"We must prepare for a complete withdrawal from the European market"

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave an interview to the Profil magazine on the possible pain points of the Russian oil and gas complex in 2025.

– Will there be new challenges and problems for the Russian oil industry in 2025, and what will they be related to?

- Yes. And they can be divided into two categories: external and internal. The first and most serious external challenge is the arrival of the Donald Trump administration and the accompanying uncertainty. We do not yet have a clear understanding of what the new president's policy in the oil sector will lead to.

At the end of 2024, prices dropped to just over $70 per barrel and will definitely not rise next year. The question is whether they will fall further. If the downward movement continues, there is a high risk that Western countries will decide to lower the price cap for Russian oil. Let me remind you that it has not changed since December 2022 and amounts to $60 per barrel. Taking into account market conditions, the lion's share of Russian supplies in December last year was carried out at a price below this ceiling.

– Then it turns out that sanctions against the Russian "shadow fleet" don't make much sense?

– To some extent, yes, because we already sell oil for less than $60. But if the West is determined to further contain Russia and tries to reduce our oil and gas revenues by lowering the price cap to $55-50 per barrel, this will become a serious challenge. Then the measures of pressure on the Russian "shadow fleet" will work in full force.

– Russian producers of liquefied natural gas became another target for Brussels and Washington last year. Will the pressure on domestic LNG projects increase?

– Further increasing pressure on the Russian LNG industry is the second challenge. Today, the bulk of our liquefied natural gas production is sold on the European market. And there are serious concerns that in 2025, for political reasons, the European Union will impose an embargo on the supply of our LNG, as was done with oil. This will be another strong and very painful blow, because supplies to Asia are a completely different logistics, a different marginality.…

I am more than confident that such an embargo will be imposed. Next year or later is still a question. If it is decided to be introduced in 2025, then, most likely, it will happen at the end of the current autumn-winter heating season.

– Which will have a stronger impact on the industry in 2025: pressure from Western countries or the monetary policy of our monetary authorities?

– I think that internal constraints are becoming key for the development of the oil and gas complex at the current moment. In 2022 and 2023, we saw how, under conditions of a more favorable monetary policy, the industry developed and found opportunities to overcome the sanctions restrictions. As far as I know, representatives of oil and gas companies are trying to negotiate with the government on a possible easing of monetary policy, but so far these efforts have been in vain.