The United States has imposed sanctions onRussian state oil giant Rosneft. Themeasures are aimed toslowly deprive Rosneft ofUS dollar funding, not bar it fromdoing business with foreign companies such as BP and ExxonMobil.
“Rosneft in fact currently has the highest debt burden compared to other Russian oil companies,” Alexander Kornilov, a senior oil and gas analyst at Moscow’sAlfa Bank, toldNew Europe on July 17, adding that the state-run Russian oil company will need some more long-term borrowings going forward.
Theresult is likely tobe anincrease inthe cost offinancing forRosneft. “Therefore the potential closure of the US market for the company would make some problems for it down the road,” Kornilov said.
He said that much depends on the magnitude of the prepayments coming from Rosneft’s contracts with China. “But based on the expected cash flow, I personally think Rosneft will definitely need some more borrowings in long term,” Kornilov said.
The Alfa Bank analyst said that the good thing is that Rosneft’s partnerships with foreign energy majors have not been affected. “Rosneft is so much heavily dependent on Exxon as a partner in Sakhalin I PSA (Production Sharing Agreement), in Arctic exploration, in reserves development,” he said.
ExxonMobil is planning a $500 billion exploration of the Bazhenov oil field in Western Siberia, and a separate Far East liquefied natural gas (LNG) $15-billion terminal project. In May, Exxon and Rosneft agreedon four Arctic exploration projects. Exxon also holds an 11.3 million acre stake in Rosneft’s Kara and Black Sea joint-venture agreements, and is also working with the Russian company to explore Black Sea reserves which lie under Crimean waters.
Rosneft owns about 30% of an ExxonMobil oil field in the Canadian province of Alberta.
Rosneft also has strong partnerships with Norway’s Statoil and Italy’s ENI.
The sanctions announced on July 16 against key parts ofthe Russian energy andfinancial industries were intended toserve notice toMoscow that its refusal tocurb violence ineastern Ukraine has consequences.
Inannouncing thesanctions, which also hit Novatek, Russian’s number two natural gas producer, as well as two banks andeight defense firms, theUS Treasury Department said American companies were only prohibited fromengaging inany new debt oflonger than 90 days maturity or new equity with theenergy firms andbanks.
The sanctions will not directly affect or limit Russia’s oil exports. Rosneft generates more than 4% ofthe world’s crude andover 8% ofRussia’s GDP.
Kornilov said analysts are worried about Rosneft being able to maintain its brown fields as well as the efforts of Rosneft in terms of development of its East Siberian fields and its gas programme which ensures the pretty sharp boost in gas production.
Meanwhile, thenew sanctions will intensify thetension between theWest andMoscow over Russia’s role inUkraine, andtherefore add tobroad geopolitical unease across theoil sector.
Russian President Vladimir Putin warned that the American sanctions would backfire. “I have already said they tend to have a boomerang effect, and without any doubt, in this case they are driving Russian-American relations to an impasse, causing very serious damage,” Putin said on July 16, still on his Latin America tour. “And I am convinced that this is harmful to the national long-term strategic interests of the American state, the American people.”
Rosneft CEO Igor Sechin called the sanctions “unlawful”. The Rosneft chief, who was placed on the US blacklist of individuals in May, maintains that sanctions will boomerang and hurt Rosneft’s US partners.
“The decision to include Rosneft on the sanctions list is unreasonable, subjective, and illegal given the company’s non-role in the Ukraine crisis,”Sechin told reporters.
http://www.neurope.eu/article/us-socks-rosneft-soft-sanctions