What Awaits the Energy Market in 2026

An expert article featuring Natalia Ivanova, Director of the petrochemical company JSC NAPOR, was published in *Kontur* magazine; it analyzes the impact of sanctions pressure and tax changes on small and medium-sized enterprises (SMEs) within the fuel and energy sector. The piece examines key risks facing SMEs in the industry for 2026, shifts in the LNG segment, and practical recommendations for adapting to the new economic landscape.

The year 2025 proved to be yet another challenging period for Russia’s fuel and energy sector. Sanctions hit both major players and smaller entities—including contractors, oilfield service providers, and petrochemical suppliers—as the difficulties faced by market leaders triggered a "chain reaction" that impacted small and medium-sized enterprises (SMEs).

Consequently, between January and November 2025, the revenues of oil and gas companies fell by 21.4% to 8.029 trillion rubles—a decline of 2.312 trillion rubles compared to the same period the previous year. In November alone, revenues dropped by 33.8% to 530.9 billion rubles (270.8 billion rubles less than a year earlier).

Rosneft alone saw its net profit plummet by more than 70% in the first nine months of 2025 compared to the same period in 2024. This decline was driven by broad sanctions pressure on the industry, as well as restrictions imposed on specific companies and business segments.

In January 2025, the US imposed a sweeping package of restrictions on the oil and gas sector, affecting Gazprom Neft, Surgutneftegas, over 180 vessels in the shadow tanker fleet, and approximately 200 energy sector companies. Some of these measures targeted Rosatom and NOVATEK, a company involved in LNG production and export.

In September 2024, NOVATEK suspended work on the large-scale Murmansk LNG (20 million tonnes) and Obsky LNG (6 million tonnes) projects. The company is currently focused on establishing shipments from Arctic LNG 2. The Russian LNG sector has faced a number of challenges:

• Shortage of ice-class gas carriers. Due to sanctions, NOVATEK is unable to secure specialized tankers capable of transporting LNG in Arctic conditions. Completed vessels from South Korea have not been handed over to Russia.
• Re-export restrictions. In June 2025, the EU banned all re-export operations involving Russian LNG via EU territory, thereby cutting off supplies from the Yamal LNG project that had previously transited through French and Belgian ports.
• Technological barriers. The provision of goods, technologies, and services for the completion of Russian gas liquefaction projects currently under construction is prohibited.

For contractors and suppliers working with NOVATEK, this means more than just a reduction in order volumes; it entails the freezing of entire business lines. Companies specializing in equipment supply, logistics, or oilfield services for LNG projects are being forced to urgently seek alternative revenue streams.

While NOVATEK is pivoting toward the domestic market—aiming to capture a 18–20% share of Russia’s gas industry, which will create new opportunities for small and medium-sized enterprises—this shift will require them to significantly restructure their business processes.

Unlike the oil sector, where Russia retains stable export channels, the LNG segment has proven far more vulnerable. In this area, sanctions operate not through price caps, but through technological restrictions and logistical barriers that are extremely difficult to circumvent.

Major oil-producing companies—such as the Irkutsk Oil Company—have significantly reduced the number of requests for well-testing services. This move was driven by pressure on Russian partners: in August 2025, the U.S. Permanent Representative to NATO announced that Donald Trump intended to impose sanctions on China and India for refusing to halt purchases of Russian oil, prompting oil and gas companies to cut costs preemptively.

Major oil producers had planned to purchase reagents—such as demulsifiers and inhibitors—from petrochemical suppliers through April 2026. However, tenders are being postponed, and new procurement is being kept to a minimum; companies are drawing down existing warehouse stocks to cut current expenses.

Petrochemical manufacturers that relied on imported raw materials have also faced a shortage of components. Those that previously used European concentrates have either shut down operations or switched to Chinese supplies, which entail longer and more expensive logistics.

Oil-producing companies continued working only with contractors who maintained prices at early-2025 levels, disregarding inflation. When budgets were set, the maximum markup allowed was just 4%, compared to actual inflation of around 7–9% throughout 2025.

