region. This also makes this project more expensive compared to the Mongolian route that would run through the plain steppe terrain.

For this reason, the Eastern route was chosen by Gazprom and CNPC as a preferred solution, and the “Power of Siberia” pipeline was commissioned to deliver Russian gas to China. The pipeline came on stream on 2 December 2019, when Russian President Vladimir Putin and his Chinese colleague Xi Jinping launched the pipeline in a teleconference mode. The “Power of Siberia” will transport natural gas from Gazprom’s Eastern Siberian gas fields, Chayandinskoye field in Yakutia and Kovyktinskoye field in the Irkutsk region. According to Gazprom, the company has already commenced the construction of the pipeline’s first section running around 2,200 kilometres from Chayandinskoye gas field to the city of Blagoveshchensk in the Russian Far East. The second phase of the project will include the construction of a section stretching for about 800 kilometres from Kovyktinskoye field to Chayandinskoye field. Gazprom plans to bring Kovyktinskoye gas field on stream in late 2022, so the pipeline construction should be completed by that time.

Natural gas resources and gas transmission system in Eastern Russia. Image credit: Gazprom

Russian energy experts point out, that apart from the technical simplicity the Mongolian route would have other advantages. First of all, it would allow gas deliveries straight to the end customers in Eastern China, including Beijing region, while the Altai route would end in China’s Xinjiang Uygur Autonomous Region, one of the largest gas-producing regions of the PRC. It is also a region where gas from Central Asia is delivered to China via the Central Asia-China gas pipeline. For this reason, once delivered to Xinjiang province Russian gas would compete for access to the Chinese gas transportation system not only with locally produced gas but also with gas supplies from the Central Asian states.

The downsides of the Mongolian route are potential transit risks and higher operating costs due to the transit fees that the Mongolian government would charge for transporting gas through its territory.

During the last 20 years, Gazprom faced several gas transit crises in Europe, first of all, due to the problems with the governments of Ukraine and Belarus. For this reason, the company made a decision to eliminate transit risks by constructing direct subsea pipelines straight to its customers in Western and Southern Europe. Thus, in 2012 Gazprom commenced two lines of the “Nord Stream” offshore gas pipeline with the capacity of 55 billion cubic meters of natural gas a year from Russia to Germany across the Baltic Sea. In 2019 a twin “Nord Stream 2” gas pipeline was constructed, increasing Gazprom’s total export capacity in the region to 110 cubic meters a year. The “TurkStream” offshore pipeline with a capacity of 31.5 cubic meters a year was constructed to deliver Russian gas to the customers in Turkey and Southern Europe. This pipeline is stretching for 930 kilometres from Russia to Turkey across the Black Sea with onshore extension to Bulgaria and the Balkans. The company expects the “TurkStream” to become operational in late 2019.

To mitigate transit risks and avoid additional costs, China also supported only direct transportation routes from Russia. Dmitry Akishin, director of the gas and chemistry practice at VYGON Consulting, notes that until recently Chinese companies were standing against any transit projects for the oil and gas supplies from Russia. Thus, recently China refused to purchase Russian crude oil delivered by rail through Mongolia due to high customs and transit fees. For this reason, a narrow but technically challenging mountainous corridor on the border between Russia and China was considered as an entry point for the “Power of Siberia 2” pipeline. However, Mongolia’s geographical location, its relatively low level of economic development and high dependence on both Russia and China for trade and transportation significantly reduce the country’s bargaining power and make it a convenient and almost risk-free partner for Russia and PRC.

Gas analyst of the Energy Centre at Skolkovo business school Sergey Kapitonov also points out that currently there are no available resources for the Mongolian route as the only developed Kovyktinskoye gas field is considered to be the resource base of the “Power of Siberia” pipeline. However, Dmitry Akishin estimates that it would take around 1-2 years to design the new pipeline and around 4-5 years for the construction. During this time new gas fields in Eastern Siberia may come online and thus the resource problem would be solved. Earlier this year Alexey Miller said that Gazprom plans to intensify its geological exploration activities in Eastern Siberia in 2020-2021. At the moment the company conducts exploration drilling on Abakan, Ilbokichskoye and Imbinskoye gas fields in Krasnoyarskiy Krai, as well as seismic surveys and additional exploration activities in Kovyktinskiy and Handinskiy areas.

