Tillerson’s appointment brings scrutiny to an exaggerated Russia and ExxonMobil connection
Strong reservations about Rex Tillerson as the proposed US Secretary of State stem from his close relationships with President Putin of Russia and members of the country’s elite. As the representative of one of largest publicly traded companies in the world, it is natural that Mr. Tillerson formed connections with Russia’s oil and gas executives while he led ExxonMobil’s Russian subsidiary in 1990s. Yet, these personal relationships have not resulted in significant returns for ExxonMobil’s shareholders; in fact, Russia contributes less than 1.5 percent to the company’s current production, with no new projects in the pipeline.
In the Former Soviet Union, ExxonMobil has invested $9.09bn during 2010 to 2016, with only about 10 percent going to Russian producing assets. In Kazakhstan, on the other hand, the company committed over $9bn to the Tengiz expansion and was instrumental in bringing Kashagan online in 2016, raising 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 Okhotsk Sea; whereas, its much-publicized 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 crude price environment and global crude oversupply are just as punishing to their feasibility.
Also, ExxonMobil’s exposure in Russia is similar to other Western IOCs’ positions in the country, with companies such as Total, BP, Statoil, 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.
Both ExxonMobil and Russia have benefited from their two-decade partnership, yet, these benefits represent a minor fraction of either’s production levels or revenues. Therefore opposition to Mr. Tillerson’s appointment based solely on his and ExxonMobil’s involvement in Russia’s oil and gas sector assigns a greater value to their relationship than either party has been able to realise.