Russia is a complex beast and is often hard for Western nations to understand. The latest bit of world drama that the country has caused is, effectively, making Crimea part of Mother Russia again. It's a move that could lead to sanctions against this giant, natural resource-rich nation. This whole event could cause more pain than you may expect in the international oil and gas space.

Where there's gas...
It wasn't long ago that Russia was getting in trouble for saber rattling with Ukraine over natural gas. Almost a decade ago it cut off Ukraine's supplies, leaving parts of Europe short on gas. Russia pulled that old sword out again this time around, too. It's no small threat: The U.S. Energy Information Administration (EIA) estimates that around 16% of the natural gas consumed in Europe passes through Ukraine. In total, the EIA says Russia supplies 30% of European consumed gas.

Now that Russia has effectively taken over part of Ukraine, Europe and the rest of the world have some tough decisions to make. Sanctions could be imposed, but the question of who gets hurt most is very real.


Source: EIA

Big oil, big loser?
One of the biggest losers could be BP (NYSE:BP). After the Gulf of Mexico oil spill, BP was forced to sell off assets to help pay the bill the Deepwater Horizon explosion left behind. That materially changed the company's outlook and forced it into a more aggressive stance globally. On that score, it owns about 20% of Russia's Rosneft. If Russia gets hit with sanctions, BP could find that stake turns into a massive liability.

But BP isn't the only company with big interests in this conflict. For example, Chevron (NYSE:CVX) inked a $10 billion deal with Ukraine to explore for shale gas in late 2013. Royal Dutch Shell (NYSE:RDS-B) made a similarly sized agreement with the country in early 2013. Both deals have 50-year terms. Clearly, Russia taking over part of Ukraine is a less than auspicious start to these deals, which have another five decades or so left to go.

Shell isn't sitting pat; the company pulled out of talks over an offshore gas drilling deal early this year. While that helps to reduce the company's exposure to a region in turmoil, the 50 year shale drilling contract keeps Shell on the firing line. So BP, Shell, and Chevron are all right in the middle of this global drama. But they aren't alone.

For example, ExxonMobil (NYSE:XOM) has designs on drilling in the Black Sea. Unfortunately, control of the region Exxon covets is now in question. Worse off is Italy's Eni (NYSE:E). This driller actually signed a $4 billion oil and gas drilling deal with Ukraine late last year. The region it contracted to drill is off of western Crimea—which now appears to be owned by Russia.


(Source: Nial Farrell, via Wikimedia Commons)

Why all the deals?
The interesting thing is that all of the wheeling and dealing in Ukraine was meant to reduce the country's dependance on Russia. At the time that seemed like good call for everyone involved. Shell, Eni, and Chevron all got access to much-needed reserves and Ukraine was able to be more independent. That could still be true, but the risk for all of the deals just went up a notch, particularly for Eni. And Exxon, which would like to join Eni's offshore party, may just be out in the cold.

In other words, it looks like big oil could be the biggest loser as Russia asserts control of Crimea. Clearly, these are all large companies that don't need this one small region to survive. However, this is a striking reminder that the world's easy oil has largely been found. International oil and gas drillers are increasingly going into more hostile regions environmentally and politically. Keep this in mind if you are a shareholder, and watch this unfolding drama closely—it may have more of an impact on you than you expect.

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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