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Eni's Black Sea Operations Adhere to US Sanctions on Russia

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Per Reuters, Eni S.p.A. E is performing exploratory drilling for an offshore project in the Black Sea. Notably, the project is being led by Rosneft, an integrated oil and gas company, primarily owned by the Russian government. We note the U.S. government had imposed sanctions on Russia last year. 

Eni - drilling an exploration well in the Black Sea - claimed that its work with Rosneft is in compliance with the latest U.S. sanctions on Russia. U.S. companies are not allowed to take part in energy projects of Russia, in particular on the Arctic offshore, deepwater and shale oil exploration and production projects. Notably, Eni and Rosneft have three licenses in the Barents Sea and Black Sea. The companies also operate in the prolific Zohr gas field in Egypt, along with British oil major, BP p.l.c. (BP - Free Report) .

Per The U.S. Treasury’s Office, American energy companies cannot participate in projects where Russian companies hold 33% or more interests. Oil giants like ExxonMobil Corporation XOM, which has a joint project with Russia’s Rosneft, had faced trouble due to the sanctions against Russia. A sanction waiver requested by ExxonMobil,in 2017  was also denied by the U.S. government.

Eni is an exception in the industry as it strikes a balance between the sanctions and operations with a Russian company. 

In a separate development, Eni – which recently provided its EST technology to Sinopec SNP – claimed that oil prices are being positively impacted by political events, like oil supply fall in Venezuela, export from Iraq, political turmoil in Libya and other factors.

About Eni

Based in Rome, Italy, Eni is an integrated energy player. The company has operations in 73 countries. Eni commenced natural gas production in Zohr field, located off the coast of Egypt. The field has huge gas reserves, estimated at more than 30 trillion cubic feet by the integrated energy firm. With huge potential gas resources, the discovery was touted to be the largest in the Mediterranean area. This new startup will add considerably to the company’s production.

However, Eni is facing top-line pressure. Over the past three years (2014–2016), total revenues have declined at a CAGR of 34.8%. Continued pressure on oil and gas prices is the primarily reason for decrease in revenues. While the company is taking cost savings initiatives to boost the top line, it will take some time to witness a rebound in the same.

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