Exxon Welcomes Russia's Rosneft Into Gulf of Mexico

Rosneft takes a 30% interest in 20 GoM blocks.

Rich Smith
Rich Smith
Mar 6, 2013 at 3:57PM
Energy, Materials, and Utilities

In a surprising case of "turnabout is fair play," ExxonMobil (NYSE:XOM) -- which has long angled to participate in big ticket oil projects in Russia -- has just announced the entry of one of Russia's national oil champions into Exxon's own backyard.

On Wednesday, Exxon confirmed that it has signed an agreement to sell Rosneft (NasdaqOTH: OJSCY) subsidiary Neftegaz America (literally "Oil and Gas America") a 30% interest in 20 deepwater exploration blocks that Exxon owns in the Gulf of Mexico.

The "blocks" in question cover 111,600 acres of water, at depths ranging from 2,100 to 6,800 feet, but are not currently being actively drilled. Once seismic surveys have been analyzed and drilling begins, Exxon -- which retains a 70% controlling interest in the blocks -- will remain operator of exploration and production operations.

Exxon and Rosneft signed a Strategic Cooperation Agreement in 2011, in which the companies agreed to "undertake joint exploration and development of hydrocarbon resources in Russia and other countries and to share technology and expertise." Pursuant to this agreement, Exxon granted Rosneft the option of investing in the 20 Gulf properties, which option Rosneft has now exercised.

Financial terms of the deal were not disclosed, but already, Exxon investors seem to be taking a rather dim view of the development, bidding the shares down 0.1% at last report. Rosneft shares are not currently trading (it being nearly midnight in Moscow right now).