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Sanctions force Russia to halt Arctic drilling

29th September 2015

Deputy Minister of The Ministry of Natural Resources and Environment of the Russian Federation, Denis Khramov, has announced the postponement of all drilling operations on Russia's Arctic Shelf for up to three years.

Russia calls a halt to Arctic drilling
Russia calls a halt to Arctic drilling

Khramov said that the postponement of drilling operations will lead to an increase in the number of wells that the companies would need to drill in subsequent years. Thus, in 2019 the number of such wells will have increased from 19 to 28, according to the deputy minister.

Our client Mr Sarosh Zaiwalla, an international lawyer representing oil majors in both Russia and Iran, believes that sanctions are the foremost cause behind the end of the oil industry’s exploration of the Arctic.

Sanctions have affected Russian energy firms' ability to raise long-term funding and plans to develop shale and deep-water oil resources. Prior to the sanctions, Exxon and Rosneft found the Victory field, containing more than 100 million tons of oil and 338 billion cubic meters of gas, in the Kara Sea. Exxon now sees a potential $1 billion loss related to its Russian operations.

Zaiwalla, Founder and Senior Partner of Zaiwalla & Co., has said: “Sanctions by the US and EU governments on Russia have severely impacted the Russian oil industry, cutting it off from the international market and causing the industry to turn inward.

“As a result, major international exploration ventures such as those in the Arctic have suffered as restrictions on financial and technical assistance have forced oil majors to pull out.

“However, rather than throw in the towel like their Western counterparts, it can be expected that Russian oil majors will now look to the Middle East and Asia to realise their ambitions in the Arctic,” Zaiwalla added.

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