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US oil industry worries over new Russia sanctions

05 Jul 2017 20:46 (+01:00 GMT)
US oil industry worries over new Russia sanctions

Washington, 5 July (Argus) — Expanding the scope of sanctions on Russia's oil and natural gas sector will make it harder for US companies to compete with their foreign competitors, US industry group American Petroleum Institute (API) said.

The US Senate last month overwhelmingly approved a bill that would make it harder for President Donald Trump's administration to lift existing sanctions that prohibit the provision of shale, deepwater and Arctic drilling equipment and technology to Russian oil companies. The bill, now under consideration in the House of Representatives, also would require the administration to penalize investors in Russian oil and gas upstream and midstream projects, including the proposed Nord Stream 2 natural gas pipeline to Europe.

The bill has far-reaching impacts to a variety of companies and industries and has the potential to penalize US interests across the globe, the API said.

And ExxonMobil, which in 2014 had to stop drilling activities at a Kara sea joint venture with Russian state-controlled Rosneft, said it is concerned about a provision that would block US companies from working with Russian companies placed on the US sanctions list on oil projects in deepwater, Arctic and shale exploration anywhere in the world. The current sanctions regime limits that ban to Russia.

The wide scope of the proposed legislation would push out US companies from any energy project in the world in which a Russian entity is involved, the API said. Such a ban would allow oil companies outside the US to gain competitive advantages, it said.

Exxon said it had no position on whether there should be sanctions. "It is up to policymakers to decide whether to impose sanctions." But Exxon said it provided members of Congress and their staff with information on how the sanctions bill would affect US companies and their workers.

The House has yet to schedule a vote on the bill. An issue that House leaders described as procedural prevented its immediate approval by the House of Representatives, but the Senate corrected the issue in a vote on 29 June. House leaders broadly support the bill, but it faces competing priorities in the three weeks-long legislative session before the August recess.

The administration said it wants to preserve the flexibility to ratchet down the sanctions regime in response to changing political realities. "Our main concern is how the Congress crafts the sanctions, and any potential erosion of the executive branch's authority to implement them," the White House said.

The bill has drawn criticism from Germany and Austria, where natural gas utilities are major customers for Gazprom's 55bn m³/yr Nord Stream 2 natural gas pipeline project.

Trump is scheduled to hold his first face-to-face meeting with Russian president Vladimir Putin on 7 July, on the sidelines of the G20 summit of major economies in Hamburg, Germany.

The White House yesterday described the Trump-Putin summit as a "normal bilateral meeting," but did not disclose an agenda. Moscow said it was ready for the meeting in any format that will suit the US. "We are ready. It is not up to us," Russian foreign minister Sergey Lavrov said yesterday.

Trump prior to meeting Putin will visit Poland on 6 July to express continued US support for LNG terminals, pipeline infrastructure and other projects reducing the overwhelming dependence on Russian natural gas of European countries in Russia's periphery. Trump during a meeting with leaders of 12 eastern and central European countries in Warsaw also is expected to hail US LNG supply as a viable alternative to Russian pipeline gas supply into the region.

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