Mongolia tried to convince Russia and China to use its territory for oil and gas pipelines for many years. However, due to the perceived threat of transit risks in both Russia and China and higher transportation costs, the pipeline projects through Mongolia were not considered before. The situation changed in September 2019, when Vladimir Putin asked Alexey Miller to “think about” the Mongolian route. He said that this route is not a simple solution but it is quite realistic. He also pointed out that China also started to consider this route. He said that the resource base for this pipeline would be the large gas fields in the Yamal peninsula, so it will help to find the necessary resources to “fill the pipe”. “We are working with Chinese and Mongolian partners on the routes for hydrocarbon exports through Mongolian territory. The work is in progress,” said Vladimir Putin, sited by Kommersant.

Connecting the Western route gas pipeline to the large gas fields of Western Siberia would allow Gazprom more flexibility in reacting to demand patterns and price fluctuation in Europe and Asia, delivering gas to the markets with higher margins. This pipeline would serve as a continental interconnector between western and eastern gas transmission systems in Russia. As a result, Russia will have a large scale, truly continental gas transportation system connecting Siberia’s gas fields to industrial centres in Western Europe and the Asia-Pacific region.

Russian oilfield services (OFS) market experiences the decline in hydraulic fracturing (HF) operations, reports Deloitte, a global consulting firm, in its recent Russian OFS report. In 2018 Russian oil and gas companies conducted 5,921 hydraulic fracturing operations, a 4% decrease compared to 2017. The number of hydraulic fracturing operations in Russia has been decreasing since 2015, with only a one-off 2% increase in 2017. The number of HF operations conducted by Surgutnedftegaz, a Russian oil and gas major, fell by 17% marking the biggest decrease compared to the company’s peer group.

Gazprom Neft Technology Centre. Image credit: Gazprom Neft

The efficiency of hydraulic fracturing operations in Russia has also been decreasing. In 2018, fracturing allowed the production of 6,7 million tonnes of crude oil, a 3% decrease compared to the previous year. At the same time, Surgutneftegaz was able to increase the efficiency of its fracturing operations by 6%, while Lukoil saw a 20% decrease in HF efficiency. The efficiency of hydraulic fracturing operations has been decreasing in Russia for the last few years. On average, in 2013 one operation produced 1,426 tonnes of crude oil, while in 2018 it decreased to 1,135 tonnes, reports Deloitte.

Around 75% of all the hydraulic fracturing operations in Russia were conducted by four oil and gas companies: Rosneft, Surgutneftegaz, Lukoil and Tatneft.

Data: Deloitte

“Hydraulic fracturing remains a perspective technology in Russia, which can be used to sustain production on the ageing oilfields and also to increase the tight oil reserves. Increase in horizontal drilling can drive the hydraulic fracturing market up but the latest data shows that this market is negatively affected by the sanctions. Thus, the priority for the Russian companies would be the development of domestic technologies and software for hydraulic fracturing. However, it would take some time,” says Andrey Kolpakov, a senior researcher at the Institute of Economic Forecasting of the Russian Academy of Sciences.

Hydraulic fracturing operations in Russia were seriously affected by the U.S. and the E.U. sanctions imposed on the Russian oil and gas sector in 2014. Thus, the U.S. sanctions prohibit “the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, the Arctic offshore, or shale projects” in Russia. As hydraulic fracturing is a primary technique for shale oil production, as well as an enhanced oil recovery (EOR) method used to increase production on conventional fields, the export ban can negatively affect both. Deloitte’s data doesn’t specify which area was more affected, however, the decrease in hydraulic fracturing operations may contradict the report’s data showing an increase in horizontal drilling in Russia by 19% in 2018.

Hydraulic fracturing is one of the key EOR technologies used by Russian E&P companies. According to Lukoil, a Russian private oil company, in 2017 hydraulic fracturing operations accounted for 30.41% of the company’s additional oil production, allowing the production of 6.6 million tonnes of crude oil. However, the number of HF operations conducted by Lukoil has been steadily decreasing from 980 in 2014 to 727 in 2017.

