Analysis: Tillerson, Russia and energy growth

Analysis: Tillerson, Russia and energy growth

By Paul Harris

Jan. 10, 2017, 7:28 a.m.


Former ExxonMobil CEO Rex Tillerson’s track record in Russia will come under further scrutiny this week.

Tillerson, who is Donald Trump’s nominee for Secretary of State, will begin confirmation hearings with the Senate Foreign Relations committee on January 11.

The nomination of Tillerson has drawn fire from critics due to his record of deal making within Russia on behalf of ExxonMobil and his subsequent relationship with Vladimir Putin. Tillerson retired as ExxonMobil’s chairman and CEO at the end of 2016. He has been replaced by Darren W. Woods, formerly the company’s president.

Trump’s actions since Tillerson’s nomination have done little to quell the view that his presidency will actively re-set Russian relations and the direction of U.S. diplomacy generally. Over the last week, the President-elect and his team have been facing questions regarding Russia cyber-espionage and other efforts to influence the US election. The President elect’s response on Twitter continues to point towards re-set with Russia.

Specific to Tillerson, critics have questioned the oilman’s views on economic sanctions and his connections within Russia as evidence that U.S.-Russia relations are about to thaw considerably.

For oil and gas producers, energy services companies and investors, a strategic shift in US-Russian relations could present significant investment and growth opportunity.

Russia continues to be one of the largest producers of oil and gas and is geographically situated between both Europe and key Asian markets. It has vast untapped reservoirs that could be accessed with unconventional technology. Thawing of US-Russia relations may lead to US-based companies being granted greater access and opportunities.

Western oil and gas companies have largely been blocked from activity in Russia due to economic sanctions. Over the last three years, Russian’s energy industry has undergone significant shifts.

Evaluate Energy recently extracted Russian M&A deals that have occurred over the last few years. Since the start of 2014, the year in which the Crimean sanctions were introduced against Russia, the following major deals, mainly involving Rosneft, have taken place for Russian E&P assets involving foreign investors:


Date Deal Cost

(US$ million)

Dec-16 Glencore and the Qatar Investment Authority acquire a 19.5% interest in the issued share capital of Rosneft 15,777
Sep-15 India’s ONGC Videsh ltd. acquires an initial 15% stake in Vankorneft from Rosneft 1,247
Nov-16 China’s Beijing Gas Group Company Limited acquires a 20% stake in Verkhnechonskneftegaz from Rosneft 1,061
Mar-16 India’s ONGC Videsh Ltd acquires an additional 11% interest in Vankorneft from Rosneft 913
Mar-16 India’s Bharat Petroleum, IOCL and Oil India each acquire a 7.97% interest in Vankorneft from Rosneft 662 (each)
Mar-16 India’s Bharat Petroleum, IOCL and Oil India each acquire a 9.97% interest in Taas-Yuryakh Neftegazodobycha from Rosneft 367 (each)
Jun-16 BP Plc farms in to earn a 49% interest in the Yermak Neftegaz onshore license from Rosneft 153
Aug-16 Australia’s Skyland Petroleum Limited acquires a 100% interest in the Sakha license from a private Russian company 100
Apr-14 Oil India farms in to earn a 50% interest in Tungol Licence 61 from PetroNeft Resources plc in Siberia 79
Dec-16 Austria’s OMV acquires a 24.98% interest in the Achimov IV and V phase development in the Urengoy gas and condensate field from Gazprom in exchange for a 38.5% participation interest in OMV (NORGE) AS Undisclosed

Source: Evaluate Energy M&A Database

Finding tools to track and understand Russian energy activity can be challenging, says Evaluate Energy senior analyst Mark Young.

“Our database may be an essential tool to understand the state of energy industry in Russia and where to find opportunity.”


About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on January 10, 2017, in economic impact, oil, political. Bookmark the permalink. Leave a comment.

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