Exxon quits some Russian joint ventures citing sanctions

HOUSTON/MOSCOW: Exxon Mobil Corp will exit some joint ventures with Russia’s Rosneft, citing Western sanctions first imposed in 2014, while the Russian company said the pullout will result in serious losses for its US partner. The move is an about-face for Exxon, which had opposed the sanctions over Russia’s invasion of Crimea and argued they unfairly penalised US companies while allowing foreign energy rivals to operate in the country, the world’s largest oil producer.
Yet the sanctions were effective in slowing work on a project by Exxon and Rosneft on what was hailed as a major discovery in the Kara Sea above the Arctic Circle. Rosneft, Russia’s largest oil company, said last year that it planned to return to operations at the project in 2019.
Exxon’s exit from projects will not affect the Sakhalin project off the eastern coast of Russia, Exxon and Rosneft spokesmen said. Sakhalin-1 operates under a Production Sharing Agreement struck in the mid-1990s and currently produces around 200,000 barrels of oil per day.
Representatives for the US Department of State and Treasury Department did not have immediate comment. The joint ventures were reached when US Secretary of State Rex Tillerson was Exxon’s chief executive. A Rosneft’s spokesman said ExxonMobil would incur serious losses because of the decision.
Rosneft spokesman Mikhail Leontyev said Exxon had been forced to take what he called a predictable decision, but confirmed the move would not affect the Sakhalin-1 joint venture. “It (Exxon) will suffer serious losses as a result of this (decision),” said Leontyev.
Exxon said it will formally start the process of withdrawing from the joint ventures this year. In 2012, Exxon and Rosneft detailed an exploration partnership with plans to invest as much as $500 billion in developing Russia’s Arctic and Black Sea oil reserves. Further deals were signed in 2014.
Exxon said in a financial filing on Wednesday that it recorded a fourth quarter after-tax loss of $200 million due to the withdrawal plan. — Reuters