* Moscow dependent on high-tech equipment, foreign know-how
* Some sanctions already in place, create uncertainty
* Western service companies crucial providers of modern
By Katya Golubkova and Dmitry Zhdannikov
MOSCOW/LONDON, July 9 With President Vladimir
Putin watching from afar, the head of Rosneft, Igor
Sechin, launched the world's biggest oil drilling platform in
the Okhotsk Sea to warm handshakes with his colleagues from
Beamed live to the Kremlin on June 27, the event marked a
major step in fulfilling the president's goal of increasing oil
output, and the presence of U.S. executives seemed to support
Putin's argument that Western sanctions were not hurting.
But partly built in South Korea, the more than 200,000 tonne
Berkut platform at the Sakhalin-1 project, led by Exxon, also
highlighted the oil industry's dependence on foreign technology
- something Washington could target if it decides to step up
sanctions on Russia over its actions in Ukraine.
It also underlines the difficulty for the Russian industry,
despite years of attempts, to build its own services sector at a
time the country needs to tap unconventional and Arctic reserves
to compensate for the output drop from mature Siberian fields.
"Russian producers can't compete in this sector with
foreigners mostly because of a complete lack of similar
(high-tech) goods," said Viktor Khaikov, vice-president of the
Yugra Association of Oil and Gas Service Companies based in
Russia's largest oil producing region in western Siberia.
Russia will be overtaken by the United States as the world's
largest oil producer this year after a decade of global
leadership and it will take years before it will be able to ramp
up output from its shale formations or the Arctic.
The Berkut platform will add only 90,000 barrels per day
within three years to Russia's total output, currently standing
at around 10.5 million bpd. Russia hopes to produce over 1
million bpd from shale and offshore sites in the medium term.
In May, Energy Minister Alexander Novak asked Putin to boost
funding of domestic equipment producers saying that a quarter of
all equipment used in oil output enhancement was imported and
naming catalysts, refining equipment and gas turbine parts as
the areas where Russia was most dependent on the West.
The remarks came just as the industry scrambled to assess
the impact from sanctions that Washington could potentially
impose on high-tech equipment exports into Russia should Moscow
fail to help reduce tensions in eastern Ukraine.
Some sanctions have been already put in place from April
when the U.S. Department of Commerce's Bureau of Industry and
Security (BIS) announced that it would deny pending applications
for licenses to export or re-export any high tech items that
contribute to Russia's military capabilities.
Wynn Segall, partner at Akin Gump Strauss Hauer & Feld LLP
in Washington, who specialises in international trade and
sanctions, said the wording of these restrictions was vague.
For most Western companies, and especially American, that
means refraining from doing business or slowing it while seeking
Domestic companies dominate Russia's oilfields services
market by revenue, according to privately-owned service firm
Integra. Eurasia Drilling Company (EDC) has 15 percent of the
market, followed by Surgutneftegas and Gazprom with 10 percent.
Schlumberger, the world's No. 1 oilfield services company by
revenue has 9 percent, while Halliburton and Baker Hughes
account for 1 percent each of a market estimated to be worth $18
billion in 2013. According to Integra, it will grow to almost
$26 billion in 2017.
Halliburton, Schlumberger and Baker Hughes all declined to
comment on the impact of Russian sanctions. Halliburton said it
would comply fully with all laws and trade restrictions and
Schlumberger said the Russian market was highly competitive.
In its 2013 report, Schlumberger said Russia and central
Asia were the key drivers behind an 8 percent growth in revenues
of its Europe, CIS and Africa division to $12.4 billion, a third
of its total revenues of $45.3 billion.
Some companies such as Gazprom Neft say they have
almost fully switched to local suppliers, spending 95 percent of
its purchasing budget at home.
In May, Gazprom Neft signed agreements with Russia's United
Heavy Machinery Plants, which produces drilling rigs and
refining equipment, and Hydromashservice, a pump producer, for
equipment for its onshore, offshore and refining operations.
Rosneft, which is developing its own oil service unit
RN-Burenie, recently agreed with Gazprom, Novatek, Gazprombank
and other firms to team up to build ships, drilling platforms
and marine equipment.
Alexander Korsik, who heads Bashneft, Russia's
fastest growing oil company by output, said sanctions on foreign
equipment might push Russia closer to China.
"China will simply be seen as more reliable," he said.
In May, Russia signed a $400 billion gas deal with China,
but Moscow has so far been reluctant to allow China to develop
its oil fields on a large scale.
(Additional reporting by Olesya Astakhova in Moscow and Anna
Driver in Houston; Editing by Elizabeth Piper and Janet McBride)