The COVID-19 coronavirus has dealt the Russian crude oil industry a two-pronged blow: first, decimating global demand, and now, disrupting output by infecting hundreds of oil-field workers. It has similarly hit natural gas–production operations, another Russian economic mainstay. The blame rests squarely with the Russian companies that failed to prevent the disease from reaching their energy operations. Lower global demand, a price war with Saudi Arabia that sent oil prices plunging (see EDM, March 25, April 13), and now crews having to stop working because some have become infected with the deadly coronavirus has the Russian industry reeling. This is bad news for President Vladimir Putin and his government because oil and gas continue to account for by far the largest share of Russia’s gross domestic product and state revenue.
The world’s first case of infected oil workers surfaced March 19, in the North Sea, when BP announced that crews at its Charlie Platform, east of the Shetland Islands, had contracted the coronavirus. Within days, France’s Total, the United Kingdom’s TechnipFMC and other oil companies announced cases on their North Sea rigs as well (Offshore Technology, April 9).
Although Russia declared its first coronavirus case on January 1, the number of infections did not begin to mushroom until mid-March—at least according to official government statistics. Most of the COVID-19 patients Russia authorities identified between January and March were in the western—or European—part of the country, particularly Moscow. Many Russians and global health experts doubt those figures, however, contending that cases are being vastly understated (see EDM, March 17, April 6, 13).
Given how quickly the coronavirus has spread globally, it was only a matter of time for it to reach the oil- and gas-producing fields in the Russian Arctic, Siberia and the Far East. But especially early on, domestic oil companies did little to prevent the disease from affecting their rigs and other facilities.
In a number of instances, local governments of some of Russia’s key oil-operation areas have had to prod the companies to act. Consequently, the first precaution that some firms took, in early March, was to restrict their employees’ overseas business travel (Rambler, March 4). But crucially, travel within Russia was not limited, meaning that cases could spread east from the country’s western hot spots. Some oil-company executives may have shied away from ordering virus-prevention measures for fear of interfering with production. Others may have simply been too complacent about the threat.
When news of the first non-oil-field cases surfaced in the Siberian province of Tyumen and the Far East province of Magadan, their governments began urging local oil and gas companies to undertake serious preventative measures to protect their workers from becoming infected. One of the first to make the plea was Dmitriy Artyukhov, the governor of the neighboring Yamal-Nenets Autonomous Region, in north-central Russia. His prodding finally prompted Novatek, Gazprom and Gazpromneft to take preventive steps, such as extending worker rotation shifts from one month to two or three months (Vedomosti, March 31).
These measures failed to prevent the coronavirus from spreading to oil-field operations, however. One of the first places to report infections among oil workers was Rosneft’s section of the Priobskaya field, in West Siberia’s Khanti-Mansiysk Autonomous Region. The company pulled a 40-person crew from the field on April 1, after one of the workers was diagnosed with the coronavirus (TASS, April 1). On April 8, two cases were confirmed at Gazpromneft’s Yeti-Purovsk field, in Yamal-Nenets. These early outbreaks did not affect operations, because the companies in question simply replaced the crews whose members had been infected with new teams (Interfax, April 8). But then the virus spread from oil-field operations in Siberia, in central Russia, to those in the Far East.
On April 11, Aysen Nikolayev, the head of Sakha Republic, notified Russian Health Minister Mikhail Murashko, Gazprom CEO Aleksei Miller and Yuriy Trutnev, the presidential envoy to the Far Eastern Federal District, that the coronavirus appeared to have surfaced at Gazprom’s Chayandinskoe gas field (Interfax, April 14). When testing confirmed three cases, the authorities quarantined the field, which feeds natural gas to the huge Power of Siberia pipeline serving China. By April 20, the number of infections at the operation had jumped to 23 (Interfax, April 20).
The biggest outbreak so far has been at Novatek’s Offshore Superfacility Construction Yard, at Belakamenka, in Murmansk Province. Only four days after news emerged of the first cases, the number of infections at the Arctic liquefied natural gas (LNG) production site had surged to 290 (RBC, April 15).
Critics contend that Novatek’s failure to test employees at one of Russia’s most important energy operations shows how nonchalantly the country’s oil and gas companies have been about the health crisis. With coronavirus now enveloping every region of Russia, and the country suffering the world’s second-highest number of new infections, energy companies will be scrambling—and spending a great deal of money—to prevent new outbreaks in their operations (RBC, April 15).
This new commitment could not have come at a worse time for the industry. While gas prices are holding, oil prices are at their lowest levels in two decades. And so far, the new OPEC+ output-limiting agreement on April 12 that purportedly ended the Russian–Saudi Arabian price war has failed to help (see EDM, April 13).
The outbreak of COVID-19 cases at Russian oil and gas fields has not sufficiently interrupted any major operations to date. But the situation at Chayandinskoe looks rather serious and is a fast-developing story that deserves to be watched closely.