Russian state oil company Rosneft will develop over a billion tonnes of Black Sea oil using a $1 billion investment by ExxonMobil, whose relationship with the world's top oil producing country has been poor in the 21st Century.
The deal was announced on 27 January in Davos and came just days after Rosneft unveiled an Arctic tie-up and share swap with Britain's BP.
Russia's Deputy Prime Minister Igor Sechin, who is also Rosneft's chairman, signed the deal with Rex Tillerson, chief executive of US No. 1 Exxon, at the World Economic Forum.
Sechin said the deal was proof that the investment climate in Russia had improved.
"We have managed to convince even Exxon of that," he said.
Rosneft officials said Exxon would invest $1 billion, and the deep-sea venture would be split 50/50 at the exploration stage, then 66/33 in favour of Rosneft at the development stage.
ExxonMobil has in recent years clashed with Russian authorities over the budget for the Pacific Sakhalin-1 project.
Even before its Sakhalin battles, Exxon had a rough ride in Russia. Tillerson's predecessor, Lee Raymond, tried to buy in to now-bankrupt YUKOS, which was then Russia's largest oil producer.
But Raymond failed to win the Kremlin's blessing and, instead of announcing a deal, Raymond rattled off a list of barriers to investment in Russia to a hotel ballroom full of reporters as YUKOS owner Mikhail Khodorkovsky listened silently.
Chequered history
Khodorkovsky was later arrested for tax fraud. Rosneft acquired the main YUKOS production unit after a bankruptcy auction.
Thursday's Exxon deal is the second tie up with a major Western oil company this year.
It follows a shares swap and drilling deal in the Arctic between Rosneft and Britain's BP, another Western major with a rocky history of investment in Russia.
BP Chairman Carl-Henric Svanberg was also present at the signing of the Rosneft deal in Davos.
"We are being asked what has changed in Russia, why now all these deals are being signed," Svanberg said.
"The regulations in the Russian oil and gas sector have changed considerably, offshore projects have been given preferences, in other words normal conditions have been created."
Analysts hailed the BP deal as a sign Russia is moving away from "resource nationalism" as it faces rising investment requirements to stay the world's top oil producer, pumping at current record rates of more than 10 million barrels per day.
Russia also approved on Thursday PepsiCo's purchase of the country's largest food processor, juice and dairy group Wimm Bill Dann.
Entry ticket
Russia wants reciprocity from the West. Russian companies are especially keen for downstream assets in Europe.
Shares in top Mediterranean refiner Saras shot up 12% on Thursday after a report of interest from Russian state gas export monopoly Gazprom.
BP and Rosneft already have a refinery joint venture in Germany, and have now agreed on three projects in the Kara Sea as well as a share swap which will make Russia a shareholder in BP.
In a reminder of the continuing complexities of investing in Russia, BP's new deal has drawn protests from its existing partners there, the co-owners of its eight-year-old joint venture, TNK-BP. The Alfa-Access-Renova (AAR) consortium is now suing over breaches of the shareholder agreement with BP.
Sechin said he was aware of the legal action but said he would meet the AAR shareholders to smooth over the protest.
Black Sea blank?
Exxon is the second US major to pledge $1 billion for a junior role on the Black Sea, where no major oil reserves have been found in the past 100 years.
Chevron pledged over $1 billion to fund exploration and development of the Val Shatskogo project in the same region.
"It is the price of the entry ticket," said a Western banker in Davos.
(EurActiv with Reuters.)
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