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Former BP CEO Warns "Sanctions Will Bite West" As US Gives Majors 14 Days To Wind Down Russian Activities
For the past six months, even as Obama and the EU were laying harsher sanctions on the Kremlin, one group of companies had managed to sneak by unscathed and largely avoided being impacted by Russia's isolation by the West: the world's biggest E&P companies, as explained in detail over a month ago in "Exxon Drilling Russian Arctic Shows Sanction Lack Bite."
All that is about to change, because while sanctions until this moment had been largely intended to specifically allow energy companies to continue their status quo in Russia, as of this Friday, it is precisely the E&Ps that are being targeted, as we noted on Friday, and as Reuters follows up today, reporting that some of the world's largest companies, namely Exxon, Anglo-Dutch Royal Dutch Shell, Norway's Statoil and Italian ENI, will have to be put their Russian projects on hold: to wit, the companies will have 14 days to wind-down activities.
From Reuters:
Projects now in jeopardy include a landmark drilling program by U.S. giant Exxon Mobil in the Russian Arctic that started in August as part of a joint venture with the Kremlin's oil champion Rosneft.
Now this and dozens of other projects that Rosneft and Gazprom Neft agreed with Exxon, Anglo-Dutch Royal Dutch Shell, Norway's Statoil and Italian ENI will have to be put on hold.
"Cutting off U.S. and E.U. sources of technology and services and goods for those projects makes it impossible, or at least extraordinarily difficult for these projects to continue...There are not ready substitutes elsewhere," a senior U.S. administration official told a briefing on Friday.
The companies will have 14 days to wind-down activities.
And just to make sure that there is once again major Obama administration-induced chaos, and thus yet another collapse in global trade, when it comes to the core covenant of capitalism, namely the sanctity of contracts from government intervention, Reuters cites a US official who said that "there is no contract sanctity."
Valery Nesterov from Russian state bank Sberbank, which was also sanctioned by the EU and the United States, foresaw serious complications. "What is really worrying are sanctions on tight oil. Russian companies haven't invested enough in research and technology. They were heavily relying on Western technologies and now it is simply too late," he said.
That may well be, but at the end of the day, Russia still has all the leverage in the long-run: "key among Russian tight oil reserves are the Bazhenov formations, which are located beneath existing mature west Siberian fields. They are estimated to contain as much as a trillion barrels of oil - four times the reserves of Saudi Arabia. Rosneft and Gazprom Neft are working on Bazhenov with Exxon and Shell.
"When we learnt about the first sanctions we decided to speed up work on all fronts to minimize the damage to the company," said a Rosneft source. Rosneft's chief Igor Sechin, a close ally of Putin, said earlier this month the company had approved a program to replace all Western technology in the medium-term.
But while expansion may or may not be hindered, and China certainly will have something to say about the expansion of Russian oil fields in the coming months - and bring its checkbook and smartest heads when it does - one thing that will certainly happen is that once again the West will prove too smart for its own good.
Enter Tony Hayward, the infamous former CEO of BP (and current Chairman of Glencore) who may have been disgraced by his handling of the Macondo spill but his comments on how the Russian sanctions will play out, are spot on.
As the FT reported moments ago, "US and EU sanctions against Moscow are in danger of turning round and biting the west by constraining global oil supply and pushing up prices in coming years, the former chief executive of BP has warned."
Tony Hayward said that cutting off capital markets from Russia’s energy groups, which would eventually lead to less investment in Russian oil production, was likely to damage long-term supply. He said the US shale boom had obscured the growing risks to the world’s supply picture, but its effect would wear off, leaving the global economy dangerously exposed to potential disruptions in the flow of oil.
“The world has been lulled into a false sense of security because of what’s going on in the US,” Mr Hayward said in an interview with the Financial Times, referring to the shale boom that has driven a 60 per cent increase in US crude output since 2008. But he asked: “When US supply peaks, where will the new supply come from?”
But why worry: after all surely nobody in the Obama administration can possibly conceive that the 8000+ producing wells in the Bakken shale alone, up from 1000 in 2008, could possibly go dry at some/any point in the future...
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Isn't the whole point to start a war? I don't even see any point for the sanctions besides that.
Blame Russia for Economic problems. Idiots-in-chief can point fingers at Putin thus postponing the great Lamppost party.
They want Putin to fire the first shot of WWIII... Justification for what is to come, be that as it may...
Eventually he's going to tire of these games check the thermometer and begin to turn the big wheel on the valve clockwise until loud squeaking noises of surrender come from Europe...
