By E. Gurkan Abay and Ovunc Kutlu
ANKARA
A U.S.-Russian oil exploration project in the Artic faces uncertainty after sanctions against Russia forced ExxonMobil to pull out.
Russian energy giant Rosneft has relied on its U.S. partner to supply high-tech drilling equipment to enable exploration in difficult conditions, according to energy experts.
Last week the U.S. Treasury Department’s Office of Foreign Assets Control announced it had given permission for the U.S. company to "wind down" its operations at the University-1 well.
"Exxon was financially carrying Rosneft with this exploration program, so their exit would shift the burden onto Rosneft," Artem Konchin, a senior oil and gas analyst at UniCredit, said.
"I think that the Russian company can replace Exxon rather effectively with a European partner like Statoil or Total, perhaps not while the sanctions are escalating but still in an expedient fashion.”
However, Lisa Ermolenko, an energy markets economist at Capital Economics, said Rosneft would find it difficult to replace ExxonMobil.
"In the past, Russia looked for the technology in Asia, but given the technology Russia needs, they couldn’t find anything there," she said. "Russia is hoping that once the situation in Ukraine improves and the sanctions are lifted, Rosneft can go back to the project."
Grigory Birg, an energy analyst from Russian firm Investcafe, said Rosneft would attempt to replicate the necessary machinery itself or replace it with technology from countries not participating in the sanctions.
"Russian companies will try to rely more on Russian machinery and services as well as on products and services from the countries which have not joined in on the sanctions," he told The Anadolu Agency.
He said ExxonMobil is providing $3.2 billion in finance to initially explore Arctic and deep sea sites with Rosneft.
The U.S. and EU have imposed sanctions on Russia over its alleged support for eastern Ukraine rebels seeking to separate from Kiev. The energy sector is one area targeted, with Western companies barred from exporting a range of oil industry technology.
Rosneft is one of three major state oil firms specifically targeted by the sanctions, due to its links to President Vladimir Putin’s regime.
The future of the joint venture was in question following the latest round of sanctions earlier this month.
It is unclear when ExxonMobil will fully shut down its operation.
ExxonMobil spokesman Richard D. Keil said: “Following this short time extension to ensure a safe and environmentally responsible completion of the University-1 well, the Office of Foreign Assets Control license is non-renewable and no further work is permitted.”
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