Hydraulic fracturing is a crucial technology for enhanced oil recovery on the mature fields, said Tatiana Mitrova, director of the Energy Institute at Skolkovo business school, in 2018. However, since the sanctions were imposed no new hydraulic fracturing fleet was manufactured in Russia, while the old fleets are ageing. According to the plan for import substitution in the oil and gas industry developed by the Russian Ministry of Industry and Trade in April 2019, by 2024 Russia should reduce its dependence on imports of hydraulic fracturing equipment to 25% from 85% in 2018. Russian E&P companies, such as Lukoil and Gazprom Neft, list the development of their own HF technologies among the top priorities for the companies’ technological development.

The current decrease in hydraulic fracturing operations in Russia shows that technological sanctions imposed on Russian oil and gas industry in 2014 may work in a mid-term perspective, eventually contributing to the oil production decline. At the same time, the western OFS service providers and equipment manufacturers are losing the significant market, while Russian E&P and OFS companies are working towards the development of new fracking technologies, enjoying the full support of the government.

The Commission on Foreign Investments Monitoring of the Russian Government has granted permission to Saudi investors to acquire a 20.5% stake in Novomet, a leading Russian artificial lift equipment manufacturer, said Igor Artemyev, head of the Federal Antimonopoly Service (FAS) of the Russian Federation. The Russian Direct Investment Fund (RDIF) will acquire a 10.2% stake in the company.

Image Credit: Novomet

Earlier this year Saudi Energy Minister Khalid Al-Falih announced that Saudi Aramco, a Saudi state-run oil company, may purchase a share in Novomet. In December 2018 Kirill Dmitriev, the CEO of the Russian Direct Investment Fund, said that Saudi Aramco and Novomet had “finalised the parameters of the deal”, which would see Saudi investments in one of the leading Russian oilfield services (OFS) equipment providers. Saudi Aramco also planned to purchase pumping systems produced by Novomet. In June 2018 the CEO of Novomet-Perm Maxim Perelman said that RDIF, Public Investment Fund (PIF) of Saudi Arabia and Saudi Aramco plan to acquire 30.76% share, which is currently controlled by the Russian state-run venture capital fund Rosnano.

Saudi Energy Minister Khalid Al-Falih, Minister of Energy of Russia Alexender Novak and RDIF CEO Kirill Dmitriev at Russian-Saudi Investment Forum. Image credit: RDIF

Mr Artemyev noted that Saudi investors will pay around 5 billion rubles (approx. $78 million) for their shares, so the total value of Rosnano’s share is estimated at around 7.5 billion rubles (approx. $117 million).

In January 2017 Halliburton, an American oil service company, applied for the Russian Federal Antimonopoly Service’s (FAS) permission to acquire 100% stake in Novomet. However, one year later it was announced that a $1 billion worth deal had been cancelled. The reason for the cancellation has never been disclosed but it was most likely caused by the position of the Russian government, which was resistant to the idea of selling such an important asset to an American company because of the technological sanctions imposed by the U.S. on the Russian oil and gas sector.

At the same time, today Saudi Arabia is considered by the Russian government as a more reliable business partner, so the Commission on Foreign Investments Monitoring has approved the sale of this strategic asset to Saudi investors. Both Saudi Arabia and Russia currently face a problem of declining oil production on mature oilfields, so technologies for enhanced oil recovery, including artificial lift equipment, become vital for maintaining stable oil production and thus leading positions of both countries in the international oil markets.

Established in 1991, Novomet is the leading Russian manufacturer of artificial lift equipment, first of all, ESP systems. Its product line includes pumps, motors, protectors, VSDs (variable speed drives), and sensors, as well as a great number of custom-made auxiliaries for specific and complex wells. According to Rosnano, in 2016 Novomet’s market share in the artificial lift equipment market was 20% (2nd) in Russia and 2.3% (7th) worldwide. Around 60% of Novomet is controlled by the company’s senior management team, 30.76% belongs to Rosnano, and minor shares are controlled by the Russian investment and private equity funds Baring Vostok and Russia Partners.