While U.S. legislators are discussing new sanctions on Russia that would increase economic pressure on Moscow by possibly expanding sanctions to the banking and energy industries, Russia is said to be in talks with U.S. supermajor ExxonMobil over possible new oil and gas projects currently beyond the scope of the sanctions.
Russia’s discussions with Exxon could potentially lead to increased cooperation between the American company and Russia’s state-held Rosneft, the biggest oil producer in the country, Bloomberg reports, quoting Russian government officials.
Russia has drafted several proposals to put up for discussion with Exxon for projects in natural gas, chemicals. These projects are for now outside the scope of the existing U.S. sanctions on Russia, two unnamed Russian officials told Bloomberg.
If Exxon were to decide to go ahead with any of the possible projects, an agreement may come by the end of this year, one official told Bloomberg.
The Russian offer for new cooperation projects comes as U.S. lawmakers discuss extending sanctions on Russia to energy and oil projects and sovereign debt markets in what Republican Senator Lindsey Graham called a “sanctions bill from hell.”
Earlier this year, U.S. officials said that existing sanctions had limited “important investment in exploratory energy projects needed to help grow Russia’s oil and gas production capacity.”
Total foreign direct investment into Russia has declined more than 5 percent since 2013, while U.S. investment has plunged by 80 percent since then, Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said in August in her testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
At the beginning of this year, Exxon said that it had decided to withdraw from most of its joint oil and gas exploration activities with Rosneft, giving in to the pressure of U.S. and EU sanctions against Russia’s energy industry. The decision, Exxon said, was made last year, after Washington imposed additional sanctions on Russia for its alleged involvement in the 2016 presidential elections.
Exxon will be withdrawing from joint ventures struck in 2013 and 2014, the group said in a SEC filing at the end of February, noting that the decision to withdraw resulted in an after-tax loss of US$200 million. Related: Riyadh Has “No Intention” Of Repeating 1973 Oil Embargo
After Exxon withdrew from exploration and research JVs with Rosneft to abide by U.S. sanctions on Russia, the only meaningful project left for the U.S. supermajor is the Sakhalin-1 project—not subject to sanctions—which Exxon’s subsidiary Exxon Neftegas Limited operates in a consortium with Russian, Japanese, and Indian participants.
Last month, the Exxon-led consortium agreed to pay Rosneft US$230 million in an out-of-court settlement of a production dispute over the Sakhalin-1 concession and an adjacent Rosneft field. The Russian major sued in July Exxon and its partners in Sakhalin-1 for US$1.36 billion (89 billion rubles) claiming the consortium had obtained “unjust enrichment and interest gained by using other people’s money.”
According to one of the Russian officials who spoke to Bloomberg, the resolved dispute last month helped to improve the relations between Russia and Exxon, but the settlement isn’t connected to the Russian offer for more projects to Exxon.
Whatever the projects Russia is reportedly offering to Exxon, the U.S. supermajor has to tread carefully in any new venture with Moscow because possible fresh American sanctions could extend to cover more areas of the Russian energy industry.
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By Tsvetana Paraskova for Oilprice.com
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