Sanction-Proof Oil Rig Beats US Policy From Cuba to Russia
(Bloomberg) -- The oil rig was built mostly in China and drilled its first well in Cuba. Now it’s delivering a victory for Russia in its fight against U.S. sanctions.
Italian oil giant Eni SpA and Russia’s state-controlled Rosneft PJSC are using the Scarabeo 9 ultra-deepwater rig to drill in water more than 2,000 meters (6,600 feet) deep in the Black Sea. It’s the first well drilled by a western company at a Russian oil project that falls squarely under U.S. sanctions imposed on the sector in 2014.
For Vladimir Putin, it’s a second energy-sector victory in a little over a week after the $27 billion Yamal liquefied natural gas project started shipping cargoes despite U.S. sanctions against its controlling shareholder.
"It is important not because of the size, but from a geopolitical perspective it is key," said Alejandro Demichelis, director at boutique investment bank Hannam & Partners. "Eni and the Italians in general have been closer to Russia than they have been to the U.S., at least in terms of oil and gas. They have always been on Putin’s side to solve problems."
Rosneft Chief Executive Officer Igor Sechin said on Monday that drilling had started on the Maria-1 well in the past few days, highlighting the “technological complexity" of the project.
Legal Loopholes
It’s also legally complex. Indeed, a request from Exxon Mobil Corp. earlier this year for a sanctions waiver to drill with Rosneft at a nearby license was rejected by the U.S. government.
For Eni to drill the well, which falls under U.S. and European sanctions targeting Russian shale, Arctic and deepwater oil development, the Italian company had to exploit a series of loopholes.
First, while European Union sanctions largely mirror those of the U.S., they do allow the "grandfathering" of projects that were agreed before sanctions were imposed.
Second, the Scarabeo 9, which is owned by Saipem SpA, is no ordinary deepwater rig. It was built mostly in China, to a Norwegian design. That means it sidesteps U.S. trade sanctions that restrict the use of U.S.-made or -designed equipment, even by non-U.S. companies.
The rig’s first outing in 2012 was to drill for Repsol SA off Cuba.
Made in China
"The Scarabeo 9 is one of the very few units in the industry which is using a technology which is not an American one," Saipem’s then CEO Pietro Franco Tali told investors before its maiden voyage to Cuba.
In a letter to the U.S. Securities and Exchange Commission in 2014, National Oilwell Varco Inc. confirmed it had sold a blow-out preventer, a key piece of high-tech kit, to Scarabeo 9 before the Cuba project. The Houston-based company said it stopped providing equipment to the rig as soon as it knew where it would be operating.
Earlier this year, the rig spent several months in port in the Canary Islands to make its towers bendable so it could pass through the Bosphorus and get to the Black Sea.
Eni and Saipem discussed the drilling campaign with the U.S. and Italian governments and received authorization to proceed, according to people familiar with the matter who asked not to be named because the talks were private.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension