Sanctions on pipelines

The House of Representatives, the lower house of the American Congress, approved a bill on Tuesday, which provides for the expansion of previously imposed sanctions against Russia. Now he will go to the Senate conciliation commission, and then - for signature to President Trump. At the end of last week, the bill was agreed by representatives of both parties in the congress - in a slightly softer version than was originally proposed. Although the final version has yet to wait, some provisions of the new bill regarding restrictions on Russian energy can already be discussed.

The bill, in particular, expands the circle of addressees of already imposed sector sanctions . So, if earlier, for example, assistance in technologies or service to enterprises controlled by companies or persons from the “sanctions” list fell under sanctions, now the projects in which the share of these companies or persons exceeds one third are prohibited. Moreover, we are talking about new projects in areas such as the development of deposits in the Arctic, on a deepwater shelf, as well as shale oil reserves.

In this case, a certain risk is rather due to the fact that the purchase of a Russian company American, despite the fact that American sanctions are valid, can have risks already for the industry as a whole

It turns out that in this part the same restrictions that operate since 2014-2015 are actually repeated? That is, the current oil production in Russia, which over the past couple of years updated the record behind the record , new sanctions, as already existing, do not affect?

Alexey Kokin , an analyst at the oil and gas industry from the financial company Uralsib:

- It seems to me that the Russian oil and gas industry, in general, has already adapted to the situation of sanctions. To some extent, restrictions on the transfer of technologies in the field of shale drilling (in Russia we are talking about geological formations similar to shale) negatively affects the development of these formations, since the potential here is very great. But the rest I do not see a fundamental difference from the previous edition ...

Vasily Tanurkov , analyst at the oil and gas sector from the Russian rating agency “Akra”:

- Apparently, these restrictions have nothing to do with the current prey. And in general, it is unlikely that they can have a significant negative impact in the future not that, say, a year or two years or more. Still, in the coming years, the main source of production growth in Russia will remain “traditional” oil, and not at all shale or “arctic”. And the projects themselves in the Arctic at current oil prices are too expensive, so even without sanctions there would be no point in developing them.

- But the production of shale oil or its analogues in Russia, as we can assume, is still cheaper than mining in the Arctic or on a deep -sea shelf ...

- The restriction for the growth of shale production in Russia is not so much the technology itself as the accumulation of experience in this area. In order to really effectively produce shale oil , you need to drill a lot of wells. And some Russian companies are already engaged in this or another. However, at current oil prices and in the conditions of the current Russian tax system there is simply no point in large -scale investments in shale oil production, ”said Vasily Tanurkov.

And in the past, this deal, let’s say, “met resistance” by the authorities, including the Federal Antimonopoly Service

A special question is new sanctions for participating in projects for the construction of new Russian export pipelines. The object of sanctions can be a company that will invest more than $ 5 million a year in such projects. In fact, we can talk about a complete ban on participation in construction, since the cost of building any large pipeline is calculated by billions of dollars, and often tens of billions. First of all, we are talking about the Northern Stream - 2 project, the second stage of the gas pipeline from Russia, laid along the bottom of the Baltic Sea to the northern coast of Germany. However, it still remains unclear to what extent new sanctions will have return, if at all possible. All the main contracts with European companies participating in the North Stream - 2 project, Gazprom seemed to have already concluded - at least judging by his statements. Given these circumstances - in what direction are the main risks for Russia see you here? The opinion of Alexei Kokin:

- The question is really very difficult ... That is, we are talking about a situation where the right to apply sanctions will be used by the US administration and, suppose, all such pipeline projects will be “authorized” ... I admit that this will not stop the construction of the Northern Stream - 2, but, on the other hand, access to foreign financing of the project can clearly be difficult, and this is an obvious potential problem. However, large European companies participate in the implementation of Gazprom projects, and for them the potential US intervention in their business creates very serious problems. Therefore, it is in terms of American sanctions regarding pipeline projects that the objections of the European Union may turn out to be the most serious, ”said Alexei Kokin.

But still, the main question is not how sanctions threaten Gazprom projects, but how much does it all arrange for the Europeans themselves? ..

This issue is now under consideration by the European Commission. The first European reaction to these plans was very sharp . In mid -June, Germany and Austria made a joint statement, in which there were such lines: “The European energy infrastructure is the work of Europe, not the United States! We decide to whom and how to supply energy to Europe, and we do it on the basis of the openness and principles of the free market” ... Vasily Tanurkov remarks:

- The construction of these Gazprom pipelines is the “closed” process. We do not know for sure whether all the contracts are really concluded, is all the money really entered? .. Based on the comments of Gazprom itself, then most likely it is. Then the construction itself, probably, is already somehow protected by these contracts-if, indeed, new sanctions do not have reverse strength. On the other hand, perhaps the sale of gas supplied through these pipelines may ultimately suffer in some way ... although there is not enough information here to draw any conclusion. But still the main question, it seems to me, is not how the sanctions threaten Gazprom’s projects, but how much does this suit the Europeans themselves? ..

