ExxonMobil, the US oil company, is winding down its drilling campaign in the Russian Arctic, making it the biggest corporate casualty of sanctions announced by the US and EU this month, by putting its $700m project on indefinite hold.
The company said on Friday that the US Treasury had granted it a short term licence “to enable the safe and responsible winding down of operations”, but said there would be no further extensions.
It added that it would be bringing to an end all activities associated with the project, a joint venture with Russia’s Rosneft, “as safely and expeditiously as possible”.
Exxon’s announcement shows that the new round of sanctions has changed the legal basis for US and European companies seeking to work in Russia’s frontier oil areas such as the Arctic and shale formations, which are specifically targeted in the measures.
The previous round of sanctions, announced in July, did not prevent Exxon and Rosneft from starting to drill a well in Russia’s Arctic Kara Sea last month, part of a planned $700m exploration programme.
Those sanctions restricted only the export from the US of technology for Arctic and shale oil exploration. The new measures broadened that to include bans on US companies providing services or technology, with a deadline of September 26.
The sanctions, imposed as a result of what the US called “continued Russian efforts to destabilise eastern Ukraine”, raise a question mark over the future of Exxon’s strategic alliance with Rosneft, the state-controlled oil group.
Their joint ventures, valued at $3.6bn, had been seen as one of Exxon’s most promising prospects for future growth.
In a series of agreements reached during 2011-13, concluded after a similar planned arrangement between BP and Rosneft fell through, Exxon agreed to work with the Russian company in the Arctic and in the Bazhenov shale of western Siberia. It also gave Rosneft minority stakes in some assets in the Gulf of Mexico, and said the two companies would work together in US shale.