(BOE Report) – U.S. oil major Exxon Mobil and Russian state-run energy giant Rosneft have signed a non-binding initial agreement to help Exxon recoup a $4.6 billion write-down it made on its activities in Russia in 2022 following Moscow’s invasion of Ukraine, according to two sources familiar with the talks.
The agreement marks a tentative step toward repairing commercial relations between the two countries, although little further progress is likely until Moscow makes enough advances toward a peace deal in Ukraine and both the United States and the European Union relax sanctions on Russia.
Exxon spokesperson Terry Wade declined to comment.
Asked to comment last week on the talks, Rosneft told Reuters it had not signed a cooperation agreement to work with Exxon in Russia. In a follow-up inquiry, Reuters asked Rosneft whether it has signed a non-binding initial agreement with Exxon to help the U.S. oil major recoup money on its Russian operation. Rosneft did not respond.
Exxon received permission to engage in talks with Rosneft under the administrations of both U.S. President Donald Trump and former president Joe Biden. The talks on recouping the losses have been ongoing since 2023, chief executive Darren Woods told Reuters last week. Exxon and Rosneft held talks as officials from the United States and Russia met to discuss Ukraine, Reuters reported in August. Trump met Russian President Vladimir Putin in Alaska in mid-August in a bid to convince Moscow to agree to a peace deal with Ukraine.
Since then peace efforts have stalled but Exxon and Rosneft have continued talks, the sources said. The companies signed the agreement in late August or early September, one of the two sources said.
The new agreement with Rosneft sets the terms for talks that could help lead to Exxon recouping the $4.6 billion writedown and is not legally binding, the two sources said.
When asked in an interview on Wednesday whether Exxon and Rosneft had reached any agreement, Woods said discussions were about recouping losses, without elaborating further.
Exxon took a $4.6 billion impairment charge on its 30% operator stake in an oil and gas project off Russia’s Pacific coast, known as Sakhalin-1, in April 2022.
Many Western companies including Exxon said they would pull out of Russia within days of Russia invading Ukraine in February 2022 as governments around the world condemned the invasion and began imposing sanctions.
Exxon said the exit from Russia meant it had lost access to 150 million barrels of proven reserves of oil equivalent.
The United States and the European Union have imposed multiple sanctions on Rosneft and its chief Igor Sechin, a close ally of Putin.
Russia expropriated multiple Western assets later in 2022 and 2023 in response to the U.S. and its allies freezing around $300 billion of Russian assets in the West and expropriating Moscow’s stakes in various Western companies.
Other major oil companies have also written down assets in Russia. In February 2022, BP took a hit of up to $25 billion for exiting its near-20% stake in Rosneft, which accounted for around half of BP’s oil and gas reserves and a third of its production.
Shell took a $3.4 billion write down of its stakes in the Sakhalin 2 LNG plant and Siberian oil fields. Moscow was ready to deepen discussions with the United States on energy cooperation, including on the Sakhalin-1 project, Russian deputy foreign minister Sergei Ryabkov said last week in comments to local media.
“I can mention Sakhalin-1 as the most obvious example of discussions that have started,” Ryabkov said. Exxon’s return to Russia would be helpful, Sakhalin’s island governor Valery Limarenko said this month.
“We need to develop further and in this sense, it would be more efficient to develop further jointly,” Limarenko said.
(Reporting by Anna Hirtenstein and Marwa Rashad in London and Sheila Dang in Houston; Additional reporting by Shadia Nasralla; Editing by Daniel Wallis)
