Citing an early exit from some projects with Rosneft due to 2014 sanctions imposed on Russia by the US and European Union, Exxon recorded a $200 million after-tax loss in the final quarter of 2017. Sputnik News photo by Maksim Blinov.
Exxon initially argued sanctions over Russian invasion of Crimea unfairly penalized US companies
Exxon Mobil says Western sanctions imposed in 2014 is the reason the global oil major is exiting some joint venture projects with Rosneft. The Russian oil company says the move will cause serious losses for its US partner.
Despite the move, Rosneft, Russia’s largest oil firm, says it will work with the Houston-based company again, should it be legally possible to do so.
When the Obama government originally announced the sanctions in 2014, Exxon opposed them, saying they unfairly penalized US companies because foreign energy firms were still able to work in the oil-rich country.
The sanctions were imposed by the US and European Union after Russia annexed Crimea in 2014 and played a role in eastern Ukraine conflicts.
In 2014, the US government also slapped sanctions on Igor Sechin, Rosneft’s Chief Executive.
The sanctions prohibit US citizens or people in the US from dealing with those blacklisted, including Sechin. Rosneft was subject to narrower US sanctions that still allowed US companies to deal with the oil major on some deals.
Also in 2014, the Obama administration fined Exxon $2 million for signing the joint ventures just after these sanctions were imposed, arguing the company showed a “reckless disregard” for the sanctions. The company called the fine “capricious” and appealed the decision.
According to Reuters, the sanctions have slowed down work on a project by Exxon and Rosneft on a major discovery in the Kara Sea, located above the Arctic Circle. Exxon and Rosneft spokesmen said Exxon’s exit from projects will not impact the Sakhalin project located on the eastern coast of Russia.
The 200,000 barrels per day (b/d) Sakhalin-1 project is operated under a Produce Sharing Agreement which began in the mid-1990s.
Rosneft spokesman Mikhail Leontyev told Reuters that the US oil giant will be forced to take what he calls a predictable decision. In a financial reporting on Wednesday, Exxon recorded a fourth quarter after-tax loss of $2o0 million and the company says the loss is due to the exit plan.
“It (Exxon) will suffer serious losses as a result of this (decision),” said Leontyev.
Despite the company’s exit from the joint ventures, which will formally begin this year, Rosneft says it will complete the projects on its own.
“The work with Exxon on projects, which are not subject to sanctions, as well as on future projects, will continue,” Rosneft said.
Reuters reports that the resources at the projects Exxon is leaving total 12.3 billion tonnes of oil and gas condensate and 15.2 trillion cubic metres of gas.