The pact, which includes an option for Rosneft to invest in Gulf of Mexico and Texan properties, ended any hope of Britain's BP reviving its deal with state-owned Rosneft to develop the same Arctic territory. That deal was blocked in May by the billionaire partners in another of BP's Russian ventures (see 'Background').
The pact gives Exxon, the biggest US oil company, access to substantial reserves in Russia, one of the world's top oil producers. Rosneft, for its part, gets to join forces with one of the few companies capable of drilling in the harsh, deep waters of the Arctic.
Russia has shown greater willingness in the past year to secure partnerships with foreign energy firms, even if some deals later fell apart. The Exxon announcement comes only months after the demise of a Rosneft deal with Chevron for a $1 billion (€692 million) investment in an estimated $32 billion (€22.15 million) Black Sea project.
Analysts cited differences between Chevron and Rosneft over the choice of contractor, the joint venture's domicile and the jurisdiction of arbitration for any business disputes.
Yet Chevron, like Shell, was also considered a potential partner for Rosneft's Arctic venture.
Russian Prime Minister Vladimir Putin attended the Tuesday signing – in the Black Sea resort of Sochi – by Exxon Chief Executive Rex Tillerson and Russia's top energy official, Deputy Prime Minister Igor Sechin.
'New horizons' for Russia
"New horizons are opening up. One of the world's leading companies, ExxonMobil, is starting to work on Russia's strategic shelf and deepwater continental shelf," Putin said.
Exxon and Rosneft agreed to invest $3.2 billion (€2.2 billion) to develop East Prinovozemelsky Blocks 1, 2, and 3 in the Arctic Kara Sea and the Tuapse licensing block in the Black Sea.
Rosneft will own 66.7% and Exxon the rest of the joint venture to develop the blocks, which Exxon said were "among the most promising and least explored offshore areas globally, with high potential for liquids and gas".
"The fact that someone with the stature of ExxonMobil is willing to give it a stab is very significant," said Amy Myers Jaffe, of the Baker Institute at Houston's Rice University.
While Rosneft will tap Exxon's expertise to open up one of the last unconquered drilling frontiers, it will also diversify further by getting a piece of some of Exxon's US developments.
"To get into Russia offshore you give up some of your domestic offshore. I think it's a fair trade," said Brian Youngberg, senior energy analyst at brokerage Edward Jones in St. Louis, who has a "hold" rating on Exxon shares.
It marks a big move for Exxon after it spent a year swallowing XTO – a much-criticised purchase that shifted its profile toward the depressed US natural gas market. "Now ExxonMobil is starting to look elsewhere for deals," Youngberg said.
Analysts also said the Rosneft-Exxon agreement indicates that the reset in relations Obama sought was working to reduce the political risk for US businesses operating in Russia.
"Three years ago, American companies were being excluded. Here, an American company is at the centre of a flagship announcement. This deal demonstrates that reset has had a positive effect on US-Russia energy relations," said Cliff Kupchan, director of Eurasian Practice at Eurasia Group.
An Obama administration official said the deal was a result of the new cooperation between the United States and Russia.
"Today's announcement of a deal between Exxon-Mobil and Rosneft valued at $3.2 billion (€2.21 billion) is another example of the expanding economic relationship and the potential for mutually beneficial collaboration between Russian and American businesses," the official said.
In explaining the deal's significance, Myers Jaffe pointed to previous failed efforts in the past decade to foster joint energy interests. "There was a lot of disappointment on both sides," she said. "The US industry just gave up on Russia."
Plan B for Rosneft
Rosneft said the Kara Sea blocks contain an estimated 36 billion barrels of recoverable oil resources. Total resources are estimated at 110 billion barrels of oil equivalent – more than four times Exxon's proven worldwide reserves.
The Black Sea block is estimated to hold nine billion barrels of oil reserves. The first drilling is planned to start in 2015, with Exxon shouldering most of the costs.
"The Russians very quickly had a Plan B, and Plan B was Exxon," said Fadel Gheit, energy analyst at Oppenheimer & Co, referring to the quick switch to Exxon from BP.
The deal marks a turnaround in Russia for Exxon, which was widely thought to be on the verge of taking over Yukos, then Russia's largest oil company, before Yukos's boss, Mikhail Khodorkovsky, was arrested in 2003.
Khodorkovsky was subsequently jailed for fraud and tax evasion and Yukos's prime assets were bought at bankruptcy auctions by Rosneft, now Russia's industry leader and with enough reserves to cover 27 years of production.
Uncertainty persists over whether Putin or President Dmitry Medvedev will seek the presidency next March. Putin can now show off the deal as a success if he decides to run.
The transaction also marks a comeback for Sechin, who was ousted as Rosneft chairman earlier this year in a purge of state company boards ordered by Medvedev. Sechin estimated total investment in the project at $200 billion-$300 billion (€138.5 billion- €207.8 billion).
In anticipation of all the money flowing there, oilfield services companies including Schlumberger Ltd., Baker Hughes Inc and Weatherford International Ltd. have been picking up assets in Russia.
Environmental concerns are unlikely to create barriers to oil extraction in Russia's remote Arctic regions, if moves this year by the country's Natural Resources Ministry to shift nature reserve boundaries are any guide.
Rosneft will be offered an equity interest in Exxon exploration projects in North America, including deepwater Gulf of Mexico and fields in Texas, as well as in other countries.
The deal thus fulfills a demand for reciprocity often made by Putin, helping Rosneft, which already works with Exxon offshore Russia's Sakhalin island, toward its long-term goal of being a global energy major.
It was not clear whether any such investments by Rosneft would need approval from the Committee on Foreign Investment in the United States. An Exxon spokesman declined to comment.
There is no exchange of equity in the agreement, while the BP deal called for a $16 billion (€11 billion) share swap in which BP would have exchanged a 5% stake for 9.4% in Rosneft.
"Exxon is double or triple the size and market value of BP," said Gheit at Oppenheimer. "So, obviously, this would be much more important for a BP than it is for Exxon."
EurActiv with Reuters