Here's the Real Deal
The West just made it impossible for a Western Company to do Biz in Russia.
If you do Biz in Russia you must do what?
Abandon it.
Obama just made a Gift of all Western Businesses on Russia to The Russian Oligarchs.
Fast times, Barack
Real swift
The Oligarchs get it and didn't even need to Expropriate of Nationalize the shit. Obie Gave it to Them
Oil is rigged
Blocking Arctic drilling with sanctions against oil majors operating in Russia for THIS reason is unassailable in the courts, and does conserve precious oil and CO2 for future generations, should the human species survive Ebola.
Brilliant(ish) really, if that's what they were trying for.
I sense a disturbance in the force. Big Oil's probably rather pissed off at Big-Money & Big-MIC.
PCR had an interesting thought..
“All Russian gas must be paid for in rubles”.
Rubles
Rubles or Yuan
Rubles or Yuan or Gold
Or Rubles or Yuan linked to Gold.
Game Over
I been saying for months this was going to be the final "line in the sand" against which the West can do NOTHING
The irony is the west pushed Putin into it.
He really didn't want to do it now , too much damage to his allies, but after six months
of prewarning its now,ready or not, fuck the petrodollar and the devil take the hindmost.
I still think it becomes official at the G20 meet in December.From now until then is going
to be an exciting ride.
I think is a bit other way around, because Putin and his clique want a strong independent sovereign Russia. They know the Western/US war pattern, so they prepared countermeasures beforehand and they waited to implement these measures and thus strengthen themselves.
"They are estimated to contain as much as a trillion barrels of oil - four times the reserves of Saudi Arabia." Well this for sure this cannot be true, this planet is running out of every resource, we are told this continuously,. U believe it, just like you should believe 8th century goat fuckers who cannot build an AK-47 are an existential threat we need to bomb them always and forever, right... Watch the resource scarcers pivot on their birkenstocks to "ur killin Gaia"...
a) Just because it's there doesn't mean it will be any easier to extract than that crap in the shelf off of Brazil
b) Even 1 trillion barrels won't mean shit if 2B Chinese and Indians decide they wanna drive Hummers because they have little dicks too
May as well be, seeing as sanctions are generally regarded as an "Act of War":
http://www.informationclearinghouse.info/article32910.htm
http://www.presstv.com/detail/2014/04/29/360604/us-sanctions-on-russia-act-of-war-paul/
http://www.lewrockwell.com/2014/03/no_author/sanctions-are-an-act-of-war/
But not according to Wikipedia, whose contributors regard them as "legal barriers to trade". http://en.wikipedia.org/wiki/Embargo
HOWEVER, the the rumblings ("Plans") within the US Administration to exclude Russia from the SWIFT mechanism would constitute an embargo, and under International Law, that IS regarded as a true "Act of War"; an act that would clearly and legally permit Russia to "point the finger" at the US and their allies, as instigators of any consequent formal conflict.
So, "The US Started it, Russia will finish it". Seems a good time to see how Russia has "finished" former conflicts . . . . .
Depends if the history books are written in Russian or English.
For the cost of very little short term pain, Russia gets a lot of long term gain from this.
Right booboo, just like the 1990's sanctions on Iraq turned that country into an idyllic desert oasis. If sanctions hold up and Putin decides to follow the same policy as Saddam Hussein did, the real gain will be tens of thousands of Russians dead by starvation.
"But others argue that the fundamental reason Iraq is in such terrible shape is not Hussein's brutality but rather the comprehensive regime of economic sanctions that the United Nations Security Council imposed on Iraq for almost 13 years, sharply restricting all foreign trade. It was these sanctions, they claim, that brought this once rich country to its knees".
From: http://www.nytimes.com/2003/07/27/magazine/27SANCTIONS.html?src=pm&pagew...
I bet you typed "sanctions" in Google, read 1st paragraph on first link and decided to enlighten us all with your knowledge.
One word sanction fan MOTM, CHINA.. They do not like us amd share a border with Putin, Iraq not so much.
China loves the US, it holds the most US treasuries of any country in the world. What has border sharing to do with it? Iraq shares a border with Saudi Arabia, world largest petroleum producer, not of much help during sanction time.
No, I actually did my homework, and it's not stated as fact but as one of possible outcomes based on past experiences, will add disclaimer next time for all the hypersensitive types op ZH. So enlighten us with your own analysis on this particular issue, i.e. trade/financial sanctions on Russia.
