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OSLO, March 16 (Reuters) – North Atlantic Drilling warned on Monday it would be difficult to conclude as scheduled a contract with Russia’s Rosneft due to weak market conditions and the challenging political environment.
Western sanctions against Russia, and Rosneft in particular, have increased concerns about the conclusion of a $4.1 billion deal between the two companies.
“As of today, it looks difficult,” Alf Ragnar Lovdal, chief executive of the subsidiary of Seadrill, told Reuters when asked how confident he was that the contract for its West Rigel rig would be concluded as envisaged.
The company earlier said the contract was expected to start in December this year and last until November 2020.
The Norwegian company received a notice of termination from Rosneft on Friday for its West Navigator vessel, the first contract under the deal, which was due to start work for the Russian firm in July.
The cancellation cut the firm’s contract backlog by $1.0 billion..
“The total agreement with Rosneft I can’t comment on, but the West Navigator was the first rig in the agreement to operate and it was not possible,” Lovdal said.
In addition to difficult political circumstances, rig firms which drill for oil companies have been hit as lower oil prices prompt firms to curb exploration. There is also an abundance of capacity as new vessels ordered during a previous boom are being delivered.
“We are many who fight over the same contracts, so it’s a tough time for the industry,” Lovdal said.
A deal under which North Atlantic Drilling would buy around 150 land rigs from Rosneft and the Russian oil group would take a roughly 30 percent stake in the company has been delayed until May this year. (Reporting by Stine Jacobsen; Editing by David Holmes)
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