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News // Russia

Russian oil industry digitisation estimated at $380 bln

25 June 2018 , 13:00Neftegaz.RU760

Moscow, June 25 - Neftegaz.RU. The digitisation of Russia’s oil industry is estimated to cost 24 trillion rubles ($380 billion) by 2035, though the process could be impeded by US and EU sanctions on the country.

 

Moscow-based Vygon Consulting said that for companies to make the digital switch over successfully, they would have to spend about 5% of their entire capital expenditure budget on cutting-edge digital technology. The consultancy said that the oil industry’s technological ramp-up could be a catalyst for economic growth as it spurs activity in other sectors.

 

The move to digitise Russia’s oil industry has been discussed for nearly a decade, but it has really gained momentum over the past year after President Vladimir Putin made the creation of a digital economy one of his main priorities at the St Petersburg International Economic Forum in June 2017.

 

The move towards modernisation is a laudable goal, but its application will prove trickier in light of the economic sanctions imposed on Russia by Washington and Brussels over the annexation of Crimea from Ukraine in 2014. Sanctions have already created obstacles, one example being US tech giant Oracle’s revision of its contracts with Russian customers earlier this year.

 

With access to Western technology stymied, Russian oil companies can either look to domestic tech companies or suppliers from China or Southeast Asia.

 

Gazprom Neft recently said it would focus on home-grown technology to achieve its goal of becoming the Russian oil industry’s technology standard bearer. There is little doubt that the company might have been able to achieve its goal quicker with access to new technology provided by the likes of US-based Schlumberger and Halliburton for example.

 

The company and its peers face other obstacles apart from sanctions, however. More taxes and broader economic issues, such as underdeveloped capital markets, a lack of venture capital and poor competition in oilfield services segment, are all impediments to rapid digitisation.

 

Shell currently controls all of its oil wells online and in real time, with BP rapidly catching up in terms of its own digital conversion. Russian companies like Gazprom Neft will one day hope to replicate such advances, but without sanctions being relieved anytime soon, their progress towards full digitisation is likely to be slow.

 

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