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The Russia oilfield services market size was USD 17.36 billion in 2020, which is a considerable share of the global market. The global impact of COVID-19 has been unmatched and staggering, with oilfield services witnessing a negative demand in Russia amid the pandemic. Based on our analysis, the Russian market exhibited a huge decline of -13.7% in 2020 as compared to the average year-on-year growth during 2017-2019. Nevertheless, the market is projected to grow from USD 18.32 billion in 2021 to USD 27.38 billion in 2028 at a CAGR of 5.9% in the 2021-2028 period. The rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the epidemic is over.
Oilfied services are witnessing a huge demand in Russia, owing to the noteworthy development in the exploration and production of natural gas. Development in various sectors such as automobile, pharmaceutical, power generation, and manufacturing has led to an increase in industrialization and urbanization, making crude oil and shale gas a vital development element.
Obstructions in Global Oil Sales and Reduced Oil Price to Hamper the Market amid COVID-19
Global crisis caused by the spread of the novel coronavirus has had a detrimental effect on almost all industries. The market has suffered a significant loss due to the imposition of countrywide lockdowns to control the spread of the COVID-19 virus. This has further contributed to the altered demand for oilfield services, which in turn has impacted the investments. The surplus supply and low demand have forced prominent players to temporarily reduce crude oil and shale gas extraction activities, ultimately leading to a fluctuation in prices. This has directly impacted the oil and gas services market. Russia has not been untouched by this impact and has suffered similar crises like the other countries worldwide.
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New Oilfield Discoveries in Russia to Augment the Market Growth
In December 2020, Rosneft discovered a new offshore gas field in the Arctic in the Vostochno-Prinovozemelsky-2 license area in the Kara Sea. The field is alleged to have 514 bcm of gas and 53 million tons of condensate. According to the U.S. Geological Survey, the Arctic has an unexploited potential of 90 bbl of oil and 47 trillion m3 of natural gas. The Russian area of the ocean has the largest share of about 48 billion barrels of oil and 43 trillion m3 of natural gas. In September 2019, Gazpromneft-Noyabrskneftegaz developed and successfully employed MAGIC, a new oil deposit search method, which augments efficiency while reducing exploration costs. These aspects, considered together, have given rise to Russia’s exploration activities to find new oil and gas fields. The rise in exploration activities and hence new discoveries are anticipated to increase oil production activities in Russia, which will require companies to combat the tough environmental conditions and complex equipment requirements. This is expected to drive the market in Russia.
Increased Investment in Offshore Oil and Gas Projects is a Vital Trend
In January 2020, Russian President Vladimir Putin announced USD 300 billion worth of incentives for new oil and gas projects north of the Arctic Circle. Growing investments in offshore oil and gas activities such as drilling, production, and exploration would increase the demand for oilfield services. The Chairman of the State Duma Committee on Energy, Pavel Zavalny, stated that global demands for hydrocarbons will remain steady until at least 2040. Therefore, Russia must do what it can to keep up production. The country is likely to see a massive increase in oil and gas production from offshore sites due to an increase in rig count, which will augment the market. The tougher production conditions in the Arctic circle due to the cold weather and ice in offshore locations necessitates specific services and equipment, which have a high investment cost. The economic factor and climatic factor of offshore production in the country is the major driver of market growth during the projected period.
Growing Investment in Petrochemical Industry to Aid Market Dynamics
The latest U.S. EIA (Energy Information Administration) report forecasted that global demand for petroleum and liquid fuels would be around 97.7 million barrels/day for all of 2021, which is a 5.4 million barrels/day increase from 2020. Furthermore, it was also predicted that the demand for petroleum and liquid fuels will rise by 3.7 million barrels/day in 2022 to an average of 101.4 million barrels/day. Hence, Russia is looking to push into petrochemicals amid ambiguous prospects for global crude oil demand.
