Amid Ukraine crisis, Russia sanctions force exodus of Western energy (+video)
Western sanctions on Russia are forcing international energy firms to rethink or even suspend plans for oil and gas projects in Russia. The most recent round of sanctions over the Ukraine crisis also severely limits Russian energy companies’ access to Western financing and technology in support of developing energy resources.
ExxonMobil Corp. was the first Western company to bow to Western sanctions against Moscow and suspend offshore Arctic drilling for Rosneft, the Kremlin-owned oil giant. Now another large Western energy company, France’s Total, is ending its effort with Russia’s Lukoil to explore for shale oil in Siberia.
But Total CEO Christopher de Margerie told the Financial Times that the move isn’t likely to have much of an impact on the company. “The Lukoil joint venture is definitely stopped,” he said. “But it hadn’t started, so it doesn’t have any impact [on Total].”
Still, de Margerie made the comments the same day his company announced a program to sell $10 billion in assets from 2015 through 2017, and reduced its goal for oil production in 2017 from 3 million barrels per day down to 2.8 million barrels per day. (Related: Western Sanctions Halt Exxon’s Drilling In Russian Arctic)
Under Total’s May, 2014 deal with Lukoil, the two companies were to develop the Bazhenov shale formation in Western Siberia. Total would have controlled 49 percent of the venture and Lukoil would have controlled 51 percent.
The most recent round of sanctions also more severely limits Russian energy companies’ access to Western financing and technology in support of developing energy resources.
Meanwhile, Total is moving ahead with a $27 billion joint project with both Novatek, Russia’s largest natural gas producer, and China National Petroleum Corp. to develop liquefied natural gas in Russia's Yamal peninsula in the Arctic. (Related: Kremlin Says Sanctions Will Cost Europe)
Novatek is also subject to the Western sanctions, but de Margerie told the Financial Times that he hoped it could obtain financing, “but not in dollars,” and thereby not violate the sanctions. He said China already had committed to put up 60 percent of the project’s financing.
Total also is part of a syndicate working to develop the $50 billion Kashagan oil field in Kazakhstan. CEO De Margerie said production at the site would resume in the third quarter of 2016 -- 11 years after it was originally expected to come online.
The development of Kashagan, the largest oil field outside the Middle East, has been plagued by a series of problems that have led to delays and billions of dollars in cost overruns. De Margerie attributed the problems less to technical challenges than to poor collaboration among the project's partners, saying, “Our reputation has really been hurt, for all of us.”
More Top Reads From Oilprice.com:
The Christian Science Monitor has assembled a diverse group of the best energy bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.