In the context of the growing conflict in the Ukraine and Crimea, this investigation and briefing looks at the long relationship between ExxonMobil and Russia. We question ExxonMobil’s allegiance to the United States amid the growing calls from the right and from the American Petroleum Institute for increasing U.S. natural gas exports as a means to pressure Russia.
We dig into the deals cut over the past few years between Exxon and Rosneft, a company 70 percent owned by the Russian government, and the U.S. assets and technology that Russia got out of the deal.
We look at President Reagan’s opposition to the first big Russian gas pipelines to Europe in 1982 and how pressure from Exxon and other multinational oil companies backed Reagan down. Turns out Reagan was right about the dangerous dependency these pipelines would create.
The Getty Images caption to the photo above right reads:
Russia’s Prime Minister Vladimir Putin speaks with ExxonMobil President and Chief Executive Officer Rex Tillerson during the signing of a Rosneft-ExxonMobil strategic partnership agreement in Sochi on August 30, 2011. Russia’s oil champion Rosneft and US ExxonMobil clinched a global deal worth up to half-a-trillion dollars that will see the US supermajor take BP’s place in pioneering Arctic exploration work. AFP PHOTO / RIA NOVOSTI / POOL / ALEXEY DRUZHININ
The title of this blog could also be “Is Exxon an American Company?” and the answer to that question comes from Lee Raymond himself. The answer is ‘no’.
Steve Coll’s book about ExxonMobil, Private Empire recounts this telling moment:
“Once, at an industry meeting in Washington, an executive present asked Raymond whether Exxon might build more refineries inside the United States, to help protect the country against potential gasoline shortages.
“Why would I want to do that?” Raymond asked, as the executive recalled it.
“Because the United States needs it…for security,” the executive replied.
“I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”, Raymond said.”
Read Coll’s book if you haven’t. The title is more true than ever as seen through recent events in the Ukraine.
I have been tracking Exxon since the late 1990s within the climate change struggle, including launching the Greenpeace project, ExxonSecrets, exactly ten years ago, where we tracked tens of millions of dollars of ExxonMobil funding to climate denial front groups in the United States and elsewhere.
Coverage of the crisis in the Ukraine quickly honed in on on the central geopolitical issue – natural gas and growing recognition (or re-discovery) of the power Russia exerts over Europe via natural gas exports. Soon after the riots in Kiev and Russia’s incursion into Crimea, we began to hear a full-throated call from Big Oil and their mostly Republican sycophants in Washington DC, for the export of U.S. natural gas to Europe…as if the U.S. could suddenly neutralize Putin’s power if not for the Obama Administration obstruction inaction on LNG terminals, gas and crude oil exports, and the Keystone XL pipeline.
What’s the saying about crisis equals opportunity? The oil industry plays this game well.
Gas and Hot Air
Steve Mufson, energy reporter with the Washington Post, wrote about the relationship between the Ukraine and Russia on natural gas in late February, “Shifting energy trends blunt Russia’s natural-gas weapon”.
The issues of the U.S. policy debate over gas exports were laid out well in this March 5th New York Times article “U.S. Hopes Boom in Natural Gas Can Curb Putin” By Coral Davenport and Steven Erlanger, looking at LNG exports as a foreign policy weapon.
Speaker John A. Boehner, Republican of Ohio, said: “One immediate step the president can and should take is to dramatically expedite the approval of U.S. exports of natural gas. The United States has abundant supplies of natural gas — an energy source that is in demand by many of our allies — and the U.S. Department of Energy’s excruciatingly slow approval process amounts to a de facto ban on American natural gas exports that Vladimir Putin has happily exploited to finance his geopolitical goals. We should not force our allies to remain dependent on Putin for their energy needs.”
Boehner’s arguments were neatly rebutted by Mufson of the Washington Post in his March 7th piece “Boehner’s plan to save Ukraine: It’s full of gas“. The Huffington Post‘s Paul Bluementhal and Christina Wilkie wrote that the “U.S. Push For Natural Gas Exports To Help Ukraine Won’t Actually Help Ukraine“.
Several articles have looked at the conflict from (the poor beleaguered) Exxon’s perspective including Joe Carroll at Bloomberg “Exxon’s Largest Non-U.S. Prize at Risk in Ukraine Crisis” and Andrew Restuccia’s Politico piece, “Exxon’s Russia ties still strong amid crisis: Russia’s invasion of Ukraine’s Crimea region could complicate Exxon’s work.”
