US sanctions likely to hurt Exxon's Arctic plans

Exxon Mobil's plans of drilling in the Russian Arctic may be in jeopardy thanks to the politics of Ukraine.

The company plans to start drilling operations in August in the Arctic's remote Kara Sea in August, in a big ticket venture with Russian state-controlled Rosneft.

The partnership, which includes shale exploration in Siberia and joint venture fields in Texas, is expected to undergo greater scrutiny screening after the US placed sanctions on Rosneft CEO Igor Sechin.

With Sechin being under sanctions it may complicate relations for Rosneft with western companies, Business Day Live reported CEO of Prosperity Capital Mattias Westman as saying.

Rosneft has however assured "shareholders and partners, including those in America" that sanctions would not hurt cooperation.

A US Treasury official said yesterday that US companies could still do business with Rosneft, according to Business Day Live.

But the sanctions meant Exxon would be in business with a group whose chief was not allowed into the US.

The exploration with Exxon is the most high-profile of several drilling ventures Rosneft had planned with international oil companies including Norway's Statoil and Eni of Italy.

The Arctic well would be the most expensive ever drilled by Exxon costing at least $600 million.

The cost though is justified in view of the potential bonanza the company would reap as Universitetskaya, the geological structure being drilled, was large enough to contain over 9-billion barrels, a trove over $90 billion at today's prices.

Meanwhile, US sanctions againt Sechin would have no effect on BP's dealings with its Russian partner, according to the chief executive of the British oil giant, Bob Dudley, The Telegraph newspaper reports.

Dudley stressed that he could continue to deal with the state-backed Russian oil group, in which BP held a near-20 per cent stake, including attending board meetings where Sechin was present.

He said Rosneft itself had not been sanctioned BP would be able to talk with Rosneft as a shareholder and a partner. Dudley participated in a Rosneft board meeting on Monday in St Petersburg along with Sechin.

The meeting is said to have ended shortly ahead of the US stepping up its action against Russians with close links to president Vladimir Putin by adding Sechin and Sergei Chemezov, Rosneft's deputy chairman, to its sanctions list.

Neither had been named yesterday among 15 individuals added to the EU list.

The escalation of US action over Crimea had thrown a scare in BP investors, who in 2012 saw the group pay almost $15 billion for shares in Rosneft as it reinvested some of the $27 billion proceeds from the sale of its 50 per cent stake in TNK-BP.