Expanded US Sanctions May Affect Russia's Foreign O&G Expansion

Newly updated sanctions introduced by the United States against Moscow for its role in the Ukraine crisis may put a brake on Russia's future efforts to increase its exposure to the global oil and gas industry, analysts said on Wednesday.

 

However, the punitive measures will have little immediate effect on the operations of Russian energy companies abroad, they said.

 

The U.S. Treasury's Office of Foreign Assets Control on Tuesday published an amendment to sanctions against exploration or production for deepwater, Arctic offshore, or shale projects implemented by Russian companies, including abroad.

 

In particular, the document prohibits helping Russian oil companies that already face sanctions in exploration or production for deepwater, Arctic offshore, or shale projects abroad which are to be initiated after Jan. 29, 2018 and where Russian holdings are 33 percent or more.

 

Leading Russian energy producers did not respond to emailed requests for comment on the updated sanctions. So far, the sanctions have had little impact on the production of Russian oil, which is being pumped at a rate of 10.92 million barrels per day (bpd), not far off a 30-year peak.

 

"Projects currently being implemented do not fall under the sanctions. This includes Lukoil's projects in Romania and Ghana offshore as well as Rosneft's projects in Venezuela," Fitch Ratings analyst Dmitry Marinchenko said.

 

Last month, Rosneft bought a 30 percent stake in Egypt's Zohr field, the largest gas deposit in the Mediterranean.

 

"The (33 percent) threshold leaves the possibility for sanctioned Russian companies to take part, even in new projects," Marinchenko said.

 

Russian oil production is mainly located in western Siberia's brownfields. Local companies have also been expanding operations in remote fields in the Arctic and eastern Siberia, such as Rosneft-owned Vankor.

 

There is only one offshore Arctic oilfield in Russia, Prirazlomnoye, which is being developed by Gazprom Neft (SIBN.ME) . It plans to produce more than 50,000 bpd this year.

 

Russia has voluntarily agreed to curb oil output as part of global efforts to reduce production and support weak oil prices.

 

Analysts pointed to grey areas over what constitutes shale oil. A lack of clarity over its definition has allowed foreign companies to produce something similar to shale oil in Russia.

 

Moscow-based producers have not yet outlined plans to produce shale oil abroad. The sanctions may still jeopardise any such future projects, analysts said.

 

"The issue is one of interpretation. There are some risks now for Russian producers if they want to start drilling for shale oil in China or Argentina," said Alexei Kokin of Moscow-based brokerage Uralsib.

 

The Iraqi oilfields Badra and West Qurna-2, as well as projects in Venezuela's Orinoco belt, are the largest for Russian companies globally but are not targeted by sanctions.


(Reporting by Vladimir Soldatkin and Oksana Kobzeva; Editing by Katya Golubkova and Dale Hudson)