Strategic priorities of Russian oil companies in challenging business environment

Many Russian energy companies, including the PJSC Oil Company “Rosneft”, faced sanctions pressure, which required to upgrade their strategies based on combining traditional mechanisms in the volatile oil market and new long-term strategic principles in emergency periods. Developing a strategy is quite challenging in a changing environment, when the company competitive advantages are under pressure not only due to market factors, but also due to the introduction of sanctions with the aim to limit access to certain markets, primarily European, the introduction of price caps and increased transaction costs. Various sanctions, including the expansion of the SDN and SSI lists, and their impact on the Russian economy are considered. Additional restrictions, for example, connected with climate change and fossil fuel limitations, create additional pressure for oil business and require updating strategies. Nevertheless, the Russian companies and “Rosneft”, in particular, could apply different adaptive strategies, market diversification, reorientation of their exports to new regions through new logistical channels, rely on settlements and investments nominated in national currencies, as well as new innovative financial instruments, strengthening government support to maintain production, and substitute Western technologies with national or alternatives solutions. It is important for “Rosneft” to invest in expanding resources base through exploration of new oil fields, mergers and acquisitions with other companies inside Russia, like the deal with JSOC “Bashneft”, as well as in other friendly countries, to propose new premium products on internal markets. But it is essential to create additional flexibility (options) for production volume for the global market, where the demand is influenced by sanctions. So, the investment activity in emergency and sanction periods should be more agile, supporting an organic growth for internal market and at the same time increasing possibilities to change supply (including decrease) for the international market. The trends analyses, OTSW framework, econometric model to confirm correlation between EBITDA of “Rosneft” with the Global Political Risk Index, oil prices, and other variables, demonstrate that “Rosneft” has an agile strategy, allowing the company to overcome challenges, be flexible and at the same time consistent with its long-term corporate goals.