Rosneft signs up rigs for harsh environments

Off to work: Semisub West Alpha set to get to work for Rosneft amid Western sanctions

Russian energy giant Rosneft has signed deals worth up to $4.25 billion with a unit of Norwegian offshore contractor Seadrill to secure rigs to drill in harsh environments.

The deals were announced a day after the EU and the US imposed broader sanctions on Russia's energy sector in an effort to quell separatist violence in Ukraine.

Seadrill subsidiary North Atlantic Drilling said in a statement on Wednesday that Rosneft had hired six rigs that will start working off Russia between next year and 2017.

The contracts include five-year stints for the drillships West Navigator and West Rigel (a newbuild), semi-submerisble West Alpha, as well as two newbuild CJ-54 class rigs. Rosneft will also get a Gusto class jack-up rig for 2.5 years.

Oslo-listed Northern Offshore said in a separate release that its jack-up Energy Endeavour would go to work for Rosneft under the 2.5-year contract.

The $4.25 billion revenue potential for the six contracts is exclusive of mobilisation, North Atlantic said, adding that "any break rights expire after 100 days".

The contracts follow on from an eight-year investment and co-operation agreement between the rig owner and Rosneft announced in May.

The agreement will give Rosneft a "significant" stake in North Atlantic Drilling, which is focused on harsh-environment drilling in the North Atlantic basin. Seadrill owns a 70% stake in North Atlantic Drilling.

"This milestone is testament to the ability of both (North Atlantic Drilling) and Rosneft's employees and we hope that further transactions can be concluded in a similar manner," said North Atlantic chief executive Alf Ragnar Lovdal.

The West Alpha will be the first of the six rigs to get to work for Rosneft, which plans next month to spud the first of two wells in the Kara Sea under a partnership with ExxonMobil.

However, future participation of Western companies in Russian exploration campaigns has become clouded in the wake of tough sanctions against the Vladimir Putin-led country's energy sector.

An ExxonMobil spokesman said the supermajor is "assessing the impact of the sanctions".

North Atlantic Drilling is based in Oslo, and Norway is not a part of the 28-member EU. However, the Norwegian government said on Wednesday that it plans to join the EU's sanctions programme against Russia, though no formal declarations have been made.

The rig company is also listed on the New York Stock Exchange. Its shares on the NYSE were down on Wednesday morning, but rose following the announcement of the contracts with Rosneft. They were up 1.9% on the day at $9.67 as of 2:45 pm in New York.

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