The Western sanctions on Russia, which started symbolically as a result of the Ukraine crisis, is now much more elaborate in targeting its oil sector which provides 70 per cent of Russian exports.

The initial reluctance of Europe has been overcome as its position converged to please the US and placing further sanctions on banks, trade, arms shipments and individuals, but more importantly on the energy sector through clamps on technology transfer, equipment and credit for exploration and development. These are thought to be enough to restrict the development of shale gas and offshore oil, as well as new oil finds in the Arctic where Western companies are now banned from cooperating with Russian counterparts.

So far, the sanctions have not affected Russia’s oil and gas production and any variation may be the result of seasonality only. In fact oil output in September reached 10.61 million barrels a day (mbd), according to Reuters, which is 0.9 per cent above August’s. Not even the decline in oil prices prompted Russia to curb its output to support prices as that may be interpreted as the effect of sanctions.

Some Western companies are involved in the fields where the increase has come from, and sanctions have not so far affected their activities.

Similarly, Russia’s gas output rose to 1.52 billion cubic metres (bcm) per day in September as compared to 1.38 bcm in August. However, on an annual basis these numbers are down from previous years due to the fact that Russia has cut its supplies to Ukraine as a result of a dispute over pricing and debt.

So far, so good... but what about the future? It seems the Western Sanctions are deliberately and opportunistically designed to target the future rather than the present to avoid an impact on European oil and gas supplies out of Russia.

One of the first projects to be affected is the joint venture to explore and develop shale oil in Western Siberia between France’s Total and Lukoil. The development gets affected by not being able to access the latest imported fracking technology. Since the project is at its early stage, it is not expected to affect Total immediately, but may deprive it from future opportunities. (Of course, Russia is counting on its massive shale oil deposits to cater for future declines in its conventional oil fields.)

But Total is still trying to hold on to its second major project in Russia, the Yamal liquefied natural gas with Russia’s Novatek and China’s CNPC, estimated to cost $27 billion (Dh99 billion) and covers a potential resource of 800 million barrels of oil. Total is trying to circumvent the sanctions by seeking financing in non-dollar currencies, especially from China and even Western banks.

Shell also suspended its participation in the development of the Bazhenov shale in Siberia with Gazprom, which said on its website that it will “continue to develop the shale oil deposits by itself”. It has started drilling the first horizontal oil well there.

Shell aspirations in Russia may not have changed, but Olivier Lazare, President of Shell Russia, said on September 19 that “of course, we have to comply with the sanctions”.

Discovery

But the biggest news is that of the joint venture between Rosneft and ExxonMobil, which involves the development of oil and gas in the Arctic over about 600,000 square kilometres. The joint venture recently confirmed the discovery of oil in Kara Sea where the size of the find is said to be around 750 million barrels.

But sanctions are catching up with this venture as the US required the removal of American staff by September 26, though it has since granted an extension to October 10. ExxonMobil was counting on this project, among others, to enhance its oil reserves, which stands at 25 billion barrels sufficient for 16 years at current production.

But sanctions may also affect Russian companies operating outside of their home market in developing oil and gas fields, as sanctions may limit their financing. For example, Lukoil is developing the giant West Qurna field in Iraq and others in Ghana. Although US officials said that the sanctions are not intended to affect such projects, it remains to be seen if this is the case.

All this is happening at a time when the price of oil has gone down by more than $20 a barrel in the last three months or so. This — and the delays in Russian projects — will undoubtedly deserve a Russian response.

Russia may decide to go it alone and develop shale resources independently, slower than before but in a determined way as it gains more experience. China is expected to come to the rescue with financing as its dependence on Russian oil and gas increases. As for the price of oil, Russia should do its utmost with other producers to stabilise the market.

The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.