Exxon has decided to withdraw from most of its joint oil and gas exploration activities with Russian Rosneft, giving in to the pressure of U.S. and EU sanctions against Russia’s energy industry. The decision, Exxon said, was made last year, after Washington imposed additional sanctions on Russia for its alleged involvement in the 2016 presidential elections. The withdrawal process will begin this year.
The supermajor said it will book an after-tax charge of US$200 million from the move, but as Bloomberg notes, the negative effect will by no means be limited to this charge. The joint projects spanned millions of acres of untapped oil and gas resources that would have been instrumental in ensuring Exxon’s long-term production growth. One joint project on Sakhalin Island, which began earlier than 2013 when the other exploration deals were inked, will remain active.
Oil production from the company’s fields across the world has been falling steadily over the past six years, with annual declines booked in five of them. To stymie or even reverse this decline, the company looked to Russia, but it has also been buying assets in the shale patch and abroad, most notably in Brazil and Guyana.
In Brazil, Exxon last year won the rights to develop 10 oil blocks in the country’s deep waters. The U.S. giant partnered with Petrobras for six of the ten fields that together fetched a US$1.2 billion. For one of the fields, located in the Campos Basin close to the pre-salt zone, Exxon and Petrobras bid US$700 million. The Campos Basin is one of Brazil’s most prolific offshore resource areas. Related: Analysts Expect Oil Prices To Rise This Year
Earlier this week, Exxon said that it had made its seventh oil discovery offshore Guyana, striking a high-quality, oil-bearing sandstone reservoir that would be developed together with the other giant fields recently discovered in the area and would bring Guyana’s oil production to more than 500,000 bpd.
At home, Exxon has focused its attention on the Permian Basin, planning to triple its oil production there by 2025 to 600,000 barrels daily. The target is part of a US$50-billion spending plan for domestic operations.
By Irina Slav for Oilprice.com
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