[Despite the high-profile nature of the announcement, this JV is a small-scale deal for XOM. Unlike the deal Rosneft just inked with BP, the XOM JV does not involve any drilling in the arctic.]
MOSCOW/DAVOS, Switzerland, Jan 27 (Reuters) – ExxonMobil (XOM) is to make a new investment in Russia for the first time in over a decade as Moscow seeks to thaw its frosty investor climate and keep its oil flowing.
Russian state oil company Rosneft will develop over a billion tonnes of Black Sea oil using a $1 billion investment by U.S.-based ExxonMobil, the biggest privately-controlled oil company in the world whose relationship with the world's top oil producing country has been poor in the 21st century.
The deal was announced on Thursday in Davos and came just days after Rosneft unveiled an Arctic tie-up and share swap with Britain's BP.
Russia's Deputy Prime Minister Igor Sechin, who is also Rosneft's chairman, signed the deal with Rex Tillerson, Chief Executive of U.S. No. 1 Exxon, at the World Economic Forum.
Sechin said the deal was proof that the investment climate in Russia had improved.
"We have managed to convince even Exxon of that," he said.
Rosneft officials said Exxon would invest $1 billion, and the deep-sea venture would be split 50/50 at the exploration stage, then 66/33 in favour of Rosneft at the development stage.
ExxonMobil has in recent years clashed with Russian authorities over the budget for the Pacific Sakhalin-1 project.
Even before its Sakhalin battles, Exxon had a rough ride in Russia. Tillerson's predecessor, Lee Raymond tried to buy in to now-bankrupt YUKOS, which was then Russia's largest oil producer.
But Raymond failed to win the Kremlin's blessing and, instead of announcing a deal, Raymond rattled off a list of barriers to investment in Russia to a hotel ballroom full of reporters as YUKOS owner Mikhail Khodorkovsky listened silently.
CHEQUERED HISTORY
YUKOS owner Mikhail Khodorkovsky was later arrested for tax fraud. Rosneft acquired the main YUKOS production unit after a bankruptcy auction.
Thursday's Exxon deal is the second tie up with a major western oil company this year. It follows a shares swap and drilling deal in the Arctic between Rosneft and Britain's BP, another Western major with a rocky history of investment in Russia. BP Chairman Carl-Henric Svanberg was also present at the signing of the Rosneft deal in Davos.
"We are being asked what has changed in Russia, why now all these deals are being signed," Svanberg said.
"The regulations in the Russian oil and gas sector have changed considerably, offshore projects have been given preferences, in other words normal conditions have been created."
Analysts hailed the BP deal as a sign Russia is moving away from "resource nationalism" as it faces rising investment requirements to stay the world's top oil producer, pumping at current record rates of more than 10 million barrels per day.
BLACK SEA BLANK?
Exxon is the second U.S. major to pledge $1 billion for a junior role on the Black Sea, where no major oil reserves have been found in the past 100 years. Chevron (CVX) pledged over $1 billion to fund exploration and development of the Val Shatskogo project in the same region.
"It is the price of the entry ticket," said a Western banker in Davos.‹
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