Oil & Gas industry in Russia

The Geopolitical, Economic and Legal Environment

Group 2
  Russia overview
 62nd Ease of doing business – making headway
 Political Climate – Shell and BP
 Russo-Britain Business Council
 Russia is the third largest producer of oil & gas worldwide,
Russian accounting for over 12 percent of
Oil & Gas Global crude oil production
Industry  Russian Oil & Gas revenues exceeded initial plans by
51.3% in 2021, totaling 9.1 trillion rubles
 Europe is Russia’s main market for Oil and Natural gas
exports and the biggest source of revenue

Source - Statista
  The Russian Oil & Gas industry is dominated by Gazprom, a
publicly traded company in which the government holds a
majority stake of 51%
 Gazprom is considered a monopolist because it owns all of

Leading Oil and the interregional pipeline & distribution network

Gas companies 1,800

in Russia
1,600 1,550

Net profit in billion Russian rubles

1,400

1,200

1,000

800 696

600 540

400 277
200

0
Source – Statista, EIA Gazprom Rosneft Lukoil Novatek
 Russia

Hofstede’s
Culture
Dimension

Source – Hofstede Insights

  Power Distance: Russia scoring 93, explains the fact that the country is
extremely centralized and follow strong hierarchies. Decisions often are
made by top management rather than through discussion and teamwork

 Individualism: With a low score of 39, Russia has strong community ties
which explains the entire community should reap the benefit of any new
product or service

 Masculinity: A low score of 36 in this dimension, shows that the culture

Hofstede’s promote sexual equality and respond negatively to gender-oriented

Culture
promotion

 Uncertainty avoidance: Scoring 95, clearly states that Russians prefer to

Dimension have product characteristics spelled out clearly with context and background
information

 Long Term orientation: With a high score of 81, explains that Russians
deal with problems with a practical mindset having a long term orientation
scores

 Indulgence: A low score of 20, tells that Russians have tight social
restrictions with fewer individual freedoms

Source – Hofstede Insights

  The oil and gas sector in Russia is full of corporatization,
privatization with increased state control
 But at the same time, existing exploration sites will require
more complex recovery techniques, while new ventures such as

Mode of Entry? in East Siberia will be capital-intensive

 International partnership as a way of Joint Venture with
sustainable engagement strategy will be beneficial for Russian
oil & gas industry

Entry modes have long been regarded as closely associated with varying degrees of resource
commitment, risk exposure, control, and profit return (Ghoshal, 1987)

Source – VOLODICHEV, K., 2020

Social License to operate in host country

It Whilst building the SLO we must do the

takes right thing and been seen doing the right
thing. This involve evaluating and re-
Time evaluating

Understand the current

and past mistakes that How did the BP oil spill cause a wider
have been made impact?

Key communication and engagement

activities as to who we are, what we plan to
do and the impact we want to have. To help Align Corporate Social Responsibility to
build trust and credibility. help endorse “social permission”

Refers to the ongoing acceptance of a company or industry's

standard business practices and operating procedures by its Understand the local perceptions of oil and
employees, stakeholders, and the general public.  gas projects in Russia
  The Russian business environment is a triangle of tension
between politics, business and interests
 So, Joint Ventures should have short, medium and long term
objectives that facilitate partnership longevity
Comply with
 We as an MNC, should bring together stakeholders to conduct
Institutional pillars analysis of this ventures such as examining the complexity of
to attain legitimacy business environment
References
VOLODICHEV, K., 2020. Perspectives for Asian countries for entering into Oil and Gas assets of Sakhalin island Shelf
and Arctic shelf of Russia. IOP Conference Series. Earth and Environmental Science, 539(1)

https://www.statista.com/topics/6207/russian-natural-gas-industry

https://www.chathamhouse.org/sites/default/files/field/field_document/20140327RussiaOilGas.pdf

https://uk.practicallaw.thomsonreuters.com/Oil and gas regulation in the Russian Federation

https://www.investopedia.com/terms/s/social-license-slo.asp

https://www.sciencedirect.com/science/article/pii/S2214790X15001318