The United States' new round of sanctions on Russia could force Exxon Mobil Corp. to alter its ongoing drilling in the Kara Sea by Sept.26.
The joint Exxon-Rosneft drilling at the University-1 license east of Novaya Zemlya started in August at a time when U.S. and European Union sanctions in response to Russia's intervention in eastern Ukraine did not include already signed contracts.
The $600 million drilling operation with the Norwegian owned rig West Alph" is the first take-off in a larger long-term Exxon-Rosneft partnership on offshore oil exploration in the Russian Arctic. The ice-free window for drilling is said to last from August to mid-October, thereafter the plan was to tow the rig back to European waters.
With the new round of sanctions announced on Friday, that might happen by Sept. 26, likely before the drilling itself is completed.
Looking ahead
In its announcement, U.S. Department of the Treasury writes "…sanctions that prohibit the exportation of goods, services or technology in support of exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil…." Among the entities listed is Exxon's partner Rosneft. The Treasury Department continues: "U.S. persons have until September 26, 2014 to wind down applicable transactions with these entities…"
This goes beyond the prior sanction on future activity and could force a halt in this autumn's Kara Sea drilling within less than two weeks from now.
Alan Jeffers, spokesman for Exxon, says to the New York Times that "we have to look what was issued …. And determine how it affects us."
The current drilling at University-1 is just the start of a larger $3.2 billion exploration agreement between Rosneft and Exxon at several licenses in the Kara Sea, said to be bigger in size than the Gulf of Mexico.
For Russia, the importance of the Kara Sea drilling was underlined by President Vladimir Putin when he in a satellite link with Rosneft's CEO Igor Sechin from the platform in the Kara Sea said: "This [operation] has become possible thanks to the joint efforts of Rosneft and Exxon Mobil. Our experiences show that it is practically impossible, or at least very difficult, to develop these kind of projects alone."
This story is posted on Alaska Dispatch News as part of Eye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.