By Selina Williams
LONDON--The U.S. Monday added Igor Sechin, a Putin ally and head
of state-controlled oil giant Rosneft, to its sanctions list,
complicating the delicate dance U.S. and European energy giants
have had to engage in amid the standoff between the West and
Moscow.
The most exposed company is U.K. oil company BP PLC, which has a
19.75% stake in Rosneft. Last year, it sold its stake in its
previous Russian joint venture for $11.8 billion in cash plus
shares in the state-controlled oil giant. Mr. Sechin owns 0.13% of
Rosneft, making him the company's third-largest shareholder after
the Russian state and BP.
BP also gained a seat on Rosneft's nine-member board, currently
held by BP Chief Executive Bob Dudley. Under the terms of the U.S.
sanctions, BP wouldn't be barred from dealing with Rosneft, though
Mr Dudley, an American citizen, would be unable to have direct
business dealings with Mr. Sechin.
"U.S. persons cannot do business with sanctioned people or
entities," a U.S. treasury spokeswoman said.
BP said Monday that it remained committed to its investment and
intended to be "a successful, long-term investor in Russia."
"We are considering today's announcement to see specifically
what this may mean for BP. We will, of course, comply with all
relevant sanctions, " the company said.
Mr. Dudley said earlier this month that BP would continue to
seek ways of developing its business in Russia even as tensions
grow over the crisis in Ukraine. Its share of Rosneft's proven
reserves already amounts to 5 billion barrels of oil and 9 trillion
cubic feet of gas, while Rosneft contributed $2.2 billion to BP's
earnings last year. BP's shares fell 1.0% on Monday, while
Rosneft's shares fell 1.7% in Moscow.
Mr. Sechin himself seemed unperturbed by the sanctions. "I view
Washington's latest steps as a high assessment of the effectiveness
of our [Rosneft's] work and assure our shareholders and partners,
including American ones, that this effectiveness won't be reduced
and our cooperation won't suffer but will develop dynamically," he
said in a statement.
While BP is the largest foreign investor in Russia's oil sector,
other major oil companies have increased their exposure there in
recent years.
Hunting for oil in Russia is one of the most promising global
prospects for Exxon Mobil Corp. The company struck a deal with
Rosneft in 2011, signed in the presence of Russian President
Vladimir Putin, to explore Russia's Arctic seas and shale in
western Siberia, which could hold billions of barrels of crude. The
agreement has been expanded to include the Black Sea and a swath of
the Arctic bigger than Texas.
Exxon will foot most of the more than $3.2 billion in
exploration costs and a majority of the costs for a $450 million
Arctic research facility in St. Petersburg.
Exxon doesn't disclose how much oil and gas it pumps in Russia,
but analysts at Raymond James estimate the oil behemoth's
operations there accounted for 6% of its production last year. That
output is set to rise this year with an expansion to its project on
Sakhalin Island, Russia's largest offshore oil and gas
facility.
Rosneft's board on Monday approved the development of two Arctic
fields, Russian media reported.
Last year, Rosneft said it acquired a 30% interest in 20 blocks
leased by Exxon in the Gulf of Mexico's deep waters, though Exxon
remained the active partner.
An Exxon spokesman declined to comment Monday on the sanctions
against Mr. Sechin.
In March, Exxon Chief Executive Rex Tillerson said the company's
progress in Russia was on track but could be affected by government
action. "Other than things like sanctions, which have affected us
before, we do not see any new challenges out of the current
situation," he said at the company's annual meeting for analysts in
New York.
Royal Dutch Shell PLC has a small stake in a Caspian oil
pipeline in a joint venture with Rosneft. And Norwegian oil company
Statoil ASA has joint projects with Rosneft in the Russian part of
the Barents Sea and the Sea of Okhotsk. Its chief executive, Helge
Lund, met with Mr. Sechin in Norway as recently as March 31.
Besides major oil companies, commodities trading giants Glencore
Xstrata PLC, Vitol Group and Trafigura Beheer BV all have close
ties with Rosneft. Last year, the three firms all agreed long-term
oil supply deals with Rosneft that included billions of dollars in
prepayments to the Russian state-owned company. In addition,
Glencore Xstrata lent Rosneft $500 million.
A Glencore spokesman declined to comment on what impact, if any,
personal sanctions against Mr. Sechin would have on their
business.
A Trafigura spokeswoman said the company was monitoring the
situation but did "not believe this move has any impact on our
existing business with Rosneft." A spokeswoman for Vitol said the
company "always complies with all sanctions."
Alexis Flynn, Sarah Kent and Daniel Gilbert contributed to this
article.
Write to Selina Williams at selina.williams@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires