RUSSIAN state oil firm Rosneft and US Exxon Mobil Corp signed a wide-ranging strategic partnership broker by Russian leader Vladimir Putin yesterday.
The landmark deal will grant Rosneft access to projects in North America, where Exxon is developing hard-to-recover reserves in West Texas, the Canadian province of Alberta and in the Gulf of Mexico.
The two companies will also seek to transfer know-how from those projects to develop Rosneft’s own vast reserves of so-called “tight” oil held in non-porous rock in Western Siberia.
The partners have announced that they will invest $3.2bn (£2bn) in exploring for Arctic oil.
Exxon, the largest listed oil firm in the world, struck an initial partnership with Rosneft last August to search for oil in three blocks of Russia’s Arctic Kara Sea estimated to hold 36bn barrels of oil.
Finalising that initial deal was contingent on Russia introducing an offshore tax regime that would make it economically viable for oil companies to shoulder the huge up-front costs of offshore exploration.
Putin said last Thursday he supported a reformed offshore tax regime that would eliminate export duties and cut rates of Mineral Extraction Tax, clearing the way for yesterday’s announcement.
“The new regime will potentially provide the certainty needed to attract foreign investment into the Russian offshore,” analysts at Bank of America Merrill Lynch, led by Karen Kostanian, wrote in a note.
“We expect that multiple exploration joint ventures of Russian oil firms with foreign majors – similar to the one between Rosneft and Exxon - will follow,” Kostanian added.
For Exxon, the deal secures access to Russia’s offshore reserves, a prize that was coveted by British oil major BP, whose own talks with Rosneft collapsed last May.
It also marks a turnaround in Russia for the US oil major, which scaled back its involvement after its attempt to buy into Yukos – then the country’s largest oil firm – was thwarted by the arrest in 2003 of Yukos owner Mikhail Khodorkovsky.
Khodorkovsky was later jailed for fraud and tax evasion, Yukos was bankrupted by back-tax claims and Rosneft snapped up its prime assets at auction.
City A.M. Reporter