WASHINGTON: Exxon Mobil said it will wind down drilling in Russia’s Arctic in the face of US sanctions targeting Western cooperation with Moscow’s oil sector, after the Obama administration granted a brief extension to safely mothball its operations.
Washington extended sanctions on Russia last week over its aggression in Ukraine. The new measures seek to stop billions of dollars worth of cooperation between Western and Russian energy companies on oil drilling in Russia’s Arctic, in Siberia and offshore. Companies have until September 26 to stop the work.
The US Treasury Department gave Exxon a short extension to wind down a rig, beyond the 14 days outlined in the sanctions, the Texas-based oil major said on Friday without elaborating.
“Following the short time extension, the licence is non-renewable and no further work is permitted,” Exxon spokesman Richard Keil said.
In July, Exxon began moving a rig called West Alpha from Norway to the Russian Arctic. The company is hoping for a major crude discovery in the Kara Sea with Russian state oil company Rosneft, with which it signed a $3.2bn agreement in 2011 to develop the region.
Exxon said the Treasury granted a licence to it and other US contractors and individuals involved with the University-1 well, where the rig was drilling, “to enable the safe and responsible winding down of operations” related to the well.
The sanctions could affect other major oil companies, including BP Plc and Royal Dutch Shell.
An analyst said the move showed the Obama administration’s willingness to tailor sanctions to accommodate challenges associated with complicated business projects in Russia.
“The flexibility it demonstrates offers serious relief to international oil and gas companies concerned about the reach and effect of tough US sanctions,” said Elizabeth Rosenberg, who worked on sanctions at the Treasury Department and now heads the energy programme at the Center for a New American Security.
The US sanctions seek to slow Russia’s future oil production by banning US and European Union cooperation on all energy services and technology in Russia’s unconventional oil fields. Reuters