“The standoff between the United States and Russia isn’t getting in the way of ExxonMobil’s lucrative relationship with Vladimir Putin’s regime. At least not yet. The U.S.-based oil and gas giant has spent years cultivating ties with the Kremlin, reaching a multibillion-dollar exploration deal with state oil company Rosneft in 2011. Putin even awarded Exxon CEO Rex Tillerson the Order of Friendship, one of Russia’s highest honors, for the company’s “big contribution to developing cooperation in the energy sector.””
Bloomberg‘s Stephen Bierman was ahead of the game with his January article “Exxon Russia ambitions show oil trumps Obama-Putin spats” when the context of the ‘spat’ was Snowden’s NSA document leaks, Pussy Riot and other human rights questions and Obama snubbing the coming Winter Olympics. That seems like a very long time ago now.
With things still hot in the Ukraine, and politics heating up on the issue on Capitol Hill, not many reporters or policy experts have explored whether ExxonMobil’s interests align in any way with the State Department’s objectives when it comes to foreign policy or the exporting U.S. energy resources. Nor have many reporters gotten the oil majors on the record regarding whether the conflict.. The American Petroleum Institute and ‘American’ oil companies like ExxonMobil, Chevron and ConocoPhillips have remained largely quiet until last week when API held a teleconference with Erik Milito, API’s director of upstream and industry operations:
“The long lead time to permit and approve the LNG facilities should not be a deterrent to taking action quickly, said Milito, addressing criticism that these approvals would do little to ease the situation facing the Ukraine and other European nations heavily dependent on Russia for natural gas and oil.
“First, market signals are incredibly powerful — provided the market believes that we will do what we say we will do,” he said. “And second, what geopolitical crisis 10 or 20 years from now will draw the same comments, if we stand by today and watch others seize the opportunity?”
Exxon’s Russian Love Affair
Exxon’s affairs with Russia have a long and rocky history.
1982– President Reagan was dead set against the gas pipelines that link Russia to Europe, seeing the future that is now. Exxon backed him down as detailed in The Washington Post “Soviet Gas Pipeline to Benefit Multinational Oil Companies”, by Dan Morgan, February 6, 1982
“The $25 billion Soviet natural gas pipeline, a project opposed by the Reagan administration, is destined to benefit not only European consumers but also major multinational oil companies, including U.S.-based Exxon, which have signed up for large volumes of the gas under agreements reached with the Soviets.
While administration officials have vowed to block or delay construction of the controversial pipeline, Exxon, Shell of the Netherlands and Britain’s BP are busily planning to add their share of the new Soviet gas to the pool they use to supply industries and homes in West Germany. The stake of the oil multinationals in the pipeline project adds a new dimension to the unresolved tensions within the Reagan administration on this issue.
The administration has a basic pro-business inclination; it also is determined to stand up to the Soviets in the wake of the crisis in Poland. The two aspects of its policy are at war.
U.S. officials warn that the pipeline, the largest single East-West business deal in history, will drastically increase European dependence on Soviet energy and will provide Moscow with $10 billion a year in hard currency.
“Reagan has absolutely no reason to forbid this business,” said Wolfgang Oehme, chairman of Exxon‘s Hamburg-based German subsidiary, in the current issue of Der Spiegel magazine.”
2003– A photograph shows a fateful meeting at the World Economic Forum.
Moscow, Russia, October 3, 2003, Exxon Mobil’s chairman Lee Raymond and Yukos CEO Mikhail Khodorkovsky taking part in the work of Moscow session of World Economic Forum on Friday, where Khodorkovsky declared that unification of two Russian oil giants Yukos and Sibneft had been practically completed, Exxon Mobil expressed intention to buy 40-persent shares of ‘Yukos-Sibneft’ for 25 billion dollars. (Photo by: Sovfoto/UIG via Getty Images)
Khodorkovsky was arrested and jailed on October 25, 2003, just three weeks after this meeting with ExxonMobil and only released by Putin in December 2013 after ten years in jail.
2011– Back to the Exxon Rosneft deal. In the photo at the top of this blog, both men are smiling like the won the deal. Further exploration of the details show that Exxon is actually sharing coveted U.S. fracking technology with Russia and Rosneft got options for U.S. fossil fuel assets including Texas fracking shale gas fields, extensive Department of Interior ExxonMobil leases in the Gulf of Mexico and sizable gas reserves in Alaska, along with Exxon oil plays in Canada.
