In Russia today there is a gap between modern breakthrough technologies that should serve as an engine of economic development and industries that operate on technological equipment of the previous generation. At the same time, the modernization of production cannot be centered around renewing only the companies’ fixed assets. The aim of the study is to analyze the current technological state of the oil and gas industry of the Russian Federation, the dynamics of investments in R&D by domestic and foreign oil and gas companies, the impact of sanctions on the modernization of the sector. The level of innovative activity in the oil and gas industry in 2013-2014 remained unchanged. The direction of technological innovation continues to depend on the future activities of the companies. The Russian company «Tatneft», which is one of the eight leading domestic vertically integrated companies and has been among the leading companies in the number of patents and inventions in the past five years but it is not the leader in the field of extraction and processing of hydrocarbons. From 2008 to 2014, there was an increase in the ratio of R&D to sales in virtually all oil and gas companies, but foreign companies remain the leaders in the volume of investment in R&D, both in absolute and relative terms. As a result of the analysis, the authors concluded that in Russia there is a reserve for the technological development of the industry, but the current high dependence on foreign technology in the commodity sector remains and is, unfortunately, unavoidable in the midterm. Production modernization in the oil and gas industry cannot consist only in updating the main funds of companies, as disregarding the implementation of new technologies by state and businessesleads to a loss of long-term competitive advantages of domestic companies.