Exxon Mobil scraps a deal with Russia’s Rosneft.
Exxon Mobil is abandoning its joint exploration ventures with the Russian oil company Rosneft, retreating from what was one of its most promising investments until Western sanctions got in the way.
During the early years of the Obama administration, when there was a brief warming of relations, Exxon Mobil signed an exploration deal with the Russians. Exxon Mobil and Rosneft, which is only half-owned by the Russian government but is state-run, agreed to invest $3.2 billion to search for oil in deep-water fields in the Arctic and elsewhere.
After Russia annexed Crimea from Ukraine in 2014, the United States and its European allies applied several sanctions on Moscow, eventually freezing Exxon’s investments.
In a regulatory filing Wednesday, Exxon Mobil said it had decided late last year to abandon the ventures this year and would take an after-tax loss of $200 million.
“The corporation and its affiliates continue to comply with all applicable laws, rules and regulations,” the company said.
With its investments already frozen by the sanctions, it was not clear what current activities, if any, Exxon Mobil’s move affected. The company has operations in Russia that are allowed under the sanctions, including an oil and gas production venture on Sakhalin, an island in the Siberian Arctic, and has had a business presence there for roughly a quarter-century.
An Exxon Mobil spokesman said the Irving-based company would have no comment beyond the filing.
In any case, the move sends a signal, said David Goldwyn, who was the State Department’s top energy diplomat early in the Obama administration.
“It’s a sign that the company realizes that U.S.Russia relations and in particular sanctions are not likely to change soon,” he said. “They are an enormous source of friction with the government, and it is better business for them to steer their business away from sanctioned activities.”
In July, Exxon Mobil sued the Treasury Department after it was fined $2 million for violating the Russia sanctions. The company had signed agreements with Igor Sechin, Rosneft’s chief executive and a close ally of President Vladimir Putin, when he was under sanctions.
The company argued that government guidance had indicated Sechin was blacklisted for personal conduct, not in his role as the oil company executive.