Competitive structure

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The Russian drilling industry was historically made up of in-house cost-centres, which were geographically focused and fulfilled all service lines including drilling. The key priorities for management were meters drilled/well count quotas and commerciality was not considered a priority. Even as recently as 2007, almost 60% of drilling activity was performed by in-house units. LUKOIL, Gazprom, Gazprom Neft, TNK-BP and Bashneft have divested their in-house drilling units to date. Most industry commentators expect that the majority of the Russian energy companies will divest their drilling units within the next few years.

The international OFS majors have been present in Russia for some time but have not built a significant presence in the Russian drilling industry, with the notable exception of Weatherford which bought TNK-BP's drilling assets in 2009. In December 2013, Weatherford announced plans to spin off their worldwide drilling business including Russia. The barriers to entry for international operators, particularly in attempting to build a material presence in the Russian onshore drilling market, are significant given the logistical challenges in Russia and complex cultural issues encountered when integrating post acquisition.

EDC-pie-charts
(Source: REnergyCO 2014)

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