Sanctions gap lets Western firms tap Russian frontier oil
OSLO/MOSCOW: A gap in US sanctions allows Western companies to help Russia develop some of its most technically challenging oil reserves, and risks undermining the broad aim of the measures, a Reuters investigation has found.
When Washington imposed the sanctions on Moscow in 2014 over its annexation of Crimea and role in the Ukraine conflict, the US Treasury said it wanted to “impede Russia’s ability to develop socalled frontier or unconventional oil resources”.
The restrictions were designed to prevent Russia countering declining output from conventional wells by tapping these hard-torecover reserves which require newer extraction techniques like fracking, an area where it relies on Western technology.
Three years on, however, Norway’s Statoil is helping Kremlin oil giant Rosneft develop unconventional resources while British major BP is considering a similar project.
Statoil is not breaching sanctions, nor would BP be doing so.
The United States, having itself experienced a spike in oil output from tapping shale rock over the past decade, worded the measures to prohibit Western companies from helping Russia develop ‘shale reservoirs’.
It did not mention other lesserknown forms of unconventional deposits.
The EU followed suit by banning cooperation on projects “located in shale formations by way of hydraulic fracturing”.
Rosneft and its Western partners are not targeting shale but are instead drilling to reach oil reserves known as limestone – deeper reservoirs that lie beneath shale oil.
Geologists are unanimous, though, that even though shale and limestone formations are different geological structures, they both constitute unconventional oil resources. Both are extracted through hydraulic fracturing, or fracking.
Experts say limestone deposits in Russia’s Domanik formation, where Statoil and Rosneft are drilling, could yield billions of barrels of crude. — Reuters