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American oilmen at Prirazlomnaya

Oil companies seek loopholes in the sanction regime on Arctic offshore development.

Despite the sanctions, U.S oil companies Shlumberger and Baker Hughes still bid for new contracts in Russian Arctic waters.

Both the EU and the U.S in September introduced sanctions against the Russian Arctic oil industry, banning cooperation in energy technology and services. However, the oil companies actively seek loopholes in the regime. Reportedly, both Shlumberger and Baker Hughes are bidding for contracts in the Prirazlomnaya project, Russia’s first and only offshore Arctic oil field in production.

Through daughter companies registered in other countries, the two American oil majors in November and December 2014 submitted contract offers on drill fluids, as well as on drilling operations, in the project, RBC.ru reports with reference to Bloomberg.

By operating through foreign subsidiaries, the American companies run a delicate balance between corporate interests and U.S government policy.

In January, Schlumberger announced its ambitions to buy a 45,65 percent stake in Eurasia Drilling, a Russian oil exploration company, thus openly challenging the sanction regime. Through Eurasia Drilling, Schlumberger might be able continue parts of its business operations in Russia.

Also other western oil and gas service companies look for loopholes in the sanctions. Among the Norwegian companies heavily engaged in the Russian Arctic is the North Atlantic Drilling Ltd, a subsidiary of Seadrill. The NADL in August 2014 inked a comprehensive deal with Rosneft over drilling in Russian Arctic waters and has since been pushing on Norwegian authorities for permission to proceed with planned operations in the Kara Sea.

The EU and U.S sanctions introduced in September 2014 ban companies from providing services necessary for deep water oil exploration and production, Arctic oil exploration or production and shale oil projects, including drilling, well testing and logging services.

That triggered a string of challenges for Gazprom and Rosneft, the two state-controlled companies with the monopoly right to develop Russian offshore projects. The situation was most critical for Gazprom Neft, the company operating Russia’s first and only offshore Arctic project, the Prirazlomnoye field.

The Prirazlomnaya project platform has up to 50 percent of services managed by foreign companies. Norwegian companies alone account for at least 25 percent of the equipment and technology applied at the installation. The  lack of foreign equipement and services supply could ultimately jeopardize security at the platform.