Obstruction Persists: Bur delays progress.
Russia's oil service market is on the rise, with a projected growth of 4% year-on-year in 2025, reaching 2.6 trillion rubles. According to Kasatkin Consulting, this trend is expected to continue, with the market's turnover reaching 3.1 trillion rubles in 2026 and 3.4 trillion rubles in 2027.
Independent players are playing a significant role in this growth. They outperform internal services in terms of flexibility and less bureaucracy, offering a competitive edge in the market. This is particularly true in tech-heavy segments like horizontal drilling, production intensification, and injection.
Despite the key risk for oil companies of losing direct control and potential quality reduction, the decrease in internal services' share positively impacts costs. In fact, by 2027, the profits of oil companies are expected to resume growth, and investments to maintain production will need to increase by 15% over the next two years.
One notable player in this shift is LUKOIL, which has been actively developing its own oil service business, including through M&A deals. The emergence of a large "national" oil service company with a 15-20% share in the Russian market over the next five years is predicted, although the exact player remains unnamed.
After some foreign companies left, the share and volume of independent players' operations decreased, but they continued working through parallel imports and their own capabilities. Now, these independent players are regaining their positions in the Russian market, with the main beneficiaries being the successors of the "big four" in Russia and domestic companies with diversified sales.
Experts do not expect consolidation of independent players at the current CB rate, but they predict market M&A activity if the rate is reduced to 13-14%. Analysts also expect an increase in the share of independent contractors in the oil service market.
Kasatkin Consulting predicts that by 2026, the share of independent players may increase by 1-2 percentage points, potentially more if in-house services are spun off into separate entities. The industry's turnover is expected to grow by 14% annually from 2026-2027.
Traditional segments like vertical drilling and current well maintenance remain with internal services due to their large volumes but low margins. However, independent companies are particularly competitive in these areas when they offer an integrated proposal and access to external markets with higher margins.
Investments in oil exploration and production will increase, despite a projected 13% decrease in the revenue of major oil companies in dollars and a 10% decrease in rubles by the end of the year. This shift towards independent players is a significant development in Russia's oil service market, promising growth and competition in the years to come.
