Russia is one of the world's leading producers of oil and gas, holding 13 per cent of world reserves. Russia's total continental shelf oil and gas concentrate reserves are estimated at 100 billion tonnes with an approximate value of US$15 trillion.

At this stage, only 15 per cent of Russia's resources have been developed. The Russian Ministry of Natural Resources estimates national oil reserves at 44 billion tonnes, with 60 per cent of this found in the Ural region and Siberia. These areas also hold 40 per cent of gas reserves. The Russian Far East holds 6 per cent of oil and gas reserves. The balance of these deposits is dispersed throughout the country.

Total oil and gas condensate production for 2004 was 485 million tonnes, representing an increase over 8.9 per cent over 2003. This meant Russia reached the production level originally forecast for 2010 six years ahead of schedule. Moreover, a number of new pipeline projects have been approved or begun in the last year, including export lines targeting China and Japan.

The oil and gas industry is critical to the Russian economy as it generates the largest share of the country's gross national product (GNP). Oil and gas account for 20 per cent of Russia's industrial production, 49 per cent of exports and 29 per cent of Federal Government revenue. The Ministry of Economic Development expects the oil and gas industry to attract total investments of US$128 billion in production and transport alone by 2015. The continued development of this sector remains critical to national economic growth.

Industry profile

There are approximately 170 companies involved in oil and gas development in Russia. Of these, some 11 large vertically integrated companies (including the state-owned Gazprom) extract over 90 per cent of the total output:

• Bashneft
• Gazprom
• LUKoil
• Rosneft
• RuSSneft
• Sibneft
• Slavneft
• Surgutneftegaz
• Tatneft
• TNK-BP
• Yukos.

International partners sought to help increase efficiency

Government and industry leaders are placing considerable emphasis on increasing industry efficiency. A state-sponsored development plan to modernise and renovate the oil-refining industry has been launched. It aims to complete 75 per cent of refinery upgrades by 2010 and 80–85 per cent by the year 2020.

Modernisation and improved efficiency is closely connected to scientific and technological advances and the introduction of contemporary oil extraction technologies. It is in these areas that Russian businesses are seeking collaboration and investment from overseas partners, including world-class businesses from Australia.

High global oil prices and buoyant exports have given the Russian oil and gas industry sufficient funds to reinvest in itself and undertake these long-overdue upgrades. Many domestic market leaders recognise the value of importing foreign expertise and technically advanced equipment to assist this modernisation process.

Diverse opportunities for Australian companies

Russian oil and gas companies are enthusiastic about collaborating with Australian partners and suppliers. Opportunities for Australian companies exist in a number of areas, ranging from resource development to supplying the hardware, services and technical expertise needed to modernise existing oil and gas projects.

Key areas of interest include:

• Development of resources;
• Advanced extraction and refinery systems;
• Exploration and exploration technologies;
• Pipeline equipment, including valves and metering equipment;
• Production safety, OH&S, training aids and training to emergency services;
• Pipeline security and integrity technologies;
• Ecology and environmental security;
• Anti-corrosion and advanced polymerisation technologies;
• Gas analysers capable of handling multiple gas types;
• Software.

Austrade missions fuel Sakhalin Island trade boom

One of the most promising areas of opportunity for Australian companies is the Sakhalin Island oil and gas province, located in the Russian Far East near Japan. Sakhalin Island is among the world's largest oil and gas fields, with an expected lifespan of 50 years and anticipated investments of more than US$100 billion over the next 20 years.

In 2003 and 2004, Austrade Russia led four trade missions to this region with Australian oil and gas companies. These missions resulted in contracts worth A$70 million to date, with Australian exporters of all sizes successfully building business relationships with Russian companies.

Success in the Sakhalin Island province reflects the strength of Australia's diverse oil and gas sector. Australian companies have:

• Excellent capabilities in specialist geological and geophysical data processing and in the appraisal and evaluation of oil and gas field reserves;
• Extensive experience in establishing and managing fixed offshore facilities, floating production systems and offshore-onshore pipelines;
• Unique and specialised building materials, technology and fittings;
• Compelling consultancy skills and expertise in monitoring, evaluating and environmental solutions;
• Competitive transportation and logistics for oil and gas clients.

Sakhalin Island project operators provided very positive feedback. Australian companies are regarded as competitive, dynamic, offering solid products and services and geographically well positioned to service the market. Australian companies also learned how important it is to have a presence in the market to win business.

Australia's strict environmental regulations and excellent safety record are generally regarded as a plus in the Russian market. However, it is essential for potential exporters to have internationally recognised certification or accreditation of their capabilities.

Success story: Global Welding Supplies

Global Welding Supplies participated in Austrade's Sakhalin Island trade mission in June 2003. As a result, it has begun selling its products to a range of large mining and construction companies in Russia. Global Welding Supplies is now exporting welding and cutting machinery, rods, wire, accessories and safety items to Russia.