Exxon Rig Enters Uncharted Waters of Russian Political Storm

Posted by Joseph Keefe
Monday, July 21, 2014

U.S. sanctions on Russia include Rosneft, Exxon's partner: Project may not break sanctions, but brings political risks.

An ordinary, long-scheduled journey of an oil drilling rig into Arctic waters is turning into a major political exercise, attracting international scrutiny and creating a dilemma for ExxonMobil.

Exxon, the top U.S. oil major and the world's most valued oil company, is bringing the rig, called West Alpha, from Norway to the Russian Arctic. It is hoping for a major discovery in the Kara Sea with Russian partner Rosneft.

The journey has begun just as the United States has slapped the toughest sanctions yet on Russia, including on Rosneft, over escalating violence in Ukraine. Further sanctions are likely after the downing of a Malaysia Airlines' plane in eastern Ukraine.

The joint activity does not necessarily break the latest sanctions, but the rig's mission will be seen a sign that a top U.S. company is backing Moscow.

Arctic exploration costs can exceed hundreds of millions of dollars. The Exxon-Rosneft drilling campaign, therefore, will also show how effective the latest sanctions prove to be in prohibiting U.S. firms from providing new long-term debt or equity to Rosneft.

"It's a bit discordant with the message that the United States government is trying to send, having this long-planned summer drilling season go ahead right now," said Elizabeth Rosenberg, energy program director at the Center for a New American Security think-tank and a former sanctions adviser at the Treasury Department.

From a broader prospective, the project will indicate the resolve of major oil companies to continue dealing with Russia even as conflict escalates with the West.

"We are evaluating the impact of the sanctions and don't have anything further at this time," Exxon said in emailed comments.

For the Kremlin, the project will become a balancing act between achieving its goals of raising oil output and government revenue and the risk of pushing foreign partners so hard that they run up against the sanctions regime.

West Alpha belongs to Norway-listed Seadrill, the world's biggest offshore rig firm, and Exxon has contracted the rig until the third quarter of 2016.

Seadrill Chief Financial Officer Rune Magnus Lundetrae told Reuters the rig had already sailed from the Norwegian yard and was on its way to the Kara Sea.

"She's on her way up now from the yard where she's been preparing for that activity ... Drilling will start within the third quarter. We're in early Q3 now, so we're talking about this quarter," he said.

Lundetrae declined to discuss the latest U.S. sanctions: "We are preparing to drill and will deal with situations as they occur."

Satellite tracking showed the rig was heading towards Russia along the Norwegian coast.

SPILLOVER EFFECTS


The latest U.S. sanctions do not necessarily aim to hit projects between Rosneft and foreign partners.

President Barack Obama said the sanctions were "designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies".

But Obama also warned that additional steps were on the table if Russia does not change course in eastern Ukraine - a signal that joint ventures with U.S. companies could face risks.

By going ahead with drilling, companies risk antagonising the U.S. administration, Rosenberg said.

"You'd be missing the point if you took one drilling season, what is ultimately at this point a pretty limited joint venture activity, and weighed it quite heavily against the president of the United States."

Exxon has shown in the past it can take decisions that do not fully align with U.S. policies.

In one recent example, Exxon's decided to invest in Iraq's semi-autonomous Kurdistan region two years ago despite, anger from the central government in Baghdad and opposition from Washington.

The West Alpha journey also will be watched by the ecologists, who call for a ban on offshore drilling in the Arctic. Earlier this year, Greenpeace climbers scaled the West Alpha rig.

Truls Gulowsen, head of Greenpeace Norway, could not say whether Greenpeace was planning another protest.

 

By Balazs Koranyi, Gwladys Fouche and Timothy Gardner

Maritime Reporter February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Stronger Panamaxes Boost Baltic Sea Freight Index

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, made minor gains on Thursday on higher rates for the panamax and smaller vessel segments.

Egypt: Suez Canal Zone to Make Up 30-35% of Economy

Egypt expects a planned economic zone near the Suez Canal to eventually make up about a third of Egypt's economy, the country's investment minister said on Thursday.

