Sanctions freeze ExxonMobil’s Arctic drilling operations

ExxonMobil has confirmed it will stop its drilling operations in the Kara Sea, offshore Russia, to comply with the sanctions imposed against Russia by the U.S. Treasury Department.

Sanctions freeze ExxonMobil's Arctic drilling operations
The West Alpha rig drill bit

According to a press release issued Friday, ExxonMobil said it has been granted a licence by the Treasury Department to safely and responsibly wind down the operations related to the University-1 well that the company is jointly working on with Rosneft.

“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,” ExxonMobil said in a statement.

U.S. Treasury on September 12, 2014, imposed 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, to five Russian energy companies – Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft – involved in these types of projects.

All U.S. companies have until September 26, 2014 to stop applicable operations in Russia according to the sanctions outlined by the Treasury.

The permission granted by the Treasury to ExxonMobil will probably mean that the company will be able to continue working on the well past the September 26 deadline, meaning that the well has not been plugged yet, as previously reported.

The drilling of the Kara Sea well, using the West Alpha semi-submersible rig, has been described as “the most important event of the year for the global oil and gas industry” by Igor Sechin, Rosneft CEO.

According to Rosneft, which has quoted ‘experts’, the volume of the Kara Sea oil province resources exceeds the oil and gas resources of the Gulf of Mexico, the Brazilian shelf, the shelf of Alaska and Canada, and it is comparable to the resource base of Saudi Arabia.

Greenpeace delighted

Responding to the news, the head of Greenpeace International’s Arctic oil campaign, Ben Ayliffe, said:

“This is great news for the Arctic but a major blow for Exxon’s shareholders. It’s also a clear example of the risks involved in working with Russian firms to drill for oil in the offshore Arctic. Even before the sanctions it was clear that the Russian Arctic was a risky place to do business, with a lax safety culture and an unreliable regulatory regime.

“Other oil companies must surely be looking at Exxon’s $600m gamble and wondering whether their own partnerships are worth the risk. The Russian Arctic poses unique technical and environmental challenges at the best of times, but especially in a period of major geopolitical tension. It’s time for international oil companies to reconsider these joint ventures and turn away from the Russian Arctic.”


Offshore Energy Today Staff, September 22, 2014