Exxon Oil Rig Enters Uncharted Waters of Russian Political Storm

Posted by Eric Haun
Monday, July 21, 2014

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 Exxon Mobil Corp.

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 Oil Co.

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 could 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 perspective, 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.

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.

Still, observers should not look at the long-planned Exxon Arctic project as an indication that companies are not wary about the sanctions, or that they will not have an effect, said Rosenberg.

"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," she said.

The West Alpha journey also will be watched by environmentalists, 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.

(Additional reporting by Timothy Gardner in Washington, Writing by Dmitry Zhdannikov; Editing by Jane Baird and Tom Brown)

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

Offshore

Statoil: Polarled Pipe-Laying Kicks Off

On 26 March, the Solitaire pipe-laying vessel started on the first stage of the Polarled installation project. The 482-kilometre long pipeline will transport gas

Swire Pacific Offshore Acquires 2 Newbuildings

Shipowner and operator, Swire Pacific Offshore Operations (Pte) Ltd (SPO) celebrated the naming of two new vessels, Pacific Centurion, an Anchor Handling Tug Supply (AHTS) vessel,

Changes in Aker Solutions' Top Deck

Tore Sjursen will assume the position as executive vice president for operational improvement and risk management at Aker Solutions on April 1. Knut Sandvik

News

CSIC, CSSC Dismiss Shipbuilder Merger Rumors

China's state-backed shipbuilding giants said they have not received any merger-related information from authorities, after an executive swap between the firms sparked a market rally in their shares.

Russia Names Nominee for IMO Secretary General

Russia has for the first time put forward a candidate to compete for the post of IMO Secretary General   The Russian Federation has nominated Vitaly Klyuev, Russia’s

Asia-Europe Box Rates Fall Almost 6 pct

Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell 5.5 percent to $586 per 20-foot container (TEU) in the week ended on Friday,

Government Update

K-Line Executive Pleads Guilty to Price Fixing

An executive of Japan-based Kawasaki Kisen Kaisha Ltd. (K-Line) was sentenced to 18 months in a U.S. prison after pleading guilty to his involvement in a conspiracy to fix prices,

Russia Names Nominee for IMO Secretary General

Russia has for the first time put forward a candidate to compete for the post of IMO Secretary General   The Russian Federation has nominated Vitaly Klyuev, Russia’s

Cosco Bulk Shipping Losses Down in 2014

China Cosco said losses in its main dry bulk shipping business fell sharply in 2014 and its container shipping gross profit grew amid a still subdued global shipping market.

Arctic Operations

Statoil: Polarled Pipe-Laying Kicks Off

On 26 March, the Solitaire pipe-laying vessel started on the first stage of the Polarled installation project. The 482-kilometre long pipeline will transport gas

Icebreaker Murmansk Launched at Arctech Helsinki Shipyard

The 16 MW Icebreaker for the Russian Ministry of Transport was launched at Arctech Helsinki Shipyard on March 25th, 2015. Before floating the vessel, she was

Seattle Fears Arctic drilling, Shell Moves Rigs

Shell Oil Co is poised to restart oil drilling in the Arctic in the near future once it receives the go-ahead from the U.S. government, which could happen soon.

Offshore Energy

Statoil: Polarled Pipe-Laying Kicks Off

On 26 March, the Solitaire pipe-laying vessel started on the first stage of the Polarled installation project. The 482-kilometre long pipeline will transport gas

Swire Pacific Offshore Acquires 2 Newbuildings

Shipowner and operator, Swire Pacific Offshore Operations (Pte) Ltd (SPO) celebrated the naming of two new vessels, Pacific Centurion, an Anchor Handling Tug Supply (AHTS) vessel,

Changes in Aker Solutions' Top Deck

Tore Sjursen will assume the position as executive vice president for operational improvement and risk management at Aker Solutions on April 1. Knut Sandvik

 
 
Maritime Contracts Naval Architecture Navigation Offshore Oil Port Authority Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar Winch
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: 0.4203 sec (2 req/sec)