The Russian Market 2008

The Russian Market

Country Context Revived Stability. After the collapse of the USSR in 1991 and the separation of former Soviet Republics Russia lived through a period of instability characterized by decentralization of power and fragmentation of numerous big state enterprises. After Putin was elected President in 1999 the strong and consolidated majority managed to stabilize the situation in the country through re-centralization focused on the role of the nation and Russian key players in the international energetic scenario (Gazprom, Lukoil and Transneft). The System Remains Close… However, the “System Russia” is still “closed” because the state control over business activities remains strict as compared to other emerging economies, such as India and China that pursue the liberalization policy; this influences negatively the flow of foreign investments, which is much lower than in India and China. In “economic isolation” the “System Russia” has the only strong tug in the export of oil products. …and “Monolithic”. Russian economy still suffers the heritage of the recent times, when few big state enterprises served a wide range of consumers employing a huge number of workers without caring about the efficiency, applying sales prices “controlled” by the government, and using infrastructure and energy granted at “political” prices. Russia: from Diaspora to Recovery State O&G Industry. Russian O&G sector features a limited presence of international players. Shell (Sakhalin project) and TNK-BP Joint Venture are the only international companies having significant production/reserves. Besides, independent Russian companies have no access to the network of international transportation pipelines, and therefore they have to sell their products on the internal market at a political price (1/4 to 1/8 of the market price). Service Providers. The oil & gas service market in Russia is worth approx. 3-4 Bln USD/year and reveals, except for rare cases, the heritage of the...