It’s all over the news: ExxonMobil has applied for a waiver from the economic sanctions against Russia—and specifically Rosneft—in order to resume its joint operations with the Russian state giant and advance a Black Sea drilling project.
Although Exxon’s former chief executive and now Secretary of State Rex Tillerson has recused himself from anything that has to do with Exxon and Russia for the next two years, the news has sparked a lot of interest.
This is actually the second application for a waiver from Exxon. The last one was submitted to the Department of Treasury in 2015, but was rejected by the Obama administration. Now, some believe the second application comes at the worst possible moment, with the election hacking scandal still hot and the FBI investigating Russian involvement in the U.S. elections, not to mention the fact that the State Department is one of the agencies that will oversee the application waiver.
But it could also be the best time for Exxon to get more objective treatment from the relevant authorities. The oil company has nothing to do with the hacking scandal. It has a partnership agreement with Rosneft, sealed back in 2011, under which the two will develop the Tuapse offshore oil and gas block in the Russia Black Sea shelf.
Tillerson, for his part, has made it painfully clear that he will not touch anything that has Exxon and Russia in the same sentence with a ten-foot pole. Whatever critics might say, it would be sheer madness for him to get involved in the waiver in any way.
Leaving speculation aside, the question is, why Exxon is so eager to get a sanction waiver for Black Sea drilling? Aside, of course, from Tillerson’s own argument that economic sanctions cause too much collateral damage by way of lost income for the foreign companies that are forced to suffer their consequences. Related: What Does The Future Hold For Canada’s Oil Sands?
Exxon has already lost over $1 billion from the sanctions, and it is very likely that the company’s management has decided to put an end to the bleeding. What’s more, the company recently had to write off a substantial part of its proved oil reserves: 3.3 billion barrels, or 19 percent of its total.
The Tuapse field in the Black Sea, where it has partnered with Rosneft, has reserves ranging between 2.2 billion and 7.2 billion and Exxon has a 33.3-percent interest in it. That’s not too shabby, but according to an unnamed source close to the matter, as quoted by the Wall Street Journal, Exxon is worrying that Italy’s Eni will take its place in Black Sea exploration in Russia.
For Italian companies, it’s business as usual in Russia, despite EU sanctions, thanks to waivers granted by the government. Eni is one of them, and like Exxon, it is a valuable major partner of Rosneft. So, Exxon’s worry seems legitimate. It stands to make substantial gains if it rejoins Rosneft in the Black Sea continental shelf, and elsewhere as well. What remains to be seen is whether the Treasury Department will agree.
By Irina Slav for Oilprice.com
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