The sharp decline in oil prices, currently dropping below $40 a barrel, has triggered financial distress among small oil producers in Russia's key oil-producing regions. The situation has worsened with the introduction of stricter US sanctions, leading to widespread bankruptcies. Particularly affected is the First Oil Group, which has significant debts and has seen its operations severely impacted since the Covid-19 pandemic.

First Oil, once under the control of Yakov Goldovsky—who also holds shares in the Russian petrochemical giant, Sibur—has now fallen into insolvency. This oil group, operating in the Khanty-Mansi Autonomous Okrug, manages a portfolio of small oilfields with combined reserves estimated at 14 million tonnes. However, the company’s high level of debt, amounting to approximately RUB 6 billion ($78.2 million), and its annual production of 500,000 tonnes are not sufficient to withstand the current financial pressures.

The bankruptcy of such companies indicates a worrying trend for Russia’s oil industry, which is primarily reliant on small producers, particularly under conditions created by international sanctions and a volatile market. The collapse of small oil producers could have broader implications for the Russian economy, especially as oil plays a critical role in state revenues. As these businesses fail, questions arise regarding the future of job security in these regions and the overall health of the oil sector.