To Tap Arctic Oil, Russia Partners With Exxon Mobil
A Rosneft flag flies over the Russian oil giant’s refinery near the city of Samara. Growth of Russia’s oil and gas output has stalled, but Exxon Mobil and other foreign firms have signed deals to help exploit the Arctic.
Russia is still the world’s largest producer of oil and gas, but growth has stalled and to get to new supplies requires going to a very difficult place — the Arctic.
“If you want to be in this business in 2020, 2025, you must think about the Arctic,” says Konstantin Simonov, head of the National Energy Security Fund in Moscow.
In the past month, Moscow has signed several deals with foreign oil companies designed to maintain Russia’s position as the top producer. The most important deal, and the most lucrative, is a partnership between Exxon Mobil and Russian oil giant Rosneft.
Exxon Mobil could eventually spend half a trillion dollars to look for and extract oil and gas in the Russian Arctic. The investment is enormous, but so are the potential rewards.
Getting To The Arctic’s Reserves
“The reserves in the Russian Arctic are vast,” says Roland Nash, chief investment strategist for Verno Investment in Moscow. “Nobody quite knows how vast, but the numbers are enormous.”
Some estimates put the oil and gas reserves in Russia’s Arctic waters at 100 billion tons. According to Simonov, the deal with Exxon Mobil is a sign that Russia knows it needs international investment and technology to get to those reserves.
“Without foreign partners, for us it will be impossible to develop this area,” Simonov says. “It’s out of [the] question.”
The deal was signed on April 18 with Russian President Vladimir Putin looking on. It gives Exxon Mobil access to oil fields in the Black Sea and provides Russia some access to Exxon Mobil’s oil deposits in Texas, Canada and the Gulf of Mexico.
At the signing, Putin said Exxon Mobil also had the option to work in Russia’s north and south, as well as in other regions. Meanwhile, the Russians will soon start work with Exxon Mobil in the U.S. and Canada.