Business

Exxon Loses Big After Ending Joint-Oil Drilling Project With Russia

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Exxon Mobil is backing out of a partnership with Russia’s state-owned oil giant to tap into Arctic oil fields thought to be some of the greatest untapped oil and gas basins, The Wall Street Journal reports.

Exxon announced the split in a regulatory filing Wednesday, though it had decided to make the move late last year. The decision cost the energy company $200 million in after-tax losses.

Former-Exxon CEO Rex Tillerson sealed the partnership in 2012. At the time, Russian Deputy Prime Minister Igor Sechin, a key architect of the plan, compared the deal to “sending man into outer space or flying to the moon,” according to Reuters.

The deal began to unravel after the U.S. and Europe placed economic sanctions on Russia for annexing the Crimean peninsula in 2014. Exxon had protested the sanctions at the time, claiming they unfairly punished U.S. companies that did business in Russia, The New York Times reports.

Exxon has not specified how the sanctions affected the oil company’s operations in Russia. Some of its assets were frozen but other activities have been allowed to continue under the sanctions.

“[Exxon’s decision is] a sign that the company realizes that U.S.-Russia relations and in particular sanctions are not likely to change soon,” former-Obama State Department official David Goldwyn told TheNYT. “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.”

Rosneft, Russia’s state-owned oil giant, said last year it planned to resume operations with Exxon in 2019. The company has since said it would re-enter the partnership with Exxon later, if legally possible.

Rosneft controls oil fields with some of the best potential in the world, but it must partner with other companies with superior technology, such as Exxon, in order to tap them, according to WSJ.

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