OPINION: Last week’s referendum on amendments to the Russian Constitution has destroyed any lingering hopes of reforms to the country’s oil and gas industry that could have reduced state involvement and the dominance of giants such as Gazprom and Rosneft.

The amendments include allowing President Vladimir Putin to run for two more six-year terms in office, with the next round of presidential elections set for 2024.

The Kremlin has claimed the proposed amendments were backed by almost 78% of voters, with the turnout reported at 68%. Putin is already serving his fourth term in office, stepping down between 2008 and 2012 to the post of prime minister after his first two terms.

His approval ratings have slumped in the past three months, with sections of the populace and business community unhappy over his handling of the economic downturn amid the Covid-19 pandemic.

Independent observers alleged unprecedented levels of ballot stuffing during the seven-day voting for the referendum, allegations the Kremlin rejected.

The level of competition and business opportunities in the Russian energy sector has significantly declined since 2000 when Putin first took over as president.

Putin has repeatedly backed growing government involvement and regulation of the oil and gas sector, partially reversing its privatisation of the early 1990s and creating favourable operating conditions for the likes of gas giant Gazprom, gas independent Novatek and oil producers Rosneft and Gazprom Neft.

These companies are either led or owned by Putin’s former associates and friends, who are widely seen as levering their proximity to the president to obtain privileges from the government to cope with the current challenging market.

With conventional cheap oil and gas resources becoming scarce in Russian provinces, keeping the status quo in the country’s energy industry for another 16 years could lead to a significant production loss, with new exploration and development opportunities missed due to the inefficiencies of large state players.

(This is an Upstream opinion article.)