Moscow — ExxonMobil said late Wednesday that it plans to exit Russian exploration and production joint ventures set up with Rosneft in 2013 and 2014, following the introduction of US and EU sanctions against Russia over its role in the conflict in Ukraine in 2014, and the further expansion and codification of US sanctions in 2017.
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Exxon's announcement comes after a three-year stalemate on the back of Western sanctions, during which the company was unable to carry out work on the JVs that include offshore Arctic, deepwater Black Sea and West Siberian tight oil licenses.
"In late 2017, the corporation decided to withdraw from these joint ventures. The corporation expects it will formally initiate the withdrawal in 2018," Exxon said in a document filed with US regulators.
Exxon said that the corporation and its affiliates continue to comply with all applicable laws, rules and regulations including sanctions, and that the decision to withdraw from the projects will result in an after-tax loss of $0.2 billion.
Rosneft declined immediate comment on Exxon's exit from the projects.
Exxon's agreements to establish joint ventures with Rosneft signed in 2013 and 2014 cover exploration and production activities in the Arctic Kara, Laptev and Chuchi Seas, as well as the Black Sea.
As of year-end 2017 ExxonMobil's net offshore acreage under these agreements was 63.6 million acres, the company said.
In the same period ExxonMobil signed an agreement to evaluate development of tight oil reserves in West Siberia.
In 2015, then-Exxon CEO Rex Tillerson estimated potential losses from the sanctions at up to $1 billion due to their impact on Exxon's role in the joint ventures.
The Kara Sea licenses include an area where Rosneft announced it had discovered the Pobeda field in 2014, estimating reserves at 940 million barrels of crude and 391.9 billion cubic meters of gas.
Exxon was forced to halt its involvement in the project following the introduction of sanctions against Russia. Since then there has been little activity at the site, with volatile oil prices making expensive, technically challenging and risky Arctic projects commercially unviable.
Hopes that Exxon may see some relief from sanctions under the presidency of Donald Trump were dashed when the administration said it would not grant any waiver requests in April last year.
Trump's perceived pro-Russian position, as well as his choice of Tillerson as Secretary of State, had fuelled speculation that the company would have some restrictions lifted.
Exxon is set to continue its involvement as operator in the Sakhalin 1 project in the Russian Far East, which is covered by a production sharing agreement signed in 1996, and has so far been unaffected by Western sanctions.
Exxon and Rosneft are also considering developing an LNG plant on Sakhalin.
Exxon has suffered from the introduction of sanctions more than other Western majors, including BP, which has seen its cooperation with Rosneft grow over the last three years.
In addition to its 19.75% stake in Rosneft, the UK major has entered new upstream projects with the company both in Russia and abroad, and agreed to cooperate on services and gas marketing.