News / Economy

    Exxon Oil Rig Enters Uncharted Waters of Russian Political Storm

    FILE - A sign for the ExxonMobil refinery in Torrance, California, Jan. 30, 2012
    FILE - A sign for the ExxonMobil refinery in Torrance, California, Jan. 30, 2012
    Reuters

    An ordinary, long-scheduled journey of an oil drilling rig into Arctic waters is turning into a major political exercise, attracting international scrutiny and creating a dilemma for ExxonMobil Corp.

    Exxon, the top U.S. oil major and the world's most valued oil company, is bringing the rig, called West Alpha, from Norway to the Russian Arctic. It is hoping for a major discovery in the Kara Sea with Russian partner Rosneft Oil Co.

    The journey has begun just as the United States has slapped the toughest sanctions yet on Russia, including on Rosneft, over escalating violence in Ukraine. Further sanctions are likely after the downing of a Malaysia Airlines' plane in eastern Ukraine.

    The joint activity does not necessarily break the latest sanctions, but the rig's mission could be seen a sign that a top U.S. company is backing Moscow.

    Arctic exploration costs can exceed hundreds of millions of dollars. The Exxon-Rosneft drilling campaign, therefore, will also show how effective the latest sanctions prove to be in prohibiting U.S. firms from providing new long-term debt or equity to Rosneft.

    “It's a bit discordant with the message that the United States government is trying to send, having this long-planned summer drilling season go ahead right now,” said Elizabeth Rosenberg, energy program director at the Center for a New American Security think-tank and a former sanctions adviser at the Treasury Department.

    From a broader perspective, the project will indicate the resolve of major oil companies to continue dealing with Russia even as conflict escalates with the West.

    “We are evaluating the impact of the sanctions and don't have anything further at this time,” Exxon said in emailed comments.

    For the Kremlin, the project will become a balancing act between achieving its goals of raising oil output and government revenue and the risk of pushing foreign partners so hard that they run up against the sanctions regime.

    West Alpha belongs to Norway-listed Seadrill, the world's biggest offshore rig firm, and Exxon has contracted the rig until the third quarter of 2016.

    Seadrill Chief Financial Officer Rune Magnus Lundetrae told Reuters the rig had already sailed from the Norwegian yard and was on its way to the Kara Sea.

    “She's on her way up now from the yard where she's been preparing for that activity ... Drilling will start within the third quarter. We're in early Q3 now, so we're talking about this quarter,” he said.

    Lundetrae declined to discuss the latest U.S. sanctions: “We are preparing to drill and will deal with situations as they occur.”

    Satellite tracking showed the rig was heading towards Russia along the Norwegian coast.

    Spillover Effects

    The latest U.S. sanctions do not necessarily aim to hit projects between Rosneft and foreign partners.

    President Barack Obama said the sanctions were “designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies.”

    But Obama also warned that additional steps were on the table if Russia does not change course in eastern Ukraine - a signal that joint ventures with U.S. companies could face risks.

    Exxon has shown in the past it can take decisions that do not fully align with U.S. policies.

    In one recent example, Exxon's decided to invest in Iraq's semi-autonomous Kurdistan region two years ago despite anger from the central government in Baghdad and opposition from Washington.

    Still, observers should not look at the long-planned Exxon Arctic project as an indication that companies are not wary about the sanctions, or that they will not have an effect, said Rosenberg.

    “You'd be missing the point if you took one drilling season, what is ultimately at this point a pretty limited joint venture activity, and weighed it quite heavily against the president of the United States,” she said.

    The West Alpha journey also will be watched by environmentalists, who call for a ban on offshore drilling in the Arctic. Earlier this year, Greenpeace climbers scaled the West Alpha rig.

    Truls Gulowsen, head of Greenpeace Norway, could not say whether Greenpeace was planning another protest.  

    You May Like

    In Britain, The Sun Still Doesn’t Shine

    Invoking Spitfires and Merlin, Leave voters insist country can be great again, following surprising 'Brexit' vote last week

    Double Wave of Suicide Bombings Puts Lebanon, Refugees on Edge

    Following suicide bombings in Christian town of Al-Qaa, on Lebanon's northeast border with Syria, fears of further bombings have risen

    US Senators Warned on Zika After Failing to Pass Funding

    Zika threats and challenges, as well as issues of contraception and vaccines, spelled out as lawmakers point fingers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeasti
    X
    June 29, 2016 6:15 PM
    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeast

    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Clinton Leads Trump, But Many Voters Don't Like Either

    In the U.S. presidential race, most recent polls show Democrat Hillary Clinton with a steady lead over Republican Donald Trump as both presumptive party nominees prepare for their party conventions next month. Trump’s disapproval ratings have risen in some recent surveys, but Clinton also suffers from high negative ratings, suggesting both candidates have a lot of work to do to improve their images before the November election. VOA National correspondent Jim Malone has more from Washington.
    Video

    Video New US Ambassador to Somalia Faces Heavy Challenges

    The new U.S. envoy to Somalia, who was sworn into office Monday, will be the first American ambassador to that nation in 25 years. He will take up his post as Somalia faces a number of crucial issues, including insecurity, an upcoming election, and the potential closure of the Dadaab refugee camp in Kenya. VOA’s Jill Craig asked Somalis living in Kenya’s capital city Nairobi how they feel about the U.S. finally installing a new ambassador.
    Video

    Video At National Zoo, Captivating Animal Sculptures Illustrate Tragedy of Ocean Pollution

    The National Zoo in Washington, D.C., is home to about 1,800 animals, representing 300 species. But throughout the summer, visitors can also see other kinds of creatures there. They are larger-than-life animal sculptures that speak volumes about a global issue — the massive plastic pollution in our oceans. VOA's June Soh takes us to the zoo's special exhibit, called Washed Ashore: Art to Save the Sea.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9017
    JPY
    USD
    102.66
    GBP
    USD
    0.7443
    CAD
    USD
    1.2990
    INR
    USD
    67.600

    Rates may not be current.