On Wednesday, August 2, U.S. president Donald Trump reluctantly signed a new sanctions bill after it was revealed that the already-placed sanctions had not been working. Because the majority of Congress had voted for it, Trump could not refuse to sign it. However, that did not stop Trump from attacking the bill. “The bill remains seriously flawed, particularly because it encroaches on the executive branch’s authority to negotiate. Congress could not even negotiate a healthcare bill after seven years of talking,” Trump claimed. “By limiting the Executive’s flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much close together.”
But it wasn’t just Trump that was unhappy with the new sanctions bill – one can imagine that the oil and gas industry isn’t too thrilled at the news either. According to the Financial Times, “International oil and gas companies have warned that the new sanctions, if signed into law, could cause unintended harms to billions of dollars worth of projects, due to the potentially broad interpretation of some clauses in the bill.”
The new sanctions, which now also cover oil and gas export pipelines, could potentially hurt projects that are worth around $4.75 billion in total. Some of these include Gazprom’s (MCX:$GAZP) Nord Stream 2 gas pipeline and Chevron’s (NYSE:$CVX) $37 billion funding to expand its Tengiz project in Kazakhstan, the Financial Times reported.
When the sanctions bill was first developed in 2014, U.S. Treasury said that the goal was to slow down Russia’s development of oil production in unconventional ways. However, the bill had only mentioned shale reservoirs specifically and no other forms of unconventional oil and gas, making it easy for the oil and gas industry to continue as it was.
According to Reuters, Norway’s Statoil (STO:$STLO) had been assisting Russian oil giant Rosneft (MCX:$ROSN) in developing unconventional oil and gas resources. Big name British oil company BP (LON:$BP) is thinking of doing a similar project. These companies are not looking for shale, but rather looking at deeper reservoirs that are in limestone, which is beneath shale oil. “Geologists are unanimous, though, that even though shale and limestone formations are different geological structures, they both constitute unconventional oil resources. Both are extracted through hydraulic fracturing, or fracking,” Reuters noted. As such, they should be banned, but the sanctions bill had only mentioned shale reservoirs in particular.
It’s a bit hard to tell whether or not the new sanctions bill will be positive for the oil and gas industry. However, who’s to say that the oil and gas industry won’t be able to find other ways to find new loopholes in the new sanctions bill?
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