MOSCOW — ExxonMobil and Rosneft, the U.S. and Russian oil giants, said Wednesday they could invest over $500 billion in a joint venture that would explore for and produce oil in the Arctic and the Black Sea.
The two companies agreed in August to team up to develop oil and natural gas fields in Russia and North America. Their chief executives signed the deal on Monday at Russian Prime Minister Vladimir Putin’s suburban residence.
Rosneft had previously teamed up with BP in a similar deal but the agreement fell through after the shareholders of BP’s Russian venture blocked it in court.
Under the Exxon-Rosneft deal, the Texas-based company will have access to some of the world’s richest sources of crude oil and other hydrocarbons in the Russian Arctic as well as the Black Sea. In turn, Rosneft subsidiaries will take minority stakes in two Exxon projects in the U.S. and Canada and will have an option for a stake in a project in the Gulf of Mexico
In a presentation in New York, Exxon and Rosneft said that recoverable hydrocarbon reserves at the three key Arctic fields are estimated at 85 billion barrels of oil equivalent. The companies are planning to drill the first exploratory wells in the Arctic’s Kara Sea, north of Siberia, as early as 2014. The final investment decision is expected between 2016 and 2017, they said.
Russian energy czar Igor Sechin promised the government’s support for the project, which he said would help modernize the whole Russian economy. The deputy prime minister said the Arctic project is a long term commitment “which is going to take several decades to implement.”
Sechin pledged that the Arctic project would be exempt from export duties, property tax and will get a flexible rate on oil extraction tax.
Industry analysts say production in the harsh Arctic environment cannot be profitable without heavy tax benefits. Rex Tillerson, Exxon Mobil’s chief executive, said the tax regime “will allow us to develop these resources now.”