Oil and gas in the capitals: Unseen changes in the Russian oil and gas industry

DR. JACQUES SAPIR, CONTRIBUTING EDITOR, FSU 

Since Feb. 28, the world's attention has been focused on the Arabian Gulf and Iran. The war between the United States and Israel and the Islamic Republic of Iran has deeply altered the geopolitical and geoeconomic balance. Disruptions to the flow of oil and natural gas, as well as all oil and gas byproducts—from raw materials for fertilizer production to helium and even aluminum production—are now signaling a global crisis. However, in this global crisis, at least one country is rubbing its hands with glee: Russia. 

This point alone could have been the conclusion of this column. However, the changes that are taking place in Russia go beyond the fleeting satisfaction of Russian authorities. Several significant events have occurred recently. In particular, two important pieces of information were revealed during the month of March. 

Power of Siberia 2. The first was China's decision to assume a large portion of the financing for construction of the Power of Siberia 2 (PoS-2) gas pipeline, built in cooperation with Gazprom. This decision was expected, if not so quickly. It marks a significant step in consolidating a bloc between Russia and China. It had become clear that the gas transit capacity of the Power of Siberia 1 (PoS-1) pipeline had been underestimated by half (23–38 Bcma). If PoS-2's capacity is 50 Bcma, a considerable volume of gas will flow to China, and to Asia as a whole. Given that preparatory work for the construction of PoS-2 appears to have already been completed, construction is expected to be rapid, with commissioning within two years. This was the information circulating in Moscow. 

PAO NOVATEK. The second news is even more significant. PAO NOVATEK—Gazprom's competitor and the dominant operator of Yamal field in the Arctic—has decided to form a shipping company. Named Severny Inzhiniring (Northern Engineering), the company was officially filed on March 25, when I was leaving Moscow after my usual “spring” trip. PAO NOVATEK is now the country’s largest gas producer, in addition to establishing a new shipbuilder. The company has declined to make comments to either TASS or Reuters.  

However, the fact is that the company, frustrated by the lack of suitable LNG carriers, is looking to accelerate those shipbuilding efforts. Severny Inzhiniring is 100% owned by NOVATEK, and its primary business is listed as the construction of ships, vessels and floating structures. Russia actually faces a limited supply of ice-class tankers to transport gas from the far-north facilities of NOVATEK. Years ago, the country had announced plans to build a fleet of ice-class gas carriers at the Zvezda shipyard that was established under the tutelage of Vladimir Putin.  

Zveda’s role. However, Zvezda has been slow in its efforts to turn out the Arc-7 ice-class vessels, which are able to handle up to 2 m of ice. The shipyard delivered the first Arc7 tanker Alexey Kosygin only in December 2025, as sanctions delayed her delivery by more than a year. The ship was built specifically to transport gas from the Arctic LNG 2 project, and the vessel measures 300 m long (984 ft) with a capacity of 172,000 m³. At the time, Sovcomflot, which manages the vessel, said it expected the delivery of two more Arc7 ice-class tankers from the yard in 2026. 

Both decisions are significant in the current context. The construction of PoS-2 confirms Gazprom's position in gas pipeline transportation, as well as a long-term political choice. Gazprom can be considered to have opted for expansion of its existing gas pipeline network, as opposed to new developments. NOVATEK, on the other hand, has made a revolutionary decision in two respects. First, its decision to establish a maritime subsidiary means that, on the one hand, it will be capable of building 15 LNG carriers and 21 tankers, in coordination with the Zvezda shipyards, giving it significant firepower in the transport of gas and oil.  

Second, Severny Inzhiniring is also slated, as its name might suggest, to diversify into the production of refrigeration and ventilation equipment, engineering surveys and engineering and technical design. Contrary to the trajectory NOVATEK had followed since its inception, this development indicates that the company is now moving towards a strategy of vertical integration—both downstream with shipyards and potentially upstream, with the development of production for equipment the company will need. 

Gauging the changes. It is, therefore, important to assess the extent of the changes that were announced in March 2026. Gazprom will strengthen its position in the natural gas land transport department, without neglecting LNG transport, particularly in regard to Sakhalin-2. Above all, we observe that NOVATEK is returning to a very “Russian,” or even Soviet, development strategy: emphasizing vertical integration and perhaps diversification, in a strategy that long characterized Gazprom, along with companies like Rosneft. 

It is important to note these decisions actually date back to the end of 2025, as confirmed by discussions I have had with officials in the Russian hydrocarbon industry. They are not linked to the new “Gulf War.” However, it does tend to highlight these decisions. It is clear that even once peace returns, and the (significant) damage is repaired, a palpable mistrust will hang over the Gulf region. Russia—with its extraction and processing capabilities, along with its control over the Northern Sea Route in Arctic waters—will carry more weight, both geopolitically and geoeconomically, than it did before this war.  

As an old friend of mine, now chairman of the University where I teach and who was, a few years ago, the chairman of the Rosneft Board of Directors—used to say: “We are going to live through interesting times (a reference to a famous Chinese curse). But I prefer to live through them sitting on a big bubble of gas and oil.” That’s a good point.