U.S. irritated by Japan-Russia offshore exploration deal

 The U.S. is reportedly irritated by the recently signed offshore exploration cooperation agreement between Rosneft and a consortium of Japanese companies.

According to Bloomberg, which cited people familiar with the matter, the U.S. feels that Japan would, as part of the Group of Seven Allies, be working against the sanctions imposed in 2014 on the Russian oil and gas industry over the country’s annexation of Crimea.

The Group of Seven Allies, popularly known as G7, comprises Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

Offshore Energy Today in December reported that Rosneft had signed a memorandum of agreement Japan with the consortium of Japanese oil companies comprising Inpex, Jogmec, and Marubeni.

Jogmec then said that the deal was for the exploration in the southwestern offshore area of Sakhalin Island of Russian Federation.

Jogmec then said that as part of the deal, the Japanese side was  considering to utilize the seismic vessel “Shigen”, which is owned by the Agency for Natural Resources and Energy of Japanese Ministry of Economic, Trade and Industry.

In the event that hydrocarbons are discovered as a result of exploration in the area, which is in close proximity to Japan, the three Japanese companies expect that the project will promote energy security in Japan through the resultant benefits of greater diversity of the country’s energy sources and a short transportation distance, Jogmec said in December.

Bloomberg on Wednesday reported that the location for the joint exploration was the Central Tatarsky license.

In his report released in September 2016, Rosneft CEO Igor Sechin said the next important priority of regional exploration would be study of the potential of northern part of the Sea of Japan at Centralno-Tatarsky area with an area of 30,000 sq.m and resources of 270 mln.t of oil and 322 bcm of gas.

Sechin said Rosneft planned to conduct 10,000 km of 2D and 2,000 km of 3D seismic to identify and “drill promising structures.”

To remind, U.S. in 2014 imposed sanctions prohibiting 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 had until September 26, 2014 to stop applicable operations in Russia according to the sanctions outlined by the Treasury. ExxonMobil had been given an extended deadline to safely complete drilling the University well – the world’s northernmost – in the Kara Sea, it had been drilling at the time. The EU imposed similar sanctions.

While Japan indeed has sanctioned Russia its list of sanctions against Russia does not include oil and gas industry specifically as the U.S. sanctions list does.

In December 2016, the two countries held the Japan-Russia summit, and their companies signed billions of dollars worth of contracts, including the memorandum on offshore exploration.

Following the event, Japanese foreign minister Fumio Kishida was asked whether the summit and Japan’s relationship with Russia was putting a wedge between Japan and the US and European countries.

Kishida responded that Japan had not in any way changed its stance of emphasis on G7 solidarity.

“The eight-point cooperation plan does not conflict with sanctions against Russia in any areas,” Kishida said at the time.

The Japanese side seemingly has a similar stance when it comes to the cooperation with Russia in the offshore oil and gas exploration.

Namely, an unnamed source told Bloomberg that the Japanese don’t feel they’re backfilling on the sanctions as they’re not competing with the U.S. oil and gas companies. They are, however, reportedly in talks with the U.S. find an amicable solution to the issue, such as drilling in the shallow waters which are not covered by the U.S. sanctions.

Offshore Energy Today Staff