Joint Ventures in the Russian Offshore – Positive News but only for the Long Term
The increasing maturity of Russia’s onshore fields, especially those in West Siberia, and the potential for the country’s production to go into sharp decline over the next decade has prompted the Russian government to promote offshore development as a potential solution. President Putin has encouraged his state oil company to seek international partnership to bring in the requisite technical and management expertise as well as much needed capital to fund what will be very expensive projects. The immediate consequence of this activity has been the formation of three joint venture partnerships between Rosneft and Exxon, ENI and Statoil respectively, with the IOCs finally seizing the chance to exploit their competitive advantages in a region with huge resource potential. However, despite the undoubted benefits which these new partnerships can bring for all parties in terms of technical knowledge exchange, reciprocal asset deals, diversification of risk and potential upside from exploration success, it would appear doubtful whether the results of their activity can be anything other than a long-term solution to Russia’s production issues. Therefore, the Russian government may need to increase the incentives for both domestic and international companies to exploit the country’s more accessible onshore resources if the country’s current levels of oil production are to be maintained in the short to medium term.