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A big group of Russia’s ministers  will arrive in  

Severodvinsk today to attend a meeting  chaired by Vladimir Putin  and devoted to oil and gas industry problems.  The keynote speech will be delivered by energy minister Sergey Shmatko who will focus on measures to develop the oil and gas industry.  Economic development minister, Elvira Nabiullina, will provide a report on the status of preparation of the state program for continental shelf exploration and production and on economic stimulation of oil and gas production.  Natural resources minister, Yury Trutnev will speak about hydrocarbon reserves replacement. The report of industry and trade minister, Viktor Khristenko, will be dedicated on measures to develop

Russia’s oil and gas equipment industry. 

Information

The oil and gas equipment industry is a relatively new segment of the Russian machinebuilding industry. The majority of oil and gas equipment manufacturing companies  of the former Soviet Union were located in Azerbaijan and

Ukraine.  Of major manufacturers, only Uralmashzavod supplying drilling was located in the territory of the

Russian Federation. After the collapse of the USSR,  when oil and gas equipment import in

Russia increased substantially due to the lack of domestic facilities, the government jointly with OJSC “Gazprom” and oil companies developed a conversion program. According to the program, most enterprises of the former Defense Ministry and other ministries controlling defense industry were conversed into oil and gas equipment manufacturers.  Among successful conversions there were FGUP “Uralvagonzavod”, FGUP “Votkinsk Plant”, OJSC “Motovilikhinskiye Zavody” and a number of other defense industry enterprises.   The oil and gas equipment segment in

Russia started almost from zero level. The approach had  an upside and a downside. On the one hand, the technology level in the defense industry was higher than in plants traditionally manufacturing oil and gas equipment, which helped to improve equipment quality. On the other hand,  defense industry companies had neither  long-standing ties with customers nor experience in oil and gas equipment development.  In some cases, oil and gas equipment made by the defense industry companies did not comply in full with customers’ requirements, or its cost was too high.  

However, the conversion helped to greatly  improve oil and gas equipment quality (as compared to automobile, aircraft and machine tool industry, etc.). Unlike automobile industry, power equipment industry and other segments, the oil and gas equipment industry has a lot of disunited manufacturers.  The notion of oil and gas equipment industry segment is rather blurred  -  many companies manufacture not only oilfield equipment but also defense equipment, road construction and other types of equipment.  More than 200 oil and gas equipment manufacturers are operating in

Russia.   Globalization of the industry is a worldwide trend.  Active consolidation processes take place throughout the globe. Consolidation leads to emergence of major players in the oil and gas equipment market. Thus, over a decade of mergers and acquisitions  an ordinary

U.S. drilling equipment manufacturer  National Oilwell by 2004 consolidated nearly 50% of the global drilling equipment market. Following the acquisition of Varco in 2005,  the drilling equipment market saw a new giant - National Oilwell Varco – that controls up to 90 percent of the world market in some segments.  In 2007, National Oilwell Varco first was among five most profitable companies. 

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