Flexibility of Ruble Shields Russia’s Oil, Gas Producers From Low Prices

Russian oil and gas producers have avoided cuts in large energy extraction projects because of changes in the ruble’s exchange rate with other currencies, Fitch Ratings said in a press release on Tuesday.

WASHINGTON (Sputnik) — Moreover, stability in the oil and gas industry is likely to continue in the coming years, the release noted.

"Unlike international players, Russian producers have avoided large investment cuts as their capex [capital expenditure] is mainly pegged to the ruble, while operating cash flows have remained stable in ruble terms due to the depreciation," the release stated.

Fitch explained that during a period of low oil and gas prices, the primary threat to Russia’s energy industry could come from a downgrade in debt ratings and tax increases.

The stability is maintained because producers are insulated from the direct effect of movements in oil prices, according to the release.

Despite historically low oil prices in 2015, Russian oil and gas producers increased capital investments by 13 percent in ruble-terms. Fitch said it expects the investment to remain unchanged this year and to fall only by mid-single digit numbers in 2017-18.