Statoil May Have to End Rosneft Ties on Sanctions, Analysts Say

Statoil ASA (STL), Norway’s biggest energy company, may be forced to terminate an agreement for oil exploration with OAO Rosneft (ROSN) because of escalating European and U.S. sanctions against Russia, analysts said.

“There’s absolutely a risk,” analyst Christian Yggeseth of Arctic Securities ASA said today in a phone interview from Oslo. “If they don’t follow up on commitments, it would be natural for the deal to be canceled.”

Statoil has signed accords since 2012 with Russia’s biggest oil company, also a target of bans, to explore offshore blocks in the Barents Sea and the Sea of Okhotsk and for pilot projects for heavy oil in Siberia and shale oil in the Samara region. Rosneft also has agreements for offshore exploration with Exxon Mobil Corp. (XOM) and Eni SpA. (ENI)

There’s a more than 50 percent chance that the Statoil-Rosneft deal will either be canceled or modified, Swedbank First Securities analyst Teodor Sveen Nilsen said in an e-mail.

The EU and the U.S. last month stepped up sanctions against Russia over its support of separatists in the eastern part of Ukraine, where a Malaysian Airlines flight carrying 298 people was shot down July 17. EU sanctions prohibit the export of technology intended for use in deep-water, Arctic and shale oil exploration and production, while U.S. sanctions directly affect Rosneft’s access to its financial markets.

Well Plans

Statoil and Rosneft are planning the first of three wells in North Komsomolskoye in West Siberia next year, the Norwegian state-controlled company said in April. The two explorers have also committed to drill six offshore wells in the Russian Arctic between 2016 and 2021 that are to be fully financed by the Stavanger, Norway-based company.

“If the sanctions are still in place in a year, when they plan to start drilling, there won’t be any drilling,” said analyst John Olaisen at ABG Sundal Collier Holding ASA. “There would be too much uncertainty about future projects. If they make a discovery, would they be able to keep it? And how would Rosneft be able to finance its share?”

Initiated projects are progressing according to plan and it’s too early to say whether or how sanctions will affect activities in Russia, Statoil spokesman Knut Rostad said.

“We’ll have to spend some time to understand the details and what they potentially mean for us,” he said by phone.

While Norway isn’t a member of the EU, it signaled this week it will probably follow the European sanctions. EU and U.S. sanctions would be relevant for Statoil in any event, Rostad said.

Much of the equipment under EU restrictions isn’t “critical,” Rosneft said today in a statement. The company can find alternatives in Russia and outside Europe, although reorganizing supplies will “take some time,” it said.

Much of the equipment under EU restrictions isn’t “critical,” Rosneft said in a statement today. The company can find alternatives in Russia and outside Europe, though reorganizing suppliers will “take some time,” it said.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Indranil Ghosh, Alex Devine

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