US Puts Russian Gas Field Off Limits

US Puts Russian Gas Field Off LimitsUS Puts Russian Gas Field Off Limits

The US declared one of Russia’s largest offshore oil and natural gas fields off limits to American tools and expertise, potentially disrupting Royal Dutch Shell Plc’s plans to liquefy the fossil fuel for export.

Sanctions imposed to punish Russia were expanded to bar the transport of US-made equipment to Gazprom PJSC’s Yuzhno-Kirinskoye field off Russia’s eastern coast, according to a US Department of Commerce statement on Friday, World Oil reported.

A previous round of sanctions prohibiting the use of US technology in Russia’s Arctic, deepwater and shale fields forced Exxon Mobil Corp. to abandon a $1 billion drilling project in late 2014.

"It is wrong to say that sanctions are destroying any sector of Russia’s economy," the statement said.  Sergei Kupriyanov, a spokesman at state-run Gazprom, declined to comment. Shell may gain access to Yuzhno-Kirinskoye as part of potential asset swaps with Gazprom, Chief Executive Officer Ben Van Beurden said last week.

“We engage with the relevant authorities and take action to ensure we comply with all applicable sanctions or related measures,” Shell said in an emailed statement on Friday. “Shell remains committed to working in Russia and we value working with our Russian partners.”

The Yuzhno-Kirinskoye deposit contains an estimated 637 billion cubic meters of gas and 97 million tons of oil and condensate, according to Gazprom’s website.

The company said earlier the field would feed new capacity at the Sakhalin-2 LNG plant, the only such facility in Russia. Shell holds 27.5% of the Gazprom-led project.

Supplies from Sakhalin-2 make up about 9% of the gas needs of Japan, the world’s biggest LNG buyer, according to Shell’s Van Beurden. Under the new restrictions, anyone wanting to use US-made gear at Yuzhno-Kirinskoye would need to obtain a special license from the US government.

Jacobson said such licenses are never issued and the requirement represents a de facto total ban on the use of such equipment at the field.