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Why the oil industry of the Russian Federation began to be active in Africa

Why the oil industry of the Russian Federation began to be active in Africa 

When the first Russia-Africa Summit took place in October 2019, most industry observers believed that many of the projects under discussion would not pass the FID stage (final investment decision). However, as it turned out, not everything is so simple.

 LUKOIL oil workers

The OPEC + Vienna production cut deal is in effect for the third year in a row. Russian oil companies have enough funds to invest, but face an uncertain future of domestic projects. Nobody wants their own project to fall into the category of “free production facilities.”

International sanctions and the consequences that they entail have forced Russia to go beyond its usual investment regions. Gazprom is currently an unwanted investor in Europe, and even LUKOIL has reduced its retail presence in the EU.

Investments in the United States or Canada are completely ruled out for political reasons. And Middle Eastern companies have become competitors who themselves are looking for opportunities to diversify their portfolio. For all of the above reasons, Africa has become a very suitable region for Russian investment.

The Russian Ministry of Energy has repeatedly refused to link Russia’s newly discovered interest in Africa with the OPEC + deal. The Office stated that it usually takes 5-7 years to implement new projects, and therefore the time gap between today’s problems and future production is too large to make predictions.

Russian oil companies are thinking about the future

However, no one knows when exactly the Vienna deal will expire. Oil companies must prepare for the future and cannot simply make a decision (usually quite sudden) to increase production to a normal level. And this is largely why Russia sees new prospects for itself in West Africa.

The Democratic Republic of the Congo (DRC) has become one of the key areas of Russian investment in Africa. Moreover, DRC will not be the first African country to receive Russian capital.

Rosneft has already bought shares in gas production projects in Egypt (Zohr) and Mozambique. And LUKOIL is trying to develop projects in Ghana. The DRC, however, may be the first country in which Russian companies assume extensive obligations, including those related to infrastructure.

LUKOIL has already bought a 25 percent stake in the Marine XII offshore license block, where the operator is Italian ENI. Five oil fields were discovered at the site with a total reserve base of 1.3 billion barrels per day. The Russian company invested $ 770 million.

LUKOIL also intends to work on the shelf of Ghana. There, the company intends to begin production drilling at the ultra-deep Pecan field. An exploratory well has been drilled to a depth of 4880 meters. And since the large deposits of Nigeria have long been exploited by Western companies, Russia seems to be looking for its place in the southern part of the Gulf of Guinea.

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