Nice Sanctions: Exxon Is Begging DC for Permission to Return to Russia
Or it's going to lose business to Europeans who already secured sanctions waivers
In theory US and the EU are sanctioning Russia. In practice everyone and their mother gets a waiver. At least when it comes to drilling for oil.
Think about it. Oil is a very finite resource. It turns out one that's even scarcer than capital needed to develop it.
From the start western sanctions never applied to drilling in Russia's Far East where a number of foreign oil giants are heavily invested in a pair of massive projects off the island of Sakhalin.
Very soon perhaps the same will be true for Russia's Black Sea off the coast of Crimea.
In theory the US and the EU are sanctioning Russia. More concretely they are sanctioning their own companies.
FOX Business has more:
Exxon Mobil Corp. has applied to the Treasury Department for a waiver from U.S. sanctions on Russia in a bid to resume its joint venture with state oil giant PAO Rosneft, according to people familiar with the matter.
Exxon has been seeking U.S. permission to drill with Rosneft in several areas banned by sanctions and applied in recent months for a waiver to proceed in the Black Sea, according to these people.
Since the fall of the Soviet Union, Russia's oil resources have been among the most sought-after prizes by U.S. and European oil companies, and multiple U.S. presidential administrations in both parties have worked to help them enter the country.
As much as 100 billion barrels of oil remains untapped in the country, although many Western companies have been stymied in their attempts to reach those reserves, often by geopolitical risks.
The proposal to drill in the Black Sea has been circulated in various federal departments in recent months, several people said.
Exxon is arguing that it deserves a waiver there because its exploration rights in the Black Sea will expire if it doesn't act by this year, under its deal with Rosneft, and because some of its top foreign competitors aren't similarly restricted.
Exxon opposed how the Obama administration applied sanctions on a number of its projects, according to people familiar with the matter, in part because the European Union granted waivers to its competitors to continue operating, including Norway's Statoil ASA, which has a waiver for arctic drilling in the Barents Sea, and Italy's Eni SpA for arctic drilling in the in Barents and Black seas.
"Exxon is worried it could get boxed out of the Black Sea by the Italians," said a person briefed on the company's waiver application. Eni has been aggressively exploring the region in cooperation with Russia in recent years.
Exxon is seeking a waiver akin to those that have been granted by the EU to its rivals, according to people familiar with the matter.
The Black Sea may hold 30 billion barrels of oil, according to estimates from Russia, Turkey and Romania. Although a number of the biggest Western oil companies are seeking opportunities there, it remains a frontier area where few deep water wells have been drilled, an indication that explorers may find far less, or more, than hoped as more work is done, according to industry analysts.
Exxon needs an oil discovery in the Black Sea by the end of this year to obtain a Russian government license to drill under the terms of the deal Rosneft. Unless Exxon receives approval soon, there might not be enough time to safely drill an exploratory well to be able to develop any discoveries, said oil industry experts.
The Black Sea has become a major area of interest for many of the world's biggest oil companies. Exxon has drilled there off the coast of Romania and holds a license for an area in Ukrainian waters. Royal Dutch Shell PLC has also drilled in the Black Sea off the coast of Turkey.
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