Oil Majors Tangled up in Russian Sanctions

By The Maritime Executive 04-29-2014 07:52:00

The United States has added Igor Sechin, the head of Russia's state-controlled energy major Rosneft, to its Ukraine-related sanctions list. Sechin was named in the list of seven individuals and 17 companies to be blacklisted, although Rosneft itself was not named. Sechin will be banned from entering the US, and his assets will be frozen.



BP currently holds 19.75 per cent of Rosneft shares and group chief executive, Bob Dudley, sits on Rosneft’s board and meets regularly with Sechin, who was instrumental in the tie-up between the two companies. Shell is also partnered with Rosneft in the $20 billion Sakhalin-2 development. ExxonMobil is working with Rosneft as it drills for oil in Siberia, and Statoil is working with Rosneft in the Arctic.

Rosneft’s share price has fallen as a result of the sanction. Along with Gazprom, its credit rating has also been cut. BP shares have also fallen one per cent. A BP spokesman is reported to have said: "We are committed to our investment in Rosneft, and we intend to remain a successful, long-term investor in Russia."

BP announced its financial results for the first quarter of 2014 on April 29. Underlying replacement cost profit for the quarter was $3.2 billion, compared with $2.8 billion for the previous quarter and $4.2 billion for the first quarter of 2013. BP reported an estimated underlying pre-tax replacement cost profit for Rosneft of $271 million for the quarter. This result was adversely affected by depreciation of the rouble against the US dollar. Total production of oil and gas for the quarter, including Russia, was 3.13 million barrels of oil equivalent a day (boe/d). BP’s share of Rosneft oil and gas production for the quarter was one million boe/d.