US steps up sanctions against Russia's oil and gas sector - Upstream Online
US steps up sanctions against Russia's oil and gas sector | Upstream Online
The US has announced a new set of sanctions in response to Russia’s invasion of Ukraine aimed at further hobbling the country’s energy industry.
The new sanctions target Russia’s capacity to produce and transport natural gas production along with its ability to carry out advanced drilling and well completion operations.
The US State Department said the enlarged list of sanctioned entities includes engineering design and construction contractor Nipigazpererabotka, also known as Nipigas, and two of its subsidiaries.
Additionally, the key Russian drillers BK Eurasia and Siberian Service Company (SSK) and their related affiliates have made their way onto the updated list.
Officials said the goal is to achieve “continued degradation of Russia’s future energy production and export capabilities”.
Russian businessman Gennady Timchenko, reportedly a close ally of President Vladimir Putin, and Leonid Mikhelson, executive chairman of the country’s largest gas independent, Novatek, reportedly have held sizeable shareholdings in Nipigas since 2021.
According to the company, it is handling the construction of two multibillion-dollar projects, the Novatek-led Arctic LNG 2 development and the Amur gas processing facility.
Mikhail Krutikhin, a partner in Moscow-based consultancy RusEnergy, said the US move against Nipigas could potentially impact the construction of the remaining two trains for Arctic LNG 2 at the Belokamenka yard near Murmansk.
Nipigas took over the Arctic LNG 2 engineering, procurement and construction contract last year following the exit of Technip Energies and Saipem in compliance with international sanctions.
The Amur gas facility, under construction in East Siberia on the Chinese border, includes a six-train processing plant to extract heavier hydrocarbons from the Sila Sibiri 1 pipeline gas stream, and a polymer facility to convert some of extracted hydrocarbons into polyethylene.
The plant is a key installation in Russian gas giant Gazprom’s plan to increase exports to China from the Chayanda and Kovykta fields to a maximum 38 billion cubic metres per annum under a long-term contract with China National Petroleum Corporation.
The Amur plant was already hit last year following the withdrawal of Nipigas’ western partner, German industrial gases maker Linde.
However, Nipigas said it was able to advance the project on its own after Linde’s exit, with the trains around 90% complete early in July.
Nipigas did not immediately reply to Upstream’s request for comment.
Drilling contractors
BK Eurasia and SSK, also targets of the new sanctions, each employ about 5000 people providing drilling services in Russia's new and legacy oil and gas fields.
The drilling contractors operate fleets of winterised rigs in West Siberia capable of spudding long horizontal wells, which have become more common in Russia as producers tap reservoirs that are either depleted or have complex geological structures.
SSK, whose main clients are the Russian oil and gas giants Novatek and Gazprom, has said about 85% of the wells it drills are horizontals.
Privately held producer Lukoil reportedly remains a main customer for BK Eurasia, which changed ownership last year after a group of its long-term shareholders who live outside the country, led by Russian industry veteran Alexander Djaparidze, severed ties with the drilling company.
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