In an overt admission that western-led sanctions agasint Russia’s energy sector are impacting offshore resource development, the country’s top state-controlled oil & gas enterprises are pushing for legislative changes meant to entice western companies – and their technology – into the sector. The proposed subsoil legislation modifications would apparently allow foreign companies to take expanded field development roles without running afoul of their home government’s legal restraints imposed as part of the sanctions process.

“The attraction to the shelf of foreign investment, technology and experience, which is impossible without foreign companies’ full-fledged participation, is impeded by the current subsoil legislation,” deputy head of the Energy Committee of the State Duma Pavel Zavalny told official Russian government news agency ITAR-TASS.

“In the conditions of sanctions, this would give an additional stimulus to foreign companies” – Zavalny

Gazprom and Rosneft proposed legislative changes that would reportedly “allow registration and re-registration of field development licenses in the name of a separate subsidiary of a legal entity,” Zavalny said.

According to that description it appears the firms are looking to craft a legal loophole that bypasses western sanctions. It is unclear exactly how that would work from this brief report, but more important is the fact that Gazprom and Rosneft are going through the trouble of changing legal frameworks due to their need for the “world’s best experience in the development of continental offshore fields.”

This clearly-stated need for western oilfield technology lends credence to recent reports suggesting sanctions could reduce Russian oil output over the medium to longer term, with commensurate global oil price implications. Interestingly, while decreased Russian oil production could exert upward global oil price pressure – which would be positive for the country’s hydrocarbon-reliant economy – Russian producers would also lose market share.

Ultimately, as Soviet era oil & gas field output declines, the strategically important industry needs to tap its more expensive and technically challenging resources in order to remain a viable economic workhorse. Western sanctions are jeopardizing that prospect and the Kremlin knows it.