U.S. Opposes Japanese Plan To Drill For Oil Offshore Russia

The United States has objected to a project of a Japanese consortium and Russia’s state-run oil giant Rosneft to drill for oil offshore Russia, Bloomberg reported on Thursday, citing people familiar with the matter.  

Japan Oil, Gas and Metals National Corporation (JOGMEC), Inpex Corporation, and Marubeni Corporation signed in December 2016 a Heads of Agreement with Rosneft to potentially jointly explore in the southwestern offshore area of Sakhalin Island of Russia. The three Japanese companies expect to strengthen Japanese-Russian economic cooperation, and diversify Japan’s energy sources, Jogmec said at the time.  

But since then, the U.S. government has objected to the project, basing its intervention over sanctions on the grounds that the U.S. allies within G7 should not “backfill” in projects that U.S. companies would be barred from carrying out, according to Bloomberg’s sources. Japan’s position is that this project is not “backfilling” because the Japanese companies were not competing with U.S. firms for the project, according to one of the sources.

In addition, part of the area that Rosneft and the Japanese consortium agreed to explore includes deepwater, which is subject to U.S. sanctions on the provision of equipment and services to deepwater oil projects in Russia, according to Bloomberg’s sources.

But according to the people with knowledge of the matter, the U.S. and Japanese governments are still discussing the project and may find a solution that would allow the project to go ahead. Some areas in the exploration license are not classified as deepwater under the sanctions, according to Bloomberg.

In April this year, the U.S. Treasury Department declined to issue waivers to U.S. companies, including Exxon, for drilling that is currently prohibited by Russian sanctions.

While Exxon’s and Japan’s plans are being stalled by the sanctions, Italy’s Eni, for example, is boosting oil and gas exploration and production with Rosneft, as well as in oil refining, petrochemicals, trading, and marketing, both inside and outside Russia. According to Rosneft’s CEO Igor Sechin, the two companies would start exploration drilling in the Black Sea this summer. 

By Tsvetana Paraskova for Oilprice.com

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