| MOSCOW, April 30
MOSCOW, April 30 Oil majors are beginning to
grow cool on new projects in Russia as U.S. and EU sanctions
over Moscow's actions in Ukraine make investment increasingly
risky and after the Kremlin's threat to review the West's role
in Russia's energy industry, the world's largest.
"I don't think we will be jumping into new investments in
the short term," Royal Dutch Shell's chief financial
officer Simon Henry told a conference call on Wednesday.
The United States and the European Union imposed more
sanctions on Russia this week as part of their drive to put
pressure on Moscow for the annexation of Crimea and what they
see as direct support for pro-Russian separatists that have
seized public buildings across eastern Ukraine.
Henry's comment came only weeks after Shell Chief Executive
Ben van Beurden visited Russia and met Russian President
Vladimir Putin to take part in celebrations marking 20 years of
the Sakhalin-2 gas project, one of the biggest foreign direct
investments in Russia.
"It was planned a long time ago. I wouldn't read too much
into the timing of the visit," said Henry.
BP's Chief Executive Bob Dudley also visited Moscow
earlier this month and said the company was "rock solid" with
its investment in the country, where it owns a fifth of the
Kremlin's national oil champion Rosneft.
However, investors are increasingly worried about the
Russian exposure of major oil companies. Rosneft chairman Igor
Sechin, a close ally of Putin, was put on the sanctions list
this week, but the company, along with state gas behemoth
Gazprom and its executives, escaped sanctions for now.
Putin said on Tuesday that Moscow saw no need for counter
sanctions but could reconsider the participation of Western
companies in energy projects.
Richard Hunter, head of equities at Hargreaves Lansdown
Stockbrokers, said exposure to Russia was among the main
challenges for Shell's operations.
Both BP and Shell have a bumpy history of relations with the
Kremlin. Shell owns 27.5 percent in Sakhalin-2, one of the
world's largest liquefied natural gas projects, supplying Asia
with super-cooled gas.
Gazprom owns 50 percent in the project, which it obtained in
2006 following months of pressure from state authorities on
Shell over cost overruns and environmental compliance.
Shell denied any violations but had to cede control over the
$22 billion project, Russia's biggest single foreign investment
at the time, in a move analysts described as one of the biggest
examples of the Kremlin's resource nationalism.
Those investment are dwarfed by those of BP.
"BP has a greater than average exposure to Russia, where it
has close to 25 percent of its production base," analysts from
Barclays said in a note.
BP ended up with 19.75 percent in Rosneft after the
Kremlin-controlled company acquired BP's TNK-BP venture for $55
billion last year.
BP agreed to sell its TNK-BP share to Rosneft after a row
with the Soviet-born TNK-BP shareholders during which Dudley was
forced out as the head of the venture and fled Russia, saying he
feared for his security.
This month, Dudley said BP could help enhance relations
between Russia and the West.
"We are in close contact with political leaders in different
parts of the world, and of course here in the UK," BP's chairman
Carl-Henric Svanberg said this month when explaining what role
BP could play to help sort the crisis.
The Kremlin has long relied on support from Western business
leaders and some politicians to advocate its case in the West.
Germany's former chancellor Gerhard Schroeder helped promote
one of Russia's largest gas projects, the Nord Stream pipeline
The pipeline helped Moscow raise its share of Europe's gas
supply to 30 percent last year from 25 percent a few years ago.
A close ally of Schroeder, the former mayor of Hamburg,
Henning Voscherau, is currently serving as chairman of South
Stream, another massive Gazprom project involving France's EDF
, Italy's Eni and Germany's BASF,
which is due to deliver more Russian gas to southern Europe.
Total's chief Christophe de Margerie is expected
to travel to Russia next month alongside Dudley and van Beurden
for the country's main annual economic conference, the St.
Petersburg Economic Forum, which Putin traditionally uses to
lure new investments in the country.
Total relies heavily on Russia for future production growth
as it has a 20 percent stake in Yamal LNG project, one of the
largest LNG projects in the world, and also owns 17 percent in
Russia's No.2 gas firm Novatek.
Novatek is co-owned by Gennady Timchenko, a businessmen
targeted by Washington's Ukraine-related sanctions as a member
of Putin's inner circle.
It is not clear if top executives from U.S. energy majors
will travel to the St. Petersburg forum after the FT reported
that U.S. banks Citigroup and Goldman Sachs were
unlikely to send their chiefs to the gathering.
Of all the U.S. majors, ExxonMobil is most deeply
involved in Russia as an operator in Sakhalin-1, one of three
Russian production-sharing deals with foreign companies.
Oil production started in 2005, and amounts to around
150,000 barrels per day. The project has yet to unlock its full
gas potential as Exxon has been unable to agree with Gazprom on
gas deliveries and price.
Exxon, Eni and Statoil have also agreed with Sechin to
develop the Russian Arctic shelf.
Russia needs Western technology to help it tap the Arctic as
well as shale oil projects. Analysts say the start of production
at these projects is 15-20 years away.
Other U.S. majors have smaller exposure to Russia.
ConocoPhillips sold out of its projects with private
major Lukoil several years ago as part of its asset
Chevron never really built up a presence in Russia
after a failed attempt to buy into Yukos, which was later
nationalised by the Kremlin as part of its campaign to punish
oligarch Mikhail Khodorkovsky for political activities.
(Reporting by Vladimir Soldatkin; Editing by Will Waterman)