You did not do your homework you spewed, you cannot isolate economically the largest country in the world especially as it possesses the largest amount of world blood supply (oil). We may try to control the world and yes we have the euro weenies by the balls but Asia and Russia have other ideas.. wake up..
Sure, Russia is large by surface, however Russia's GDP is hardly bigger than that of Italy. Regarding oil/gas reserves, it has less than 7% of the reserves of OPEC countries. If Russia would implode tomorrow, the world would continue to exist. They surely can be isolated, already planning to cover the cost of sanctions by targeting pension funds. Good luck with that! http://www.reuters.com/article/2014/09/15/russia-budget-crisis-idUSL6N0R...
Look ar an atlas before you make an even bigger fool of yourself.
Try tens of thousands of Europeans dead from exposure.
Sanctions rarely are a deterrent and are useless in changing behavior. What they do is allow time for market makers to place their bets on the crooked roulette table after the ball has dropped onto the colored number. They shake out the dumb money for the Croupier or the U.S. in this case and buy time and distract the sheep from the farmer corking them.
Sanctions, like any other barrier to free trade (taxes, tarriffs, regulations, etc.) only divert the flow of commerce into pathways that ultimately circumvent the barrier. If there is a demand, it will be supplied.
http://mid.ru/brp_4.nsf/0/FEF8F7E49F212B9744257D510036F218
Russian Foreign Ministry on the statement by the President of the European Council Herman Van Rompuy on further EU restrictive measures against Russia
2111-11-09-2014We have the following to say regarding a statement by President of the European Council Herman Van Rompuy on 11 September this year on the adoption of a new package of anti-Russian sanctions.
By taking this step, the European Union has made its choice against a peaceful settlement of the internal crisis in Ukraine, which all responsible forces in Europe should have supported instead.
Brussels and the leaders of the EU member-countries now need to give a clear answer to their citizens as to why they are putting them under the risk of confrontation, economic stagnation and unemployment.
Give the people a chance for peace.
11 September 2014That red line on the shale play graph.......that's your Red Queen.
my co-worker's step-aunt makes $76 /hour on the laptop . She has been fired from work for nine months but last month her payment was $16491 just working on the laptop for a few hours. Get More Information... www.payvalt.com
So $76 / hour is the going rate for webcam porn these days?
Neocons dont care, they just have case of red ass for russia. Rest is irrelevent
I really thought the NeoLibs would have backed the NeoCons off by now.
They had Russia with the hook in it's mouth... subserviant to US dollar hegemony with hundreds of billions of dollars of sovereignty crushing debt injected into it along with control of stategic oil producing asssets and then THIS shit keeps happening.
Either this is a brilliant Obama plan I can't even begin to figure out... the Russian are somehow tricking the US and Europe into leaving their assets alone... or we are being led by a pack of mentally deficient NeoCon nutcases.
My call is "We are being led by a pack of mentally deficient NeoCon nutcases."
Exxon, BP, etal. should just ignore the sanctions & the 2 week deadline. What's gonna happen to them if they do ignore the sanctions? Nothing.
They should try it. Perhaps even sue the US under a WTO/GATT Tribunal for losses.
If not it's either Russia on it's knees or war.
Better yet, they should tell the US if they are forced to comply with the sanctions, they will shut down all of their US gas stations in 2 weeks, and that they will then wait another 2 weeks and see if there is still a government in the US. Nothing brings out pitchforks and torches in our country like lack of gasoline.
BP could still keep their gas stations open but board up the mega suger drink stations with a sign that states "Closed Due to U.S. Sanctions." and watch the cities burn.
" and then THIS shit keeps happening...."
This shit keeps happening because the objective of destroying Syria and Iran has not been met. Russia still stands in the way of Israel's divide and conquer crusade in the ME.
Obumpma is not very smart but he is no McCoccain or his boy friend Greaseham. Why then does he persist in provoking a confrontation with Russia ? The military industrial complex is strong but to damage the business of big oil ? So what do we have left ? Mother Fucker ISRAEL.
Watch how colonel Lawrence Wilkerson, former chief-of staff of Colin Powell explain how the Israeli lobby controls the decisioin-making structure in the BLACK house.
http://www.youtube.com/watch?v=N294FMDok98
I wont be as upset if the zionist 's action did not affect my investment, my money, my family's bread and butter.
Well fuck the EU and the US government.
Great sanctions ass wipes.
Russia conventional oil has peaked (self admitted by Russia). This will actually bite. Problem is it will bite everybody...
