In 2012, Exxon Mobil Corp. (NYSE: XOM) struck a deal with Russian oil giant Rosneft to explore for oil off the north coast of Russian and in certain onshore locations. The two firms formed joint ventures with licenses running out through 2040 and projected investments of some $300 billion to $500 billion over the course of the contract periods. Some or all of those are now off the table.
In its Form 10-K annual report filed Wednesday with the U.S. Securities and Exchange Commission, Exxon said it decided late last year to withdraw from the joint ventures and that it will “formally initiate the withdrawal in 2018.” The company said the decision has resulted in an after-tax loss of $200 million.
The first sign of trouble for the deal came in 2014 when the Obama administration imposed a series of sanctions on Russia for its violation of “the sovereign and territorial integrity of Ukraine, or for stealing assets from the Ukrainian people.” U.S. energy companies were prohibited from “provision, exportation, or reexportation of goods, services (not including financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve five major Russian energy companies.”
That prohibition stopped all work on the Rosneft-Exxon joint venture that was drilling an exploration well in the Kara Sea off Russia’s Arctic coast. According to a Rosneft report, the resource base estimate of just this first reservoir was 338 billion cubic meters of natural gas (about 12 trillion cubic feet) and 100 million metric tons of oil (about 733 million barrels).
Further sanctions on U.S. investment in Russia were imposed just before President Obama left office as a result of Russia’s then-alleged interference in the 2016 U.S. presidential election.
Last year President Trump rejected a request from Exxon to allow the company to resume work on the Rosneft joint ventures. That rejection ultimately sealed the fate of the Exxon’s hopes for the Russian ventures.
Exxon stock traded up fractionally on Thursday at $76.22, in a 52-week range of $73.90 to $89.30.