Australia Announces Patrol Boat Tender

Tender announced for Pacific Patrol Boat Replacement Project   The Australian Government announced a Request for Tender (RFT) to replace the Pacific Patrol Boats

Energy

Wintershall Takes Over Operatorship of Norwegian Subsea Oil and Gas Field

Wintershall has taken over the operatorship of the subsea oil and gas field Vega from Statoil, Wintershall announced today.   Vega is the BASF subsidiary’s

First Subsea Achieves API 17L1 Certification for Bend Stiffener Connectors

Connector technology developer First Subsea has received APL 17LI certification for its bend stiffener connectors from the American Petroleum Institute, the company announced today.

Lamprell Delivers Jackup Rig to Greatship

Lamprell announced it has completed construction on jackup drilling rig Greatdrill Chaaru, delivering the rig to Greatship Global Energy Services Pte. Ltd.    Greatdrill

Maritime Security

Australia Announces Patrol Boat Tender

Tender announced for Pacific Patrol Boat Replacement Project   The Australian Government announced a Request for Tender (RFT) to replace the Pacific Patrol Boats

Panama Accredits Maritime Security Firm

The Panama Maritime Authority has accredited ESC Global Security personnel to offer protection aboard Panamanian-registered vessels, in what is thought to mark

GOST to Unveil New Products at MSE Conference

GOST (Global Ocean Security Technologies),announced today that it will highlight its newest commercial maritime products at the 2015 Maritime Security East conference in Jacksonville,

News

Two Mooring Tugs Delivered to NSW

Nakilat Damen Shipyards Qatar (NDSQ) has delivered two new Qatari-built mooring tugs to towage operator Nakilat SvitzerWijsmuller (NSW).   The delivery of the

Senate Committee Approves Vessel Discharge Reform Legislation

The effort to establish a uniform national framework for the regulation of vessel discharges took another step forward as the Senate Committee on Commerce, Science and Transportation approved S.

Vancouver Port Operations Resume Atfer Container Fire

Port Metro Vancouver said on Thursday that operations had resumed at most port facilities shut down by a shipping container fire the day before, but that its Centerm

Maritime Safety

Senate Committee Approves Vessel Discharge Reform Legislation

The effort to establish a uniform national framework for the regulation of vessel discharges took another step forward as the Senate Committee on Commerce, Science and Transportation approved S.

Vancouver Port Operations Resume Atfer Container Fire

Port Metro Vancouver said on Thursday that operations had resumed at most port facilities shut down by a shipping container fire the day before, but that its Centerm

Panama Accredits Maritime Security Firm

The Panama Maritime Authority has accredited ESC Global Security personnel to offer protection aboard Panamanian-registered vessels, in what is thought to mark

People in the News

Vancouver Container Fire Closes Port

A large portion of Canada's biggest port was shut down on Wednesday after a chemical fire broke out amid numerous shipping containers piled up in a yard east of Vancouver's downtown core.

Port of Rotterdam 2014 Profit Dips

The Port of Rotterdam Authority said on Thursday its net profit for 2014 fell 4.9 percent to 215 million euros ($237 million) on higher financing costs. Europe's

UK Will Force Fridman to sell N.Sea Assets

Britain is ready to force the sale of Russian oligarch Mikhail Fridman's recently acquired North Sea energy assets unless it receives unspecified assurances within the next week,

Government Update

Senate Committee Approves Vessel Discharge Reform Legislation

The effort to establish a uniform national framework for the regulation of vessel discharges took another step forward as the Senate Committee on Commerce, Science and Transportation approved S.

Egypt: Suez Canal Zone to Make Up 30-35% of Economy

Egypt expects a planned economic zone near the Suez Canal to eventually make up about a third of Egypt's economy, the country's investment minister said on Thursday.

Australia Announces Patrol Boat Tender

Tender announced for Pacific Patrol Boat Replacement Project   The Australian Government announced a Request for Tender (RFT) to replace the Pacific Patrol Boats

 
 
Maritime Contracts Maritime Security Naval Architecture Offshore Oil Pod Propulsion Port Authority Salvage Ship Electronics Ship Simulators Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2705 sec (4 req/sec)