Russia's oil sector digitisation to cost $380 billion

While Russian oil majors are eager to invest in technological modernisation and digitisation of their business, the upgrade is likely to be hampered by limited access to modern Western technologies. Without them, progress towards full digitisation is likely to be slow, warn industry experts.

The digitisation of the Russian oil industry is estimated to cost 24 trillion rubles (US$380 billion) by 2035, though the process could be impeded by US and EU sanctions on the country, says Your Oil And Gas News. According to the estimates of Moscow-based Vygon Consulting, oil companies have to spend about 5% of their entire capital expenditure budget on cutting-edge technologies to make the digital switchover successfully.

The long-discussed intention to digitise the country's oil sector has really gained momentum after President Vladimir Putin prioritised the creation of a ''digital economy'' at the 2017 St Petersburg International Economic Forum. Such shift towards modernisation is a worthy goal, as it can serve as a catalyst for economic growth by spurring activity in other sectors, considers the consultancy. Royal Dutch Shell currently controls all of its oil wells online and in real time, and BP is rapidly moving towards its own digital conversion.

Nonetheless, the goal's implementation may be hindered by the economic sanctions currently imposed on Russia by Washington and Brussels. For example, US tech giant Oracle had to revise its contracts with Russian customers earlier this year. Given the limited access to Western technology, Russian oil companies can turn to domestic technology providers or companies from China or Southeast Asia.

Gazprom Neft aims to become the Russian oil industry's technology standard bearer. Photo: Vadimirushka

Gazprom Neft has recently announced its plans to focus on home-grown technology. However, the producer might have been able to achieve its goal of becoming the Russian oil industry's technology standard bearer quicker with the support of foreign tech players like US-based Schlumberger or Halliburton, the source claims, adding that without sanctions being relieved anytime soon, progress towards full digitisation is likely to be slow. Besides the limited access to modern technologies, Russian oil companies face other obstacles, such as more taxes, underdeveloped capital markets, a lack of venture capital and poor competition in oilfield services segment.

By Anna Litvina

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