To maintain product quality and retain orders, some oilfield service companies were forced to operate with minimal margins or even at a loss. Others chose not to prioritize quality, opting instead to replace expensive active ingredients with cheap substitutes or to cut production costs by increasing the proportion of methanol—or even water—in their chemical reagents.

We view this as a "time bomb." Substandard chemicals do not reveal their flaws immediately; companies continue pumping oil, but serious problems arise after a year or two:

• Accelerated equipment wear. Pumps break down due to clogging from deposits. Pipelines and equipment deteriorate. The durability of industrial structures is reduced by a factor of two to three.
• Shorter intervals between repairs. Instead of scheduled maintenance every two to three years, equipment requires repair much more frequently, driving up capital expenditures.
• Reduced commercial oil quality. Inadequate preparation of oil for transport can result in failure to meet quality specifications, leading to potential fines and reputational risks during export.

From January 1, 2026, a large-scale tax reform will come into force in Russia, which will affect small and medium-sized businesses. The President signed a law increasing the VAT rate from 20% to 22%, as well as gradually reducing the revenue threshold exempting from payment of this tax from 60 million rubles. up to 10 million rubles by 2028. For companies from the fuel and energy sector, such tax changes mean:

With revenue of 10 million rubles and a 10% margin (1 million rubles in profit), VAT "eats up" approximately 200,000 rubles, leaving the business with about 800,000 rubles in net profit. Given that businesses are currently compelled to channel almost all their revenue back into operations, their growth becomes dependent on external investment and expensive loans, as funds allocated through state support programs for SMEs are difficult to secure due to intense competition.

Companies becoming VAT payers for the first time will be required to submit additional reports, issue VAT invoices, and manage the associated documentation.

Companies using the simplified taxation system (STS) that work with suppliers on the general taxation system (GTS) will be unable to reclaim input VAT, which will increase their costs.
The government has imposed a moratorium on penalizing SMEs that switch to VAT for the first time in 2026 and commit violations regarding its payment, in order to give businesses time to adapt.

Dependence on one or two major clients poses an unacceptable risk in the current environment. Companies need to expand their geographical reach and client portfolios to mitigate the impact of budget cuts by oil companies.

If your company conducts activities that meet the criteria for a special economic zone and operates within its territory, it may obtain resident status and benefit from a preferential tax regime, including VAT exemption and a reduced corporate income tax rate.

Under the federal "SME" project—part of the "Efficient and Competitive Economy" national program—308.8 billion rubles have been allocated to support small businesses through 2030. Priority areas for state support include manufacturing, the IT sector, and research and technical activities. The program provides for grants, concessional lending, leasing at reduced rates, subsidies, and other forms of assistance.

In the current environment, developing domestic production of petrochemical components is becoming not merely a competitive advantage, but a matter of survival. Critically important high-tech segments—such as drilling technologies, hydraulic fracturing, and methods for developing hard-to-recover reserves—remain dependent on foreign technologies. This creates opportunities for innovative Russian companies willing to invest in research and development.

China is becoming a key supplier of chemical components for the Russian fuel and energy sector. Logistics from China are partially offsetting the shortfall in European supplies, albeit at the cost of higher expenses. Companies that quickly established Chinese supply chains have gained a competitive advantage.

In an environment where many competitors resort to price-cutting and compromising on quality, companies that maintain high standards can position themselves as reliable, long-term partners. Ultimately, major oil companies pay a much higher price for substandard chemicals when faced with accidents, unscheduled repairs, and environmental incidents.

Analysts estimate that the Russian oilfield services market will grow by an average of 10% annually between 2025 and 2027, reaching 3.4 trillion rubles by 2027. However, 2026 will be a transition year.

In 2026, small and medium-sized businesses will have to navigate a landscape of economic instability, declining demand, and a labor shortage. The companies that survive will be those capable of maintaining product quality, operational efficiency, and flexibility amidst this turbulence.

It is also important not to overlook the opportunities that crises invariably create: the exit of Western players has opened up space for Russian technology brands. Companies that prioritize sustainable development and innovation will gain a competitive edge, including access to tax incentives and state support.