African oil projects gaining appeal among Russian investors

African oil projects gaining appeal among Russian investors
Photo: kremlin.ru

Russian oil majors are seeking new business opportunities abroad, as domestic development is constrained by output cuts. While participation in Western projects is hindered by international sanctions, Africa is emerging as a new direction of investment.

Africa has emerged as a suitable region for Russian investment in oil production, says Oilprice.com adding that international sanctions and the ramifications they entail have compelled Russia to look beyond its usual investment regions. While Russian oil firms have enough cash to invest thanks to rebounded oil prices, they are facing an uncertain future with domestic projects due to output limitations in the framework of the acting OPEC+ agreement. Russian oil and gas majors are currently unwelcome investors in Europe, the United States and Canada. As for Middle Eastern oil companies, they have grown to become competitors, themselves looking to diversify their portfolio.

The Russian Ministry of Energy has repeatedly declined to link Russia’s newly-found interest in Africa and the country’s OPEC+ commitments, but no one really knows how long these cuts will last. As oil companies need to prepare for the future and cannot just act upon a sudden decision to ramp up production to normal levels, Russia sees a new role for itself in Western Africa, which is the world’s least explored oil frontier.

Drilling platform in Gabon, Central Africa. Photo: needpix.com

Russian oil companies have already invested in African countries — Rosneft has stakes in gas-producing projects in Egypt and Mozambique, while Lukoil has had projects in Ghana. Most of Nigeria is already booked by international majors, so Russia seems to be seeking a place of its own in the southern part of the Gulf of Guinea. Thus, the Democratic Republic of the Congo has emerged as one of the key areas for Russian investments in Africa. Investments will be headlined by VEB, the state development corporation. In the near future, VEB and Congo’s national oil company SNPC are expected to finalise the deal on the construction of an oil products pipeline. Russia’s leading steel pipe manufacturer TMK will reportedly join the contract on the pipeline in the upcoming weeks, but it is still unclear which oil company will take the project.

A few months earlier, Russia’s leading private oil company Lukoil bought a 25% stake in a license block consisting of five discovered fields. Besides, Lukoil and Russia’s state-owned geological exploration company Rosgeologia have signed agreements with Equatorial Guinea on future exploration activities in the country.

Investing in Africa, Russian firms are seeking ways to attain development goals, which will be quite difficult if they focus solely on projects at home. Successful investments abroad can help them recover whatever has been potentially lost domestically, considers Oilpice.com.

By Anna Litvina