Will ExxonMobil, BP, and Royal Dutch Shell Be Forced to Skedaddle From Russia?

With cacophonous calls for far stronger sanctions against Russia, its hardly impossible that the country's deals with major oil companies could be scuttled.

Jul 21, 2014 at 1:15PM

Amid a crescendo of calls in Washington for the imposition of severely tightened sanctions on Moscow, following last week's tragic shoot-down of a Malaysian airliner over Ukraine, I'm wondering whether in, say, six months, the likes of ExxonMobil (NYSE:XOM), BP (NYSE:BP), and Royal Dutch Shell (NYSE:RDS-B), will retain permission to work side-by-side with Rosneft and other Russian state-controlled energy companies.

Somehow I suspect they will. But whether they should is clearly another matter.

Crash Site Of Malaysia Ai

Source: spark-online.org

You obviously know about the world's latest aviation tragedy, in which nearly 300 passengers and crew perished over eastern Ukraine, almost certainly as a result of a well-aimed Russian-made missile. The aircraft was not the first one shot down, earlier in the week, a pair of Ukraine's military planes were obliterated from the sky. The separatists took credit for those hits.

Tepid sanctions
On Wednesday, the day before Malaysia Airlines' second tragedy in the past four months, President Obama had unleashed a new round of sanctions on Russia. Those strictures resulted from fighting in Ukraine, but as The Wall Street Journal noted the day after they were announced, "The sanctions stop well short of crimping international business ties or blocking deals with entire sectors of the Russian economy."

Perhaps a new round of impediments will contain such blockages. And just maybe, as Senator Ted Cruz from my home state of Texas has suggested, they'll be directed against the country's finance and energy sectors, where they'd clearly have the most impact. Prohibitions against western companies toiling in Russia clearly would affect the three above-named western companies. But they'd have an even more profoundly damaging impact on Rosneft, Gazprom, and their country's efforts to escalate its oil and gas exploration and production skills, both offshore and in its shale formations.

Three majors in the land of unpredictability
As all energy aficionados know, about two years ago Exxon and Rosneft signed a series of joint venture agreements with one another. Those pacts have -- or soon will have -- the largest member of Big Oil helping its Russian counterpart in exploring the frigid Kara Sea in the Russian Arctic, along with similar efforts in the Black Sea.

Further, Rosneft now has stakes in 20 ExxonMobil blocks in the Gulf of Mexico, along with interests in the Permian Basin, which covers parts of Texas and New Mexico. The huge Russian company also has obtained a 25% holding in Exxon's Alaskan Point Thomson natural gas field. And Exxon is sharing its fracking expertise in Western Siberia shale plays. It's not beyond the realm of possibility, nor should it be, that these ventures could be abruptly halted by a fiat emanating from the Obama administration.

Other deals with Russia
For its part, BP owns just shy of 20% of Rosneft, perhaps until the capricious Russians decided it no longer should. It's stake was the spoils for its enduring a highly contentious oil and gas joint venture relationship, TNK-BP, which it owned with a group of Russian oligarchs. When both parties sold what had become the third-largest oil company in Russia to Rosneft for $55 billion, BP received $16.7 billion in cash and a fifth of the buyer's shares.

That relationship could also be thwarted by tightened western sanctions. (Rosneft's CEO Igor Sechin has been named persona non grata by current U.S. sanctions. He's called that labeling illegal because Rosneft isn't involved in the conflagration in Ukraine.)

Shell has a 27.5% interest with Gazprom in Sakhalin-2 on a desolate, eponymously named island in the Sea of Okhotsk, to Russia's east. Until 2006 Shell operated the project, but late that year it was forced to sell much of its then majority interest to Gazprom, for what was generally agreed to be a pittance, relative to the $20 billion the company had already invested in the project. Exxon also continues to operate the Sakhalin-1 project on the same island.

A Foolish takeaway
The Exxon-Rosneft joint venture agreements were billed as opportunities to "share technology and expertise." In reality, that "sharing" is a one-way street, since the Russian's have few capabilities to impart. On that basis alone, were impending U.S.-European sanctions to have the strength to call the western companies home from Russia, the result would be devastating for Vladimir Putin and his country.

OPEC is absolutely terrified of this game-changer
If you're "circling" the energy sector, you should know about a company that causes a broad smile to break out on Warren Buffett's face. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

David Smith owns shares of ExxonMobil. The Motley Fool has no position in any of the stocks mentioned. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers