Exxon Mobil Corp. (XOM) extended its partnership with Russia’s state-controlled oil company even as U.S. and European nations threaten additional sanctions to punish Vladimir Putin’s regime for its actions in Ukraine.
Exxon signed the agreement with OAO Rosneft (ROSN) Chief Executive Officer Igor Sechin at a forum in St. Petersburg today, extending a pact that involves drilling for crude in the Arctic and Siberia and liquefying natural gas for export in Russia’s Far East, according to a statement on Moscow-based Rosneft’s website. Exxon didn’t immediately return a phone message seeking comment.
Exxon is among American oil producers that rebuffed U.S. State Department pressure to skip the International Economic Forum this week in Putin’s hometown. With at least $30 billion already invested in Russia’s oil and gas sector, U.S. and European explorers are betting the Ukraine crisis won’t derail their aspirations to capture some of Russia’s 75 billion barrels of reserves.
Among U.S. companies, Irving, Texas-based Exxon is the biggest player in Russia, where it has a series of joint ventures with Rosneft. (ROSN) It already produces oil in Russia’s Far East with Rosneft and the two companies plan to start drilling an exploration well in the Kara Sea this year. Together they hold licenses to explore huge swathes of the Arctic Ocean.
While sanctions against Russia have targeted individuals -- including Sechin -- and avoided industrywide measures, the U.S. has threatened stronger action if Putin’s government obstructs the Ukraine presidential election scheduled for May 25. Producers still plan to invest more in Russia, pursuing exploration in the Arctic Ocean and drilling shale oil fields in Siberia.
“Foreign companies are expected to invest billions of dollars in Russian projects,” said Timur Salikhov, an oil and gas analyst at BCS Financial Group. “I don’t think many of them will do so until there is resolution to the ongoing standoff with Ukraine.”
U.S. and European energy producers hold equity partnerships in Russian oil and gas worth at least $30 billion, according to Alexander Nazarov, an analyst at OAO Gazprombank in Moscow. The investments are led by BP Plc (BP/)’s almost 20 percent stake in Rosneft, Total SA (FP)’s stake in gas producer OAO Novatek (NVTK) and a gas project operated by Royal Dutch Shell Plc. (RDSA)
Some oil-industry leaders declined to attend this week’s forum after U.S. officials called for a boycott. Others came anyway.
Christophe de Margerie, CEO of France’s Total, was at the forum, where he signed an agreement with OAO Lukoil to seek shale oil in Western Siberia. BP CEO Bob Dudley attended the meeting and said he had no plans to exit Russia.
Neil Duffin, president of Exxon’s development unit, signed the agreement today at the forum, according to Rosneft. Exxon has declined to say whether CEO Rex Tillerson will make an appearance.