Sanctity of Contract...What a joke? Ever heard of " Force Majeure"....
"Respect my power" proclaimed by one BO..... The executive power came directly from divine...
More likely from the infernal...
ekm & tov were debating oil, banking, and the saudis on the Art C thread...and imho it feels like this set of sanctions plays somewhere through this. neither clear nor obvious but fascinating.
welcome to the human race
It is a pity that Europe is not taking the opportubnity to put the US in its place by unilaterally reversing all sanctions and letting the US realise thant is no longer hegemon anywhere except in its own mind.
All Europe has to do is negotiate a realistic, fair and lasting solution to the Ukraine crisis.
I never thought I would see the day that Russia would gain territory without firing a shot while America has never ceased firing shots and yet never been able to gain any territory or friends. Just enemies.
Envy of Russian resources and greed for control and profiting is what is driving all this and any pretence that this is about controlling the Russian threat of military expansion is a lot of hog wash.
Why do you think the bigger powers in Europe would have changed? They've been competing for influence amongst themselves for hundreds of years. Now they are at a direct confrontation with Russia. Do you just expect them to let Russia, a tiny economy, use its natural resource leverage to trample on them? No Sir, that's not how it works. They would rather be first in a small village in Gaul than second in Rome. Come what may, Russia will submit. If it takes until Putin is gone, so be it.
You obviously know nothing of the Russian world or it's mindset. Your wishful thinking will not happen even in the wests wildest dreams, Zbig be dammed.
They've been vassal states of the U.S. for 70+ years (longer in some cases).
Fixed it for ya'.
NSA has portfolios on each and every one, their weaknesses and proclivities, they will sacrifice their children on a fire before their political careers..
The decision-making structure of the government of both the US and EU are heavily influenced by Israel lobbies.
http://www.globalresearch.ca/pro-israel-lobby-ensures-israeli-terrorist-...
If the western O&G majors cannot deliver on their exploration commitments, their existing production shares will be at risk. Time for S&P to rebalance and preserve some semblance of 2000.
A view from the Russian side. They know all the ins and outs of 'sanction busting'. Time to go short on Schlumberger and other oilfield equipment suppliers?
Updated 1:20 a.m. Moscow Time
MOSCOW, September 15 (RIA Novosti) - Sectoral sanctions imposed on Russia by the European Union and the United States fail to inflict a severe damage on Gazprom Neft, according to Vadim Yakovlev, deputy chairman of the Management Board and first deputy CEO.
"As for the previously implemented sanctions, there is no real damage to our company. There are no cases when we would have to suspend some of our projects, and there are no situations, in which our operations would have to halt. Yes, there are certain difficulties. Our suppliers are forced to apply for authorization documents. It creates certain delays, and there are a small number of cases when the delivery of non-crucial equipment has been refused. Usually, we have managed to find alternative ways," he said.
Speaking of the new round of sanctions introduced on September 12, Yakovlev said that the company's main partners did not feel a big impact of those.
"Judging by talks with our main partners, they do not feel the influence [of sanctions]. What our partners do is they also choose the path of localization, meaning the services are provided by Russian staff of oilfield companies," he added.
The first deputy CEO also noted that the sanctions have given Gazprom Neft a reason to work on import substitution.
"In terms of our work and our future, we intend to work on import substitution, localization. It concerns our current requirements, as well as our future projects," Yakovlev said
One more point. Had someone like deGaulle continued to be around when he died, who would continue to insist on gold as payment, the parasitic and evil military expansion as well as money printing of the US over the last 50 years would never have manifested themselves.
Unfortunately the world has allowed the US to turn into a self righteous monster.
In the 17th Chapter of St Luke it is written: “the Kingdom of God is within man” - not one man nor a group of men, but in all men! In you! You, the people have the power - the power to create machines. The power to create happiness! You, the people, have the power to make this life free and beautiful, to make this life a wonderful adventure.
.
.
Except for one thing:
F(alse)
E(xpectations)
A(ppearing)
R(eal!)
Peak Extortion.
The chart alone could have been posted without comment
It looks like a massive wave about to come crashing down
"US and EU sanctions against Moscow are in danger of turning round and biting the west by constraining global oil supply and pushing up prices in coming years, the former chief executive of BP has warned."
Less USD demand from BRICS trading requires higher oil prices so that Saudi oil trading compensates the shortfall.
Also more trade barriers in general are beneficial because they push up inflation which is what we need to deleverage.
Nothing to see here, please move on.