Russia is planning to take new measures to shoot the petrochemical industry progress, to increase the production to around 20 million metric tons per year by 2030. ZapSibNefteKhim marked the beginning of rapid development in the Russian petrochemical industry. It opened the gates for several projects including a 420,000 ton per year ethylene plant in Novy Urengoy in western Siberia, which was commissioned in 2020 by the state-controlled gas firm Gazprom.
In March 2019, the Russian energy ministry approved a new roadmap for developing petrochemicals till 2025, aimed at unraveling an extra USD 40 billion in investments and creating some 18,000 jobs. Hence, the increasing petrochemical infrastructure, which is directly related to oil & gas production, is anticipated to drive the market during the forecast period.
Increasing Technological Advancements to Drive the Demand
There is a significant increase in the developments and technological advancements in cloud computing and artificial intelligence that has led to an increase in analytical software and services development in oilfield services industry, which enhances efficiency while reducing costs. This factor drives the demand for the market in Russia. This software can be efficiently used to study subsurface geology to understand the location of the underground reservoirs. Technological advancements have also helped develop a Digital oilfield that combines business process management with digital technologies. This helps in systematizing workflow for maximizing productivity, reducing costs, and controlling the overall risks associated with oil & gas operations. Wintershall Dea, along with Gazprom and OMV, developed a new method for producing gas from Turonian formations, maintaining plateau production from the Yuzhno-Russkoye field for longer. The Far Eastern Federal University and Anchor Company suggested using the groundbreaking technology of low-frequency oil and gas exploration to explore fields in the Arctic environment by capturing ultrasonic sound signals using sensors and a special station capable of operating under the ice.
The Production Cut Due to the 2016 OPEC+ Agreement Restraints the Market Growth
The OPEC+ agreement to cut oil output was signed in 2016 between several OPEC and non-OPEC countries, including Russia. More recently, oil prices had reached USD 0 per barrel, forcing oil and gas giants to shut down. The deal involved reducing supply to manage oil prices. The deal was signed to boost oil prices by reducing the oil supply by a combined 1.7-1.8 million barrels per day. When the agreement was signed, the price of a barrel of oil was below 50 USD. The signing of the deal showed results in a year by the year-end to almost USD 55. The cut in production in 2017 led to the prices increasing to USD 65 per barrel and a further increase by the end of 2018 to USD 80.
As of 2021, according to the WTI crude oil index, the oil prices stand at almost USD 65 per barrel. The increasing shift towards clean energy also has reduced the demand for oil and gas, affecting oil barrel prices, further pushing the need for an OPEC+ deal. The reduction in production caused by the OPEC+ deal had a long-lasting adverse impact on the Russia oilfield services market growth.
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Owing to Maximum Utilization of Services, Field Operations Hold a Significant Share in the Market
Based on the type, the Russia market is segmented into equipment rental, field operations, and analytical services. The services and equipment required specifically during maintenance and operation of oilfields are categorized under field operation. Field operations hold the maximum share due to the increased number of services in the type, coupled with increased drilling activities. Russia’s increased exploration activities have helped the country locate more oilfields. The rig count and production activities in these rigs have increased in the past few years. This has increased the market share of the field operations segment.
Oilfield construction is required to get any oilfield project started, which needs precise, specific, and reliable equipment. These equipment being costly, are preferred by companies on rent, known as equipment rental. The increased drilling operations contribute to making the equipment rental segment the second largest in terms of market share. With the advancement of technology, oilfield services employ software and cloud-based analytic software, known as analytical services. Due to the increased reliance of oil and gas industries on information technology and cloud services, this segment is the fastest-growing segment.
Increasing Production Activities Will Boost the Production Segment
Based on services, the Russia oilfield services market can be primarily split into geophysical services, drilling services, completion and workover services, production services, and processing and separation services. The actual production of oil and gas from oilfields involves equipment and services like artificial lift, support vessels, floating production vessels, well testing, subsea equipment, enhanced oil recovery, digital oilfields, and many others. Currently, the maximum portion of the industry is employed in the production sector due to the increasing production activities from new and old oilfields.
