Widening Sanctions On Russia Rattle Some In Western Oil Industry
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The new sanctions that the U.S. and the EU imposed on Russia this week have done little to quell the violence in eastern Ukraine, but they have shaken Western oil and gas companies that have ongoing projects in Russia. The sanctions didn't specifically target Russia's energy sector, but as NPR's Jackie Northam reports, they're coming close to a largely state-owned oil giant.
JACKIE NORTHAM, BYLINE: The latest round of sanctions by the U.S. and the European Union named 17 Russian companies and about two dozen individuals, many with close ties to President Vladimir Putin. But there was one name on the U.S. list that has rattled the collective nerves of Western oil and gas companies says Leslie Palti-Guzman, a senior analyst at the Eurasia Group.
LESLIE PALTI-GUZMAN: The most significant individual that was targeted was Igor Sechin, the CEO of Rosneft, which is one of the largest oil and gas companies in Russia. However, the individual, the oil man has been targeted, but not his company, Rosneft.
NORTHAM: But Igor Sechin was often the man that interacted with Western oil executives. The U.S. decision to sanction him, but not Rosneft, has created uncertainty. In a statement to NPR, BP, Britain's oil giant, said it's considering what the sanctions against Sechin might mean to its operations. The company has about a 20 percent stake in Rosneft. Norway's Statoil said the situation is dynamic and that it, too, is assessing its operations in Russia.
Exxon Mobil spokesman Richard Kyle offered only a brief statement.
RICHARD KYLE: As a corporation, we comply with any and all sanctions imposed by the United States government.
NORTHAM: Exxon Mobil has deep connections with Rosneft and has signed several major contracts over the past few years, including this one for oil and gas exploration in the Arctic.
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UNIDENTIFIED MAN: (Unintelligible) Edwards(ph), president of the Rosneft Oil Company and Steve Greenley(ph), president of the Exxon Mobil exploration...
NORTHAM: This 2012 YouTube video shows executives from Rosneft and Exxon Mobil at a table signing a multi-billion dollar deal. A stern-looking Putin hovers over them.
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UNIDENTIFIED MAN: ...joint development of technologies, to extract heavy oil in the Western Siberia.
NORTHAM: Russia's vast resources of oil and gas are attractive to Western energy companies, but require joint ventures. Robert McNally, the president of Rapidan Group, an energy consultancy, says some projects are in the Arctic under severe conditions and require collaborating on things like high technology for horizontal drilling and hydraulic fracturing.
ROBERT MCNALLY: These are multi-year, indeed multi-decade projects, involving tens of billions of dollars of capital and huge sustained commitment of personnel, time and technology with long-term payoff. These are areas where it's very difficult to get started and very difficult to turn off quickly.
NORTHAM: For now, those projects can go ahead. But the concern is if another round of sanctions would include Russia's overall energy sector. Like other analysts, McNally doesn't see that happening yet. He says it would be difficult for President Obama to convince the European Union to go along because Russia supplies much of its natural gas. McNally says Obama needs to walk a fine line between punishing Putin and hurting U.S. oil companies.
MCNALLY: The Obama administration realizes that if energy sanctions are unilateral imposed by the United States alone, it is just U.S. companies, U.S. investors who are going to suffer because foreign companies will be asked to replace those U.S. companies.
NORTHAM: Fadel Gheit, a senior energy analyst with Oppenheimer and Company, says oil companies worry there could be decades-long repercussions if they're cut out of Russia.
FADEL GHEIT: These company CEOs and boards, their number one obligation is not to any country. It's to their shareholders wherever they are. So they try to, as much as possible, to veer clear, away from politics.
NORTHAM: Gheit quips that the administration and the oil companies are having some very lively discussions about Russia.
Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.