Exxon's New Exploration Deal in Russia

On August 30, 2011, Irving-based Exxon signed a $3.2 billion exploration deal with state-owned Rosneft in the Kara Sea on the Arctic Ocean. As part of the deal, Rosneft has options to invest in Exxon drilling projects in the Gulf of Mexico and shale oil fields in Texas where hydraulic fracturing is used. The companies will also research into possibilities of finding new shale oil resources in Siberia. The deal is similar to the one Rosneft signed with BP PLC earlier this year, but that deal unraveled in May after BP could not come to the terms with its existing Russian partner, TNK-BP. Exxon and Rosneft, as part of the $3.2 billion deal, will build Arctic Research and Design Center for Offshore Development in St. Petersburg, Russia to (I) develop safety and environmental protection systems; and (II) Organize employee exchange. In 2003, Exxon was trying to make a much bigger bet in Russia with OAO Yukos, then the largest oil company in Russia, but days after the then-CEO of Exxon met with Russian President Vladimir Putin, Yukos founder and CEO Mikhail Khodorkovsky was jailed on charges of tax evasion and fraud. Yukos later filed bankruptcy and most of the assets were transferred to Rosneft.