Sanctions and their impact on corporates' funding pose a greater threat to the Russian oil industry than the weak oil price, Fitch Ratings said in the report: "Russian Oil and Gas Under Sanctions: Technology, Funding More of a Threat Than Weak Oil".

"Our stress tests show credit profiles can withstand oil at USD55 a barrel for several years. But if access to funding does not improve and export restrictions remain producers may not be able to make the investments needed to maintain production," Fitch said.

Sanctions have virtually eliminated access to Western capital markets for all Russian oil and gas companies, not just those directly affected. Russian banks can offer some liquidity, but they rely on the state and the Central Bank of Russia for funding and capital to maintain their lending capacity. Banks are therefore likely to roll over existing debt, but substantial new funding is unlikely.

"We do not believe the sanctions prohibiting the transfer of certain technologies and equipment to Russia will have a significant impact on near-term the country's oil and gas production. But if it persists the prohibition will hurt oil production in the medium term," it said.

A sharp increase in the use of technologies such as horizontal drilling and hydraulic fracturing has helped offset production declines from traditional brownfield sites. But it has also made Russia even more reliant on equipment from Western suppliers, with over 50% of oil equipment imported. It would take several years for Russian manufacturers to be able to substitute most of the imported hardware, while components from other markets that have not imposed sanctions are likely to be lower quality.

The sharp decline in oil prices also undermines the viability of more technically challenging, costly projects and will weaken cash flows, which will contribute to the reduction in investment. But a 40% depreciation of the ruble has helped offset the impact by reducing already low lifting costs and capex. Major Russian oil companies historically reported some of the lowest oil production costs globally. The dramatic decline in the ruble has therefore helped make the sector even more competitive on lifting costs, Fitch said.