JUNEAU - Russia's Rosneft oil company, facing U.S. sanctions following Russia's seizure of part of neighboring Ukraine, won't be buying part of the huge Point Thomson natural gas field on Alaska's North Slope, Exxon Mobil said Wednesday.
Rosneft, one of the world's top oil producers along with Exxon, received the option last year as part of an agreement the two companies signed to expand their strategic cooperation in the Arctic.
But now, Exxon says Rosneft won't be part of the development of Point Thomson.
"Rosneft had evaluated the opportunity, and elected not to participate," said Kimberly Jordan, an Exxon spokeswoman for the company segment that includes Point Thomson and other Alaska operations.
Russia has become increasingly controversial lately, especially with the shooting down of a Malaysian passenger airliner, apparently by pro-Russia separatists in eastern Ukraine. But the new U.S. sanctions this week stem from earlier Russian actions, including its seizure of the Ukraine's Crimea Peninsula, according to the U.S. Department of State.
Earlier sanctions had targeted individual Russians, including Igor Sechin, president of Rosneft as an individual, but not the company. Sechin is reported to be a close ally of Russian President Vladimir Putin, and Rosneft is majority-owned by the Russian government.
The latest sanctions now target Rosneft itself, and limit some financial transactions it may make, complicating its ability to conduct business in the world outside of Russia.
Department of Natural Resources Commissioner Joe Balash said that before Rosneft, or any other company, can control Alaska leases, it needs state approval.
Even before the U.S. sanctions, Balash said Alaska would have looked particularly closely at Rosneft because of its role not just as a investor, but also a potential competitor.
Approval would have depended on the specific terms of any deal, had the process gotten that far.
"Were they going to get a veto card? Were they going to have the ability to hold our project hostage to advance their own projects in other parts of the Pacific? Anything like that would have been a concern," he said.
Point Thomson holds about 8 trillion cubic feet of natural gas, about a quarter of the total known gas on the North Slope, according to the department. That resource is expected to play an important role in the ongoing Alaska LNG project that aims to transport gas by pipeline to Nikiski and by ship to Asia markets.
In the same deal in which Exxon provided an option to buy a 25 percent share of Point Thomson to Rosneft, it also signed a memorandum of understanding with the company to evaluate an LNG project in the Russian far east.
President Putin was present when an Exxon Mobil Exploration Co. executive signed the Point Thomson and other deals with Rosneft's Sechin, Exxon reported at the time.
Despite the potential controversy involving sanctions on Russia, Balash said Alaska still welcomes foreign investment.
Foreign petroleum and mining companies have long been active here, and in recent years so have foreign-government owned or controlled companies.
"We've seen tremendous benefits from those sorts of investors," Balash said.
That's recently included Spain's Repsol and Italy's Eni, he said.
Exxon Mobil holds about 62 percent of Point Thomson. The 25 percent that it was looking at selling to Rosneft was recently acquired from Chevron Corp., Balash said.
Contact Pat Forgey at pat@alaskadispatch.com.
CORRECTION: An earlier version of this story stated incorrectly that Rosneft received the option to buy a stake at Point Thomson earlier this year. The company received the option last year. This story has been updated to reflect the accurate information.