A Rosneft press release about the initial deal says:
“Neftegaz Holding America Limited, an independent indirect subsidiary of Rosneft registered in Delaware, concluded separate agreements on the acquisition of a 30 percent equity in ExxonMobil’s share in the La Escalera Ranch project in the Delaware Basin in West Texas in the United States.
Neftegaz Holding America Limited will also be given the right to acquire a 30 percent interest in 20 blocks held by ExxonMobil in the U.S. Gulf of Mexico, one of the most oil and gas rich basins in the world. The ExxonMobil blocks are located in prospective areas of the Western part of the Gulf.
In addition, RN Cardium Oil Inc., an independent Rosneft subsidiary, acquired 30 percent of ExxonMobil’s stake in the Harmattan acreage in the Cardium formation of the Western Canada Basin in Alberta, Canada. The Cardium formation is an active unconventional oil play in which ExxonMobil has a significant acreage position. The execution of that project may become a source for the development of technologies for unconventional reservoirs in Russia.
A February 2013 ExxonMobil press release goes into more detail about the Alaska gas portion of the deal:
“A separate Heads of Agreement was signed providing Rosneft (or its affiliate) an opportunity to acquire a 25 percent interest in the Point Thomson Unit, which covers development of a remote natural gas and condensate field on Alaska’s North Slope. It is estimated that Point Thomson contains approximately 25 percent of the known gas resource base in Alaska’s North Slope..”
Meanwhile, Exxon and Rosneft are getting to work in Russia as shown by a March 5, 2014 Exxon press release touting “ the largest offshore oil and gas platform in Russia…among significant projects scheduled for startup this year”
The Rosneft website has a string of press releases on the deals:
August 30, 2011 – Rosneft and ExxonMobil to join forces in the Artic and Black Sea offshore, enhance co-operation through technology sharing and joint international projects
April 16, 2012 – Rosneft and ExxonMobil Announce Progress in Strategic Cooperation Agreement (Note: Tillerson met with Putin again on this occasion)
September 6, 2012 – Rosneft and ExxonMobil Announce Selection of Vostochniy Offshore Structures Construction Yard for Concept Evaluation and Feasibility Study of Shallow Water Arctic Drilling Platform
December 7, 2012 – Rosneft and ExxonMobil Sign Agreement For Western Siberia Tight Oil Pilot Project
December 7, 2012 – Rosneft and ExxonMobil Sign Declaration on Russian Arctic Shelf Environmental Protection
February 13, 2013 – Rosneft and ExxonMobil Expand Strategic Cooperation
March 6, 2013 – Rosneft Subsidiary Acquires Interest in ExxonMobil Gulf of Mexico Exploration Blocks
Exxon Giving Taxpayer Funded Research to Russia?
The Obama Administration is quick to brag about its “all of the above” energy strategy, which isn’t a strategy at all, but instead like Senator Tim Kaine of Virginia said the other night, more like a teenagers’ blow off line “whatever…”
And Obama will brag that there is more drilling now than under Bush an about the fracking gas boom which has created so much surplus gas that Exxon says its “losing its shirt.” Exxon is largest US fracker after its purchase of the XTO company – meaning it has the most interest and would the most profit from exporting fracked Pennsylvania or Texas gas.
Obama and Democrats fending off Tea Party treasonists will rightly give the Government credit for enabling the fracking boom with over $100 Million in government funded research into drilling techniques.
Exxon is now giving all that intellectual capital to Putin. The Free Market at work.
Gas Gas Everywhere
Meanwhile, Exxon has gas interests all over the globe that it might choose to market ahead of U.S gas even if the Congress or State Department says ‘please’. Exxon invested upwards of $10 Billion in an LNG export facility in Qatar and has another such project Papua New Guinea, along with being a partner in Chevron‘s Australian “Gorgon” gas export monstrosity
The Other Oil Majors Also Big Into Russia
ConocoPhillips in Russia since 1992 Polar Lights joint venture with Rosneft.
BP still has a 25 percent stake in Rosneft.
Chevron, like most has had its ups and downs with Russia, but has strong interests there, investing billions in pipelines.
Shell Starts Fracking Giant Russian Shale Oil Formation in January 2014
Which begs the biggest question: While Big Oil uses this crisis to gain political support for oil and gas exports, are they also lobbying against sanctions on Russia, just like in 1982? …taking a crucial negotiating tool out of the government’s hands. Maybe that’s why Putin was laughing when Obama called him on in late February to complain about the occupation of Crimea.