Demand and Supply Need to be Created in the Market of Oil and Gas Equipment

8 june 2016

“On instructions from the Government Office we prepare materials on import substitution issues in various sectors of the economy on a quarterly basis. This quarter we are looking at the oil and gas equipment sector,” said the Head of the Department for Strategic Studies in the Energy of the Analytical Center Alexander Kurdin, opening a round table to discuss the progress made so far with import substitution and its prospects in the manufacture of equipment for extracting and transporting oil and natural gas, as well as advisability of making adjustments to the current industrial policy measures.

The Head of the department for the development of oil and gas equipment of the Ministry for Trade of Russia Aleksey Dubinin talked about how the state is supporting investment projects in the fuel and energy sector. “One of the most effective mechanisms for stimulating import substitution is entering into long term contracts that guarantee future deliveries,” the government official said. - “We are now working to make sure this approach can be implemented by the governmental import substitution commission.” The plan is for the commission to generate consolidated demand for oil and gas equipment that must be manufactured in the country, Mr. Dubinin explained. The specialist also cited other regulatory state support measures such as improvements in the customs and tariffs regulations of the fuel and energy complex, stimulating experimental operation of new equipment and harmonization of international and national standards for oil and gas equipment.

The chief executive officer of Pipe Innovation Technologies LLC Ivan Shabalov believes that private capital is needed to boost growth in the sector. “The fuel and energy sector is a huge source of finance that many companies are interested in. So if we are not seeing private companies investing in this sector it means there is no comfortable environment created for it,” the expert believes. The specialist sees creating supply and demand as the key problem. He is against the state interfering in the existing market relations. “The state had no part in the creation of the pipe manufacturing industry and it is ticking along just fine at the moment. This means we can grow without state meddling in,” the expert is convinced. At the same time, he noted that should the state decide to meddle in after all, it must be done with the greatest of care.

The participants also noted that the banks have currently stopped extending development loans to private companies. This has had a very negative impact on companies, the experts believe.