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Oil Tanker Rates Soar To Astronomical Levels

Oil Tanker Rates Soar To Astronomical Levels

Soaring tanker rates are weighing…

Andy Tully

Andy Tully

Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com

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Another Western Energy Company Ends Russian Cooperation

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.”

By Andy Tully of Oilprice.com

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