Apparently, these restrictions have nothing to do with the current prey. And in general, they are unlikely to have a significant negative impact in the future not that, say, a year or two years or more

- If the Northern Stream 2 project, that is, the supply of Russian gas to Europe from the north, is still being discussed, then the project of such supplies from the south - the “Turkish stream” is already being implemented . The first tens of kilometers of the pipeline in the direction to the north-west of Turkey are laid along the bottom of the Black Sea. Is it possible to assume that the risks of both projects - from the new US sanctions - will be different? Or - rather, of the same type?

- Rather, the same type. By and large, both of these projects are in the same position, although the implementation of the "Turkish stream" has already begun ...

The restriction for the growth of shale production in Russia is not so much the technology itself as the accumulation of experience in this area. In order to really effectively produce shale oil, you need to drill a lot of wells

Literally on the same days when a new version of sanctions against Russia was agreed by both parties in the US Congress, plans were announced on a large American-Russian energy transaction. The American company Schlumberger is ready to buy 51% of the shares of the Russian oilfield company Eurasia Drilling Company. Moreover, this is the second attempt in recent years, the first, in 2015, was unsuccessful. But Schlumberger is the world's largest oilfield service company, which is largely engaged in precisely the technologies, the provision of which Russia today falls under sanctions, namely, the development of hard -to -reach deposits in the Arctic and the Shelf, as well as the shale oil reserves. Although the range of services provided by the company, including in the Russian market, is much wider ... But the very coincidence by the time of announcement of the plans of this transaction and the expansion of American sanctions against Russia makes the transaction even more remarkable. Alexey Kokin believes that the interests of Schlumberger will not suffer as a result:

- I believe that Schlumberger is primarily interested in the main business of Eurasia Drilling, that is, ground drilling. And it does not fall under sanctions, unless it is a question of shale prey. Moreover, Schlumberger has been working in Russia for a long time, including against the backdrop of existing sanctions, providing Russian companies with quite high -tech services to accompany the drilling of wells. If Schlumberger now receives a control or close to that package of Eurasia Drilling shares, then the range of services provided to it will certainly expand somewhat. However, this expansion is unlikely to lead to the fact that the activities of the American company in Russia will spread to those areas where sanctions are operating ...

Vasily Tanurkov shall have the opposite opinion:

-The deal is still not concluded, so it cannot be completely ruled out that it can somehow still fall under the sanctions. But there is another side of the matter. Eurasia Drilling is a very large contractor of Russian oil companies such as Lukoil, Rosneft or Gazprom Neft. And in the past, this deal, let’s say, “met resistance” by the authorities, including the Federal Antimonopoly Service. And in the conditions when the sanctions are expanding, the transaction to sell this company to the American investor, according to the same logic, is unlikely to be able to guarantee its uninterrupted work in the future 100%.

I admit that this will not stop the construction of the Northern Stream - 2, but, on the other hand, access to foreign financing of the project can clearly be difficult

- That is, do you believe that the transaction does not threaten the expansion of American sanctions, but the position of the Russian authorities?

-The problem is that precisely, due to sanctions, this transaction may have risks for the largest Russian companies, very significant for both the budget and the economy as a whole. And therefore it cannot be ruled out that the government can block the transaction. This is generally normal practice not only in Russia, but also in Europe and the USA. And even to a greater extent than in Russia ... It is enough to recall examples of how transactions with potential Russian investors were blocked abroad. Therefore, I think, in this case, a certain risk is rather due to the fact that the purchase of the Russian company is American, despite the fact that American sanctions are valid, can have risks for the industry as a whole.

Alexey Kokin notes one more point:

- In principle, there is another “but”, although small. Eurasia Drilling owns drilling plants in the Caspian Sea. And it’s hard to say so far whether such projects fall under sanctions or not. However, Schlumberger probably has more than once checked its plans with the current restrictions of the United States. In the end, if such a necessity suddenly arises, you will be possible for those segments of the Eurasia Drilling business that fall under sanctions, say, just selling some Russian company. But, I repeat, the main area of her business is the drilling of ordinary land wells, which is not yet affected by sanctions ...