OIL AND GAS SECTOR

September 2001

The Russian national economy is highly dependent on the oil and gas sector. As about 60 % of the oil produced in the country is exported, fluctuations in the world price of oil have an effect on Russian economic development. The share of exports varies according to the product groups: raw oil 40 %, oil products 50 %, and gas 34 % in 1999. The major share of oil, oil products and gas is exported to non-CIS countries. The main share of the export of the sector consists of raw oil.

The industry is heavily consolidated. In 1999, notable changes took place in the organizational structure of the industry, as the big companies acquired each other's shares. In 1999, so called vertically integrated oil companies, like LukOil and KomiTEK, domitated the business. Their share of oil drilling is over 85 %, and almost 90 % of oil refinement. In the gas sector, the absolute leader is Gazprom. The share of the company of gas extraction in Russia in 1999 was almost 95 %. The two giants, Gazprom and Lukoil, have begun internationalization as well by acquiring shares in foreign companies in Central and Eastern Europe and CIS. The oil and gas companies form the base of Russian big industries and lead the list of the largest companies in the country. Gazprom is the second, and Lukoil the third largest company in the country measured by realized production. 7 out of 10 of the largest companies in Russia are in the oil and gas sector. These companies are also large in the world-wide comparison of oil and gas companies, which are often national firms.

Source: Institute for Economy in Transition (2000) Rossiiskaya ekonomika: tendentsia i perspektivy, available at http://www.iet.ru