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Tillerson’s appointment brings scrutiny to an exaggerated Russia and ExxonMobil connection

20th January 2017

According to Anna Belova, Ph.D., GlobalData’s senior analyst covering oil and gas, the strong reservations about Rex Tillerson as the proposed Secretary of State stem from his close relationships with President Vladimir Putin of Russia and members of the country’s elite.

Rex Tillerson, proposed US Secretary of State
Rex Tillerson, proposed US Secretary of State

“As the representative of one of the largest publicly traded companies in the world, it is natural that Tillerson formed connections with Russia’s oil and gas executives while he led ExxonMobil’s Russian subsidiary in the 1990s,” Belova said. “Yet these personal relationships have not resulted in significant returns for ExxonMobil’s shareholders; in fact, Russia contributes less than 1.5 per cent to the company’s current production, with no new projects in the pipeline.

"The current worldwide asset exposure of ExxonMobil is testimony to the broad involvement that the company has in practically every region of the world and to the depth of Tillerson’s experience in negotiating deals. In the upstream sector outside the United States, the corporation has investments exceeding USD93 billion in the period 2010-2016. However, this level of investment and global exposure is the norm for key international oil companies (IOCs). In fact, when compared with its peers, ExxonMobil has a smaller footprint in some regions or is involved in fewer projects.

"ExxonMobil ranks first among global oil companies for upstream capital expenditure invested in the period 2010-2016. During these years, the company’s main investments outside the United States were in Canada with USD21.6 billion and Africa with USD16.6 billion. In the Former Soviet Union, ExxonMobil has invested USD9.09 billion over the same period, with only about ten per cent going to Russian producing assets. In Kazakhstan, on the other hand, the company committed over USD9 billion to the Tengiz expansion and was instrumental in bringing Kashagan online in 2016, raising the company’s position with the country’s leadership for opportunities in the under-explored Caspian Sea.

"ExxonMobil has only one producing asset in Russia, Sakhalin-1 encompassing three fields in the Okhotsk Sea; where its much-publicised billion-dollar commitments are early-stage exploration projects focused on deepwater Black Sea and offshore Arctic. Sanctions prevented these projects from moving forward; yet, the current low-price environment and global crude oversupply are just as punishing to their feasibility. ExxonMobil exposure in Russia is similar to other Western IOCs’ positions in the country, with companies such as Total, BP, Statoil, and Shell producing from a limited number of projects while maintaining strategic relationships focused on long-term prospects in Russia’s offshore and unconventional reserves. Total and BP also have significant stakes in Novatek and Rosneft, respectively."

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