The current state and development prospects of independent oil companies in Russia

Abstract

Aim. The presented study aims to analyze and examine the current state of the independent oil business in Russia, assess its development prospects, develop and propose measures necessary to support this sector of the oil and gas industry.Tasks. The authors describe the state of the independent oil business in the Russian Federation at the current stage and identify problems in its development; analyze the prospects and trends of business development in this industry; suggest possible measures to improve the situation.Methods. This study uses complementary general scientific (classification, comparison, abstraction, etc.) and special methods of cognition (observation, examination, generalization, etc.).Results. The study identifies several problems that hinder the operation of small and medium private enterprises in the oil and gas industry: high well servicing costs; high additional costs for the purchase, implementation, and maintenance of upgraded equipment; high dependence on the situation in the domestic market and price changes; the problem of attracting qualified personnel to small companies. The role and importance of independent oil companies in Russia are substantiated. The following proposals for improving the state of the independent oil production sector are presented: improving legislation and developing regulations aimed at simplifying the official transfer of oil fields that are uneconomic and unprofitable for large vertically integrated oil companies (VIOCs) to small market players, provided that it will be beneficial to all parties; further stimulating close mutually beneficial cooperation of the government represented by research universities, large oil companies and small businesses engaged in oil production; providing and modifying various preferential coefficients — for example, returning a reduction coefficient that takes into account the production of super-viscous oil; providing benefits to small independent oil companies in terms of resuming production at previously mothballed or abandoned fields; provision benefits to independent oil companies (IOCs) for the purchase and (or) production of industrial equipment necessary for the development and operation of oil fields; introducing a system of tax deductions aimed at stimulating geological exploration.Conclusions. The prospects for the functioning and development of IOCs in Russia are great. The government should provide more support to IOCs. It seems feasible to take several protective measures to ensure the sustainable growth of such firms at the initial stage. In turn, the operation of IOCs facilitates the development of regions (additional tax deductions, employment, etc.), which has a positive effect on the national economy as a whole. Underestimating small businesses’ role and prospects in the oil industry may lead to the loss of existing opportunities and Russia’s leading positions in the global oil and gas industry.