Russia to Invest $590 Million to Diminish Its Reliance on Foreign Equipment for Arctic Energy Operations

On January 25, the Russian Industrial Ministry announced that it is currently setting up a $590 million investment program aimed at increasing Russia’s energy extraction capabilities in the Arctic and diminishing the country’s dependence on imported equipment to develop its less accessible locations (for which the country has long relied on foreign technology).  Under the program, funding will be used to support oil and gas equipment manufacturing.

Russia’s weakness in this area is especially pronounced in deep-water drilling and in conducting operations in the Arctic, where U.S. firms such as Exxon hold a significant technological edge.  A self-sufficient Russia in this regard would be less susceptible to future sanctions aimed at its energy industry, although it is questionable what can be accomplished at this initial level of funding support.  Nevertheless, a program focused on this vulnerability is worth noting.

This announcement comes as Russia also begins to utilize an Arctic shipping route that would deliver LNG from its mammoth Arctic Yamal LNG project to Asian markets.  Sovcomflot recently began testing this route with a recently-delivered $300 million LNG transport vessel equipped with special ice breaking capability.  Fifteen more such vessels are to be delivered to Russia in the coming years.  South Korea’s Daewoo is responsible for their design and construction.

Russia’s ice-breaker fleet significantly outmatches those of other nations, positioning Moscow to outcompete its neighbors in the extraction and delivery of Arctic oil and gas that is estimated to hold as much as a third of remaining global energy reserves.