MOSCOW, October 1 (RIA Novosti) - US oil company ExxonMobil has suspended its operations with Russia’s state-owned oil giant Rosneft on nine out of 10 joint ventures following a new round of Western sanctions imposed on Moscow for its alleged involvement in the Ukrainian civil war in September.
The latest development will negatively affect both companies. Rosneft will now have to finance the initial stages of exploration in the Kara and Black Seas, Grigoriy Birg, gas and oil analyst at Investcafe, Russia, pointed out in an interview with Radio VR. ExxonMobil was going to provide funding estimated to be worth $3.2 billion for the project before the US Treasury imposed the sanctions, according to an agreement concluded in 2011.
The American company is heavily involved in oil and gas projects in Russia and "is clearly interested in growing its resource base and production in the future. Russian projects were key to these long-term goals,” Birg maintains.
However, “sanctions could not last that long to seriously affect the long-term strategic partnership of Rosneft and ExxonMobil,” the analyst stressed. Therefore, both companies are eager to resume cooperation. “At this stage both sides are investigating options available to them on how to continue cooperation without breaking the sanctions,” Birg stated. There are certain ways to make that happen.
For instance, both companies continue to work on the Sakhalin-1 project, which is “unaffected by sanctions because it is carried out under a product sharing agreement [signed in 1996]. Sanctions do not specifically apply to it,” Birg explained. Rosneft, ExxonMobil, Sodeco and ONGC participate in the Sakhalin-1 project aimed at developing three oil and gas fields off the northeastern coast of Sakhalin Island in Russia's Far East.
Rosneft is pursuing numerous joint ventures with foreign companies, but those initiatives require access to Western products and services. “I think, the effectiveness of Western sanctions will depend on whether Rosneft and other Russian oil and gas companies could find an alternative supplier in Russia and other countries, particularly from the Asia-Pacific region,” the expert stated.
On September 12, a new round of sanctions was introduced by the European Union and the United States against Russia, targeting the country’s largest banks, energy and defense companies, as well as individuals. In particular, they prohibited export of goods, services and technology “in support of exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil,” to five Russian energy companies, Rosneft, Gazprom, Gazprom Neft, Lukoil, and Surgutneftegas, according to the US Treasury.
