Western sanctions weaken oil and gas construction pipeline in Russia and Eastern Europe


Sanctions imposed on Russia over the Russian-Ukrainian conflict have led to a $237.5 billion drop in the pipeline of oil and gas projects in Eastern Europe, as restricted access to intermediate goods and international capital halted construction of many oil and gas projects, according to GlobalData, a data and analytics firm.

“These sanctions have weighed heavily on the growth of oil and gas projects in Eastern Europe and have caused significant disruption to activity as countries plan to completely phase out Russian oil and gas,” he said. Jack Riddleston, construction analyst at GlobalData. “Projects funded by foreign entities have also had their funding withdrawn and restricted supply chains have forced construction to a halt.”

GlobalData’s latest report, “Project Insight – Oil and Gas – Q2 2022″, reveals that large projects on hold have limited the size of the pipeline. Russia dominates the project pipeline in Eastern Europe, accounting for 40.4% of the pipeline, with the total project value amounting to $95.9 billion. Projects in the pre-execution and execution phase represent 64.2% of ongoing projects.

Based on GlobalData’s analysis of oil and gas construction projects currently underway in Eastern Europe, construction spending will reach $33.1 billion in 2023 if all projects proceed as planned and if the expenses are spread evenly over the construction phase. However, there are risks hanging over the progress of projects in Russia.

Novatek’s $21 billion liquefied natural gas plant, Yamal Arctic 2, is one of many oil and gas projects in Russia that has been put on hold and is currently 60% complete with Train 1 at 80% and is expected to be completed by 2023. However, although progress has been made in the construction of Trains 2 and 3, completion remains uncertain as the May 27 deadline for foreign companies to supply Russian projects has passed.

“Furthermore, the import ban is likely to continue to stifle the growth of upstream projects in Russia, as alienation from the West has depressed Urals crude prices and, consequently, US revenues. ‘export,” adds Riddleston. “However, as the opportunities in the West dwindled, the opportunities in the East opened up. As a result, India and China took advantage of the reduced prices. India went on a frenzy of oil spending in the Urals and China agreed to a 30-year deal to import natural gas through Siberia Power with plans to expand capacity with a new pipeline in northeast China.

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