Rosneft, Russia's largest oil producer, says it's working out ways to maintain its profitability despite increasingly tougher Western sanctions, and that its revenues so far are still soaring.
Rosneft CEO Igor Sechin issued a statement on July 25 saying the company has been developing steps to cope with the sanctions imposed by Western nations because of Moscow's actions in neighboring Ukraine this year. “Together with our partners – the world's leading oil companies -- we are working on a plan to minimize the consequences of including Rosneft on the sanction lists,” the statement said.
Two of those partners are the Exxon Mobil of the United States and Statoil of Norway, both of which plan to cooperate with Rosneft to develop Russia's Arctic oil reserves and other Russian oil that's difficult to extract. Statoil CEO Helge Lund said his company has studied the sanctions so far in place and found no reason to change its partnership plans with the Kremlin-owned oil company.
But that's only so far. Rosneft is among several Russian enterprises awaiting even tougher sanctions from the European Union, which so far has been reluctant to go as far as Washington in imposing sanctions on Russia. EU nations, after all, rely on Russia for one-third of their gas supplies.
Yet European leaders, caught in the deepest confrontation with Moscow since the Cold War, say they are determined to punish Russia further since a Malaysia Airlines jetliner was downed by a surface-to-air missile over Ukrainian territory controlled by Russian-armed separatists on July 17, killing all 298 people on board, most of them Dutch.
New European sanctions may include a ban on exporting oil- and gas-extracting equipment to Russia, which could interfere with Rosneft's efforts in the Arctic.
The first round of U.S. sanctions, imposed in May, in part targeted Sechin in response to Moscow's annexation of the Ukrainian peninsula of Crimea. Those measures forbid U.S. nationals to do business with Sechin, but may maintain ties with Rosneft itself because Sechin is not its majority owner.
The latest U.S. sanctions, imposed since the downing of the Malaysian jetliner, forbid individuals or companies with ties to the United States to extend medium- or long-term credit to Rosneft and several other large Russia's companies.
Meanwhile, Rosneft also issued a statement on July 25 announcing that its profits during the second quarter of 2014 rose fivefold over the same period in 2013 to 171 billion rubles, or $4.87 billion, eclipsing the average estimate of 156.7 billion rubles predicted in a Bloomberg News survey of 10 oil industry analysts.
Rosneft attributed this rise to a 24 percent increase in sales of oil and gas and elevated total revenue by 22 percent to 1.44 trillion rubles. Cash on hand, meanwhile, rose to 112 billion rubles during the quarter, the company said.
By Andy Tully of Oilprice.com
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com