Bullish, right?
Global security alert. Shut down Goldman Sachs or die M'Fers.
Interesting graph and table.
The table tells us from January 2010 to July 2014, the range of daily oil production per well was between 122 bbls per day and 144 bbls perday.
And since January 2013 it hasn't been over 140 bbls per day once. As the older wells (6 to 8 years old) dry up, they bring down the average for all wells.
Isn't there's a whiff of desperation about drilling oil wells that produce but 135 bbls per day?
M. King Hubbert described "Peak Oil" as looking like a bell curve with a very gradual decline on the right side.
The graph seen here looks like a chart of 'peak oil' of the Bakken Shale Formation.
You may remove your heads from the sand now. Refreshments will be served.
"Isn't there's a whiff of desperation about drilling oil wells that produce but 135 bbls per day?"
Bingo!!
I am of the belief that these 'so called' wells of the Bakken aren't even wells. They are pools of oil in 'shale' or 'tight oil' formations that have formed over the eons (or longer) through geothermal activity in the erath's crust.
This is why they're drilled horizontally (not to be confused with slant drilling) using pipes with holes in them.
These 'so called' wells dry out in 6 to 8 years and, at 135 barrels a day don't appear to be under any pressure, except for what normally occurs at 3 or 4 thousand feet.
I think you might be misinterpreting the graph. What the graph seems to say is that during the periood you mention that there were between 7000-8000 wells, EACH delivering an average of between 4000-4500 bbl/day. I am open to correction on this.....
The graph seems to say that even as the number of producing wells increases, the gross production of all wells has plateaued
It's kind of of "peak oily" and indicative of how short lived these tight oil wells are.
The table tells us the same thing.
https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf
I may be wrong,Victor, but I think these larger numbers are not bbls per day, rather bbls per year.
If I'm wrong please let me know.
i pridict some major oil co. will make the big move this is the oportunity of the century
That would be Sooooo anti-American.................where can I invest?
So a vote against the Banking Elite will be to invest in Russia.....after all the banksters/Congress do what they want so can't I? I also buy Physical Gold , that is a bet against the $US. Right?
All the western companies need to do is this. Have some cronie form a Russian company, have the key employees (who know how to implement the new technology) quit their jobs at the western companies, then become contractors (not employees) to the new standin companies.
Then once all this "Russia is enemy" nonsense blows over (or blows up into nuclear war), the temporary Russian company sells their assets back to the western company on the basis and terms agreed at the beginning.
So simple.
honestann,
yes, you may be right. during the early oil plays in alberta, landmen would quit their company and claim the site themselves. if this happens in the kara sea, i don't think the temp russian company will sell their assets back to the west but remain happily ensconced in the new world.
Hmm, lessee here: Pay a tax rate of 12% to Russia, or 35% to USA -- no need for calculators or even slide rules here!
Nobody cares what Tony Hayward says. Nobody cares what Tony Hayward thinks.
This is unfolding as it should. Watch for economic conditions to improve in the other members of CIS as Western investment spills over into their economies.
NATO is set to expand East... of the Ukraine.
Sanctions are an act of war.
This is seriously funny. Project managers will now make $400,000 in Russia instead of $200,000 in Texas. Drillers too. The Chinese will come with their stolen blueprints. You can't stop technology!
The cronies will now get higher bribes. Everyone wins!
It is preferable to western jewes-and-their pretorians to invest the money into a shale gas fracking, where they incur everyyear a loss instead of investing into russian resources. Greed. And stupidity.
HomObamma wants :
Mushroom clouds all over Russia,
Capture Russian Oilfields
Enjoy.
No,Russia alerady let in the US company Exxon to drill in the arctic virgin territory. They want to play ball but Obumpma has no ball and no brain so he does what the zionist told him.
The oil flows from the Producers to the Consumers. If the Consumers are winding down the oil consumption, the Producers will have intense problems. Then the oil price will start getting lower and the Producers will see a second wave of problems. This is the reverse of Putin using, for more than 10 years, the energy leverage for political purposes in Europe.
If these Producers are able to live long enough with these problems (usually we are talking about autoritarian regimes, keeping in power by payments to the majority of a dependent population from oil profits), then the Consumer will be hit hard too by the decrease in economic activity. But the main problem for Putin now is to keep its power with a population that is getting poorer, an oligarchy that sees its travel plans abroad getting cut and an army having less resources and seeing war loses in Ukraine.
PS. Anyone who thinks that China is a solution to Russia problems should go see a head doctor.