By Selina Williams and Daniel Gilbert
France's Total S.A. said it was seeking alternative nondollar
financing for a major gas project in Russia days after Exxon Mobil
confirmed it would stop drilling in the Russian Arctic, as major
oil companies start to feel the bite of western sanctions on their
expansion plans there.
While oil majors have played down the impact of western
sanctions on assets already producing oil and gas in Russia, the
comments from Total and Exxon Mobil show how projects key to their
future growth are now being directly affected.
Exxon Mobil, based in Irving, Texas, said it had obtained a
license from the U.S. government to wind down drilling of its first
well in the Kara Sea, where it has an exploration joint venture
with state-owned OAO Rosneft, struck in 2011, that the companies
estimate will cost at least $3.2 billion.
Exxon didn't make clear whether it would take longer than the
Sept. 26 deadline to halt operations mandated by the latest round
of sanctions, which bar U.S. companies from collaborating with
Russian partners to drill for oil in the Arctic or in shale-rock
formations.
An Exxon spokesman didn't immediately say whether the license
would give the company additional time. A spokesperson for the U.S.
Treasury Dept., which administers sanctions, said it doesn't
comment on license applications.
Meanwhile Total's Chief Financial Officer Patrick de la
Chevardière said on Monday the company was looking at financing its
share in the $27 billion Yamal liquefied natural-gas project in
Chinese yuan, Russian rubles and euros.
"The effect of U.S. sanctions was that Yamal LNG will be
prevented from raising any dollar financing," Mr. de la Chevardière
told a news briefing in London. Total is developing the onshore
Yamal project in Russia's Arctic north with independent Russian gas
producer OAO Novatek and China's CNPC.
Sanctions on Russia's resource sector were designed to punish
Russia for its aggression in Ukraine. U.S. officials have said they
could be lifted if they see evidence that the Kremlin is complying
with the terms of a cease-fire signed earlier this month.
But if the measures persist, they could imperil Exxon's joint
venture with OAO Rosneft and one of its biggest opportunities to
find new supplies of oil and gas.
Total is in turn relying on Yamal, which is expected to start up
in 2017, to provide a big chunk of the French's company's future
production growth. Yamal is estimated to hold proven reserves of
800 million barrels of oil equivalent.
U.S. and EU sanctions imposed so far include financing limits on
some banks and energy companies and restrictions on technology
transfers and equipment to develop deep-water and offshore Arctic
oil and onshore shale oil. They come on top of asset freezes and
travel bans on dozens of officials and tycoons, including one of
Novatek's biggest shareholders-- Gennady Timchenko.
Yamal is a complex project requiring western technology that
Russia lacks, such as the liquefaction plant that will supercool
the gas into liquid form so it can be transported around the world
in giant tankers.
The project has so far managed to proceed despite the sanctions
because the companies involved have been able to pursue other
avenues for finance.
Russia relies on oil and gas to provide the bulk of its revenues
and Yamal is vital to Kremlin plans to increase the country's share
in the fast-growing global LNG market.
Write to Selina Williams at selina.williams@wsj.com and Daniel
Gilbert at daniel.gilbert@wsj.com