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Sanctions force Exxon Mobil to pull out of Russian Arctic project

23 September 2014

Under the latest round of US and European sanctions on Russia following its invasion of Ukraine, foreign oil companies have been barred from providing equipment, technology, or assistance to Russian oil projects. On September 20, Exxon Mobil issued a statement that the company was shutting down its joint project with Russian state-controlled oil giant OAO Rosneft in the Kara Sea, north of Siberia. 

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The statement said the US government had provided a license to allow Exxon Mobil and other US contractors to “enable the safe and responsible winding down of operations related to this exploration well. The license recognizes the need to protect the safety of the individuals involved in these operations as well as the risk to the environment. All activities related to the wind down will proceed as safely and expeditiously as possible.”

Russia has yet to develop significant expertise in Arctic offshore oil exploration, so the sanctions are effectively bringing all such projects to a halt.

Exxon Mobil signed an agreement with in 2011 to develop the potentially huge reserves on Russia’s Arctic Shelf and in Western Siberia’s shale oil deposits. The deal was estimated to be worth as much as $500 billion.

Another of the new sanctions against the Russian oil companies — Gazpromneft, Transneft, and Rosneft — forbids European banks from lending to the companies on maturities of more than 30 days. Russia’s five state-controlled banks, which have been allowed to raise funds on maturities up to 90 days, will also see their maximum maturities cut to 30 days.

French oil major Total SA is searching for alternative financing for the $27 billion Yamal Peninsula natural gas project in the Arctic following these sanctions.

Chief Financial Officer Patrick de La Chevardiere told investors in London the company was looking for financing from French and Italian export-credit agencies as well as loans denominated in Chinese and Russian currencies to cover its 20% stake in the project.


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