Oilfield service companies in Russia are unable to invest in development under current macroeconomic conditions, with many of them heavily indebted, Gazprom Neft CEO Alexander Dyukov said during the Central Bank of Russia’s Financial Congress, as per Interfax.

“If you look at the situation in Russia’s oilfield services sector, half of such companies are so indebted that they effectively already belong to the banks. The rest of the oilfield service companies are financed by their owners. But in both cases, we can speak of an absence of investment in development and in the renewal of fixed assets. At the same time, I would like to avoid criticizing the Central Bank, because we are seeing only part of the picture – the full picture is available to the Central Bank. And I am confident that in a short time we will successfully overcome these problems, and the macroeconomic situation will return to balance,” he said.

At the same time, Gazprom Neft is increasing its investments, Dyukov said. “We are investing primarily in hydrocarbon production projects. The second area of investment is in increasing refining depth and the production of high-margin oil products. The third important area is technological development. We continue to increase investments because demand for our products is stable. And in general, we can speak of a long-term trend of growing demand, even if it’s not rapid,” he said.

“Of course, the macroeconomic situation – prices, the exchange rate, interest rates, taxes – does not encourage increased investment. But we see how Gazprom Neft’s investments in technology are paying off in project profitability, which allows the company to remain effective even under current macroeconomic conditions. Technological development not only allows us to maintain stability. We are becoming developers and manufacturers of equipment, producing new materials and software. The company also develops and manufactures catalysts, field chemicals, and so on,” Dyukov said.

“If we talk about the production of high-tech equipment, a large amount of this equipment is cross-sectoral and can be used in other industries. This provides additional income and has serious export potential. In the West, the tasks of producing new equipment, technologies and materials are fulfilled by oilfield service and engineering companies. In Russia, we are now forced to take on these tasks for several reasons. First, because we have the relevant competencies and skills. And second, because we can afford to do so due to our margin of safety. But domestic service companies do not have this margin of safety,” he said.
Source: Reuters