Drilling for exploration and production is an important activity in acquiring oil and gas from oil and gas fields. Many complicated drilling like directional drilling, horizontal drilling, logging while drilling, managed pressure drilling, and others make up this service segment. Drilling services are the second-largest segment in terms of market share. Completion Services and Workover Services involve well development, repair, and maintenance activities like well intervention, hydraulic fracturing, sand control, mud logging, completion fluid, wireline logging, and others. Oil & gas business includes exploration, production, refining, and distribution of oil & gas.
Processing and Separation involve the refining process, which includes separating various grades of fuel from the well and removing impurities to make it usable for various purposes. Geophysical prospecting involves technologies, services, and equipment used by the oil and gas industry to acquire seismic data, processing, interpretation, reservoir geophysics, borehole seismic, micro-seismic, equipment manufacturing, and software R&D. With the rising exploration activities, especially in offshore locations, the geophysical segment is anticipated to grow at the fastest rate.
Onshore to hold a Larger Share due to Growing Onshore Processing Activities
Based on the application, the market is segmented into onshore and offshore segments. The onshore segment holds the maximum market share owing to the increasing demand for production and separation and processing services for onshore oilfields. Offshore segments include oilfield service activities, or operations carried out in relation to fields present along coastlines or open ocean waters. They can be specified with the depth of the oilfield like shallow water, deep water, and ultra-deepwater, which require specific services for different depths. The offshore segment is growing rapidly due to the growing investments in exploration and drilling activities in an offshore application.
The market has been analyzed across Russia. The increased oilfield discoveries and growing investments in offshore exploration and production north of the Arctic are major contributing factors for the growth of the market in the region. Growing investment in the petrochemical industry and increasing technological advancements in the field have propelled the growth of this market. Despite the economic slowdown and the OPEC+ deal, Russia has increased the Arctic offshore and pipeline infrastructure investments. Russia has the longest pipelines in the world to facilitate the transportation of oil and gas. The Yamal-Europe pipeline connecting Western Siberia in Russia to Austria stretches to 4,196 km across Russia and other CIS countries. The Druzhba pipeline, which carries oil and gas from the eastern part of Russia to Germany through other CIS countries, is the world's longest oil pipeline and one of the biggest oil pipeline networks in the world. The increase in transportation services has directly given a boost to the market. There have been massive drilling cuts in the region in the past few years. Still, the government’s increased inclination to exploration activities has helped investment in the market in the country.
Rosneft-Burenie and Surgutneftegas Are the Players Expected to Lead the Way with Investments in Oilfield Equipment and Wide Customer Reach
A study of the competitive landscape shows very few of them have enough rig fleet and equipment of global standards. Most of the oilfield service companies are increasing investments in the equipment of international standards of quality and specialized equipment for the tough weather conditions. The fragmented market has seen numerous new technological advancements coming up to keep pace with the top-performing players. Considering all the scenarios Rosneft-Burenie, Surgutneftegas, and Gazprom Bureniye LLC are the major market players in the country. They are expected to lead the market in the upcoming years.
An Infographic Representation of Russia Oilfield Services Market
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The research report on the Russia oilfield services market highlights the country to better understand the customer. Additionally, the market research report provides outlook and understandings of the latest industry trends and examines technologies that are being set up at a rapid speed at a global level. Finally, it further elucidates some of the growth-stimulating factors and restraints, helping the reader to gain in-depth knowledge about the industry.
Value (USD Billion)
Fortune Business Insights says that the market size in Russia stood at USD 17.36 billion in 2020 and is projected to reach USD 27.38 billion by 2028.
The market is likely to grow at a CAGR of 5.9%, over the forecast period (2021-2028).
The field operations segment is anticipated to dominate this market during the forecast period.
The new oilfield discoveries in Russia is the key factor driving the market.
Rosneft-Burenie and Surgutneftegas are the key participants in this market.
The government incentives for new oil and gas projects north of the Arctic Circle is likely to propel investments in offshore oil and gas activities such as drilling, production, and exploration, which would accelerate the demand for oilfield type of services in Russia
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