ExxonMobil, BP extend partnerships with Russia despite sanctions
Several of the largest oil companies in the world are doubling down in Russia despite moves by the West to isolate Russia and its economy. ExxonMobil and BP separately signed agreements with Rosneft 鈥� Russia鈥檚 state-owned oil company 鈥� to extend and deepen their relationships for energy exploration. The U.S. slapped sanctions on Rosneft鈥檚 CEO Igor Sechin in late April, freezing his assets and preventing him from obtaining visas.
However, the sanctions do not extend to Rosneft itself, allowing western companies to continue to do business with the Russian oil giant. ExxonMobil signed an agreement with Rosneft, extending its partnership to build a liquefied natural gas (LNG) terminal on Russia鈥檚 pacific coast. Known as the Far East LNG project, the export terminal will receive natural gas from Russia鈥檚 eastern fields as well as from Sakhalin-1, an island off Russia鈥檚 east coast. Rosneft announced the deal in a聽聽on its website on May 23.
The following day, Rosneft and BP signed an agreement to jointly explore oil in the Volga-Urals region. It will consist of a pilot project in the Domanik formations, and if successful could lead to the development of shale oil in Russia. Rosneft will maintain a 51 percent ownership of the joint venture and BP will own 49 percent.
The signing of the agreement occurred during a ceremony at the聽St. Petersburg International Economic Forum. The oil majors attended despite pressure from the White House to boycott the event. Many big name companies聽chose not to attend聽even though they have large economic interests in Russia, including PepsiCo, German companies E.ON and Siemens, and some of the biggest banks in the U.S.
By defying the White House, the oil majors salvaged what would have otherwise been an embarrassing event for the Kremlin. The absence of the world鈥檚 largest companies would have demonstrated Russia鈥檚 increasing isolation. Instead, Russia used the event to detail plans to expand its massive energy sector. 鈥�(They're) eager to continue work on projects in Russia,鈥� Russia鈥檚 Energy Minister聽Alexander Novak聽said of ExxonMobil and Royal Dutch Shell.
BP CEO Bob Dudley emphasized his company鈥檚 determination to stick with Russia. 鈥淲e are very pleased to be a part of Russian energy complex,鈥澛�. 鈥淧resident (Putin) has urged us today to invest into shale oil... There's so many natural resources in Russia, the openness and partnerships Russia has with companies from all over the world is a good thing for energy,鈥� Dudley added.
Even though there are international sanctions on Rosneft鈥檚 Igor Sechin, Dudley insisted that their business with Rosneft will continue. 鈥淚t does not affect our cooperation with the company itself,鈥澛燚udley said, referring to sanctions on Rosneft鈥檚 boss. He was even able to meet Sechin privately.
French oil giant Total S.A. also signed an agreement with Lukoil 鈥� Russia鈥檚 second largest oil company 鈥� to explore for shale oil and gas. Total鈥檚 chief executive Christophe de Margerie also went to lengths to reassure the Russian hosts. 鈥淢y message to Russia is simple 鈥� business as usual,鈥澛�.
To be clear, the oil companies are not legally running afoul of international sanctions. But their collective shrug in the face of European and American pressure to boycott Russia 鈥� along with the聽$400 billion natural gas deal聽Russia signed with China last week 鈥� illustrates the difficulty with which the West will have at undermining Russia鈥檚 energy sector, if it chose to do so. Russia is too big of a prize for the likes of ExxonMobil, BP, and Shell.
Or viewed another way, the moves to deepen business in Russia suggest that the world鈥檚 biggest oil companies are confident that the U.S. and Europe won鈥檛 be so bold as to truly attack Russia鈥檚 energy machine.
