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Russian Sanctions Are Hurting Western Companies

In an effort to get Russia to back off from the crisis in the Ukraine, the United States and the European Union (UE), imposed some severe sanctions. These sanctions were strengthened on September 12, and included banning the export of oil producing technology and oil related products. They are aimed at Russia’s five major oil companies, which are Gazpron, Lukoil, Rosneft, Surgutneftegaz, and Transneft. This is a huge blow to the companies, effectively cutting off any fracking and deep sea drilling. It is estimated these sanctions will cost Russia around 10% of its total oil production by the year 2020. The five Russian companies, however, aren’t the only companies suffering from the increased recommendations.

Many of the West’s major oil companies do big business with Russia and its major oil companies. The blocking of exporting oil related products, will be putting a huge dent in Western oil companies profits and investments. Predictions are that it will cost our companies anywhere from $300 -500 billion. BP and oil service and production related companies like Baker Hughes, Halliburton, and Essentra, could miss out on one of the world’s biggest untapped oil shale deposits, if the penalties continue. The shale deposits are the size of California, and are thought to contain 75 billion barrels of oil, which is obtainable. In fact, Russia is estimated to hold $7.5 trillion worth of gas and oil. Western companies like ExxonMobil are literally chomping at the bit to get a piece of the action. Exxon was planning to invest over $50 billion in Russia, this year alone. With the sanctions still in place, Exxon and other companies can lose this and a lot more.

Western companies that make oil related products, like Oil Country Tubular Goods (OCTG), may also suffer losses. OCTG is a term used to refer to tubing and casing, oil line pipe and other types of pipe used in the oil industry. Casing is the pipe used in the drilling of an oil well. It is drilled and cemented into place, keeping the hole from collapsing. Tubing is the pipe which is put into the finished well. The oil and gas flow through the tubing pipe to the surface. Line pipe is the pipe that makes up the actual oil pipelines, which can go on for miles.

The companies that make all these different types of piping and casing typically export many tons to Russia, and were expected to produce and ship a lot more. The untouched shale deposits that Russian and Western companies were counting on getting at, would have provided huge orders for more pipe and oil related technology companies. OCTG companies may even suffer further losses if Russian authorities impose sanctions of their own. It is rumored that they are already close to doing just that. The proposed and much anticipated boom in the Russian oil market, is now in jeopardy due to the crisis in the Ukraine. Sanctions meant to hurt Russia, may end up hurting our own companies just as much.

For further information about their products or how the imposing Russian sanctions can affect our way of life, call or visit Essentra today.