Crimea may nationalize oil and gas assets within its borders belonging to
Ukraine, and sell them off to Russia. Crimea's Deputy Prime Minister hinted
at the possibility that it would take control of Chornomorneftegaz, a Ukrainian
state-owned enterprise, and then "privatize" it by selling it to Gazprom. "After
nationalisation of the company we would openly take a decision - if a large
investor, like Gazprom or others emerges - to carry out (privatisation)," Deputy
Prime Minister Rustam Temirgaliev said.
Crimea's Russian-backed government has decided to hold a referendum on March
16 to secede from Ukraine. At the time of this writing, Russia's heavy involvement
in the drive for Crimean secession makes it hard to believe that Sunday's result
will be anything other than an overwhelming result in favor of breaking ties
with Kiev (either greater autonomy or annexation by Russia). The next steps
are much less clear, however. Secretary of State John Kerry is hoping Russia
will hold
off on fully annexing Crimea, leaving open the possibility of some diplomatic
way of resolving the crisis.
The ongoing political standoff in Crimea has already halted Ukraine's oil
and gas ambitions. Ukraine came close to inking a deal with a consortium of
international oil companies that would have led to an initial $735
million investment to drill two offshore wells. The consortium led by ExxonMobil
- with stakes held by Shell, Romania's OMV Petrom, and Ukraine's Nadra Ukrainy
- had been particularly interested in the Skifska field in the Black Sea, which
holds an estimated 200 to 250 billion cubic meters of natural gas. If it can
get the field up and running, Exxon hopes to eventually produce 5 billion cubic
meters per year. Exxon's consortium outbid Russian oil company Lukoil for the
rights to the block.
Those plans were still in the early stages - the consortium and the Ukrainian
government led by Viktor Yanukovych couldn't agree on terms. Obviously, once
Yanukovych was ousted, ExxonMobil had to put
those plans on hold until further notice.
Exxon's plans for Skifska may not have a future if Russia simply takes Ukraine's
assets. The speaker of Crimea's parliament said on March 13 that its oilfields
should be under the care of Moscow. "Russia, and Gazprom, should take care
of the oil and gas production," said Vladimir
Konstantinov. The new Ukrainian government in Kiev may not have much control
over the situation if Crimea's government nationalizes Chornomorneftegaz
and its assets. Ukraine had been optimistic about developing its offshore
oil and gas reserves, but after Sunday's referendum, those reserves may
suddenly be in Crimean (or Russian) territory.
Exxon is in a bit of a pickle, as it has billions of dollars of investments
in the Russia Arctic in a co-venture with Rosneft, its largest non-U.S. project.
It is therefore staying pretty quiet about its position in Skifska, and will
likely maintain a low-key position even after the referendum. Exxon likely
doesn't see much upside in getting into a tiff with Russia over the Black Sea,
especially since it hadn't even agreed on a production sharing agreement with
Kiev yet. Exxon's plans for the Russian Arctic are too important.
ExxonMobil aside, If Crimea and Russia move forward with the nationalization/privatization
of Ukrainian oil and gas reserves, it will heighten the conflict between Russia
on the one hand, and Ukraine and the West on the other. The U.S. has promised
tougher sanctions over what it argues as an illegal annexation of Crimea. Russia's
annexation of Ukraine's energy resources will only add fuel to the fire.
Source: http://oilprice.com/Energy/Energy-General/Rus...s-Reserves.html
By Nicholas Cunningham of target="_blank" Oilprice.com
