Russian energy industry facing looming investment crisis

The oil and gas industry, which used to enjoy Putin’s privileged attention, has become a major victim of the Russian economy’s reorientation to provide for military needs in Ukraine. The expropriation of petro-revenues and rerouting them to the military-industrial complex may resemble the old Soviet model. The extraction of hydrocarbons, however, is a very different business today. Modern technology is needed for the oil production from the deep horizons of “brownfields.” Partnerships with major Western energy companies, such as ExxonMobil, TotalEnergies, and Haliburton, are crucial to Russia’s energy industry. As these partnerships have broken down, Russian corporations, including Rosneft, have been reduced to over-exploitation of their core assets. Thus, Putin’s war of attrition against Ukraine is set to further erode the effectiveness of Russia’s oil and gas sector.