Oil-field services firms in Russia are sounding the alarm as drilling activity slows and order books sit empty, underscoring the immense pressure the country’s oil and gas industry faces amid budget shortfalls. Ever-intensifying Western sanctions, limited access to technology and partnerships, and high borrowing rates are squeezing Russia’s entire upstream sector, which provides a vital source of revenue for Moscow and will face even more pressure to grow production as Opec-plus lifts some of its production quotas. Services players at the recent Tyumen Oil and Gas Forum called the current situation “alarming,” with drilling volumes down by 15% and the broader sector facing one of the most difficult operating environments in decades. Struggles across Russia’s upstream oil industry are being felt perhaps most acutely in the services sector. Low prices, sanctions, high taxes and high borrowing costs all have weighed heavily on producers, limiting their appetite to drill. Speaking at the Tyumen forum, Alexander Dyukov, the head of Gazprom Neft, Russia’s third-largest oil producer, called for tax breaks for the industry, saying they would be necessary if Russian firms are to develop and deploy the technical capabilities needed for sustainable growth following Opec-plus’ decision to ramp up production in the coming months. The Russian finance ministry, however, has no plans to introduce any significant new oil industry tax breaks in the next three years as the state grapples with growing military expenses in Ukraine and oil and gas revenues that have hit a 30-month low. Russian financial authorities now forecast an average price of around $59 per barrel for Urals crude export blend in 2026 and $56/bbl this year. Oil revenues comprise about 25%-30% of Russia’s budget.
