Exxon & Russia's Rosneft, a $200 to $300 Billion Oil Pact (XOM, BP)

Russian oil giant Rosneft and US oil supermajor Exxon Mobil Corp. (NYSE: XOM) are reported to have reached an agreement that will give Exxon access to oil deposits off the Arctic coast of Russia in exchange for giving Rosneft access to projects in the US Gulf of Mexico and onshore in Texas.

Russian news agency Interfax notes that the direct investment under the terms of the agreement is estimated to be $200-$300 billion. The prospective deal is similar to the deal that BP plc (NYSE: BP) failed to achieve earlier this summer.

Russia’s Arctic shelf is believed to hold huge amounts of oil but the area suffers under some of the harshest climate conditions in the world, and very little exploration has been done to date.

Interfax also reports that Putin said that Exxon “is starting operations in Russia’s strategic shelf and in the deep water shelf.”  Putin also said the agreement extends to other parts sections of Russia and includes training and operations with financial institutions.

A press release does appear on Exxon Mobil’s investor site noting a deal between the two that includes approximately US $3.2 billion to be spent funding exploration, but that is just the exploration part.  The vast amount of oil is not mentioned exactly nor are the total values in dollar terms so the “up to $200 to $300 billion” should be considered as a possibility rather than as a certainty.  There is also a note to editors as follows:

• The East Prinovozemelskiy License Blocks have a total area of 126,000 square kilometers (30 million acres) in water depths ranging between 50 and 150 meters (165 feet and 500 feet). Tuapse Block in the Black Sea has the total area of 11,200 square kilometers (2.8 million acres) and water depths ranging from 1,000 to 2,000 meters (3,300 feet and 6,500 feet). Rosneft equity interest in both joint ventures will be 66.7 per cent, while ExxonMobil will hold 33.3 per cent.

Paul Ausick