By Daniel Gilbert, James and Marson
Exxon Mobil Corp.'s chief executive is set to speak at an energy
summit in Moscow on Monday, even though the U.S. government has
discouraged American attendance as it tries to isolate the Kremlin
over its actions in Ukraine.
CEO Rex Tillerson's scheduled address at the World Petroleum
Congress, a major industry event held every three years, will be
just months ahead of Exxon's plan to drill its first well in
Russia's Arctic waters, with state-controlled OAO Rosneft.
He is appearing with the head of Rosneft, Igor Sechin, a
longtime associate of Russian President Vladimir Putin. The U.S.
Treasury sanctioned Mr. Sechin and others in April. The order bars
U.S. citizens from doing business with him, but not Rosneft, and
doesn't prohibit appearances with the Russian executive.
Exxon's alliance with Russia's largest oil producer represents
one of the Irving, Texas, company's most promising chances to
discover new petroleum reserves. But Exxon must chart a tricky
course to stay in the good graces of both the Kremlin and the White
House as tensions between the governments mount.
Ukrainian officials last week accused Moscow of moving tanks
into the country to support pro-Russian separatists. U.S. and other
countries backed up the claim, raising the possibility of further
sanctions. Ukrainian President Petro Poroshenko said Saturday in a
phone call with his French counterpart that the European Union
should apply tougher sanctions if Moscow doesn't stop destabilizing
Ukraine.
Russia has denied arming separatists.
The U.S. said it wasn't sending government officials to the
World Petroleum Congress in Russia and discouraged senior U.S.
executives from attending.
"We do not believe it is appropriate to return to 'business as
usual' in Russia," Laura Lucas Magnuson, a spokeswoman for the U.S.
National Security Council, said by email.
Exxon said only that Mr. Tillerson had attended the last four
World Petroleum Congress conferences.
Rosneft confirmed that Mr. Sechin would appear with Mr.
Tillersonon a panel , but declined further comment.
Exxon in 2011 beat out BP PLC and other competitors for the plum
Arctic deal with Rosneft. The U.S. and Russian