ExxonMobil’s Arctic Coup with Russia

ExxonMobil’s epic win in securing access to Rosneft’s Arctic oil holdings is the culmination of almost 15 years of effort by Chief Executive Officer Rex Tillerson. Exxon’s partnership with Rosneft will allow it to tap into a region potentially containing tens of billions of barrels of oil. Exxon beat rivals, including BP, Royal Dutch Shell, and Chevron, to gain its piece of one of the globe’s last largely undeveloped oil provinces. In return, Exxon is providing Rosneft with the capital and expertise it needs to help Russia hold on as the world’s biggest oil producer.

For Tillerson, who oversaw Russia’s first offshore project in Arctic conditions in the 1990s, the agreement with Rosneft, which involves an initial $3.2 billion investment, is his biggest deal since the $35 billion acquisition of U.S. shale gas producer XTO Energy in 2010. Prime Minister Vladimir Putin estimated that the total infrastructure buildout of the region could eventually approach $500 billion. “Between Russia and the XTO deal, Tillerson has put together a big resource base for the end of the decade,” says Jason Gammel, an oil industry analyst at Macquarie Capital in London. Exxon and Rosneft plan to explore Russia’s Arctic offshore and the Black Sea. Exxon has also agreed to give Rosneft stakes in some of its deepwater Gulf of Mexico projects and fields in Texas, making it the first major Russian oil producer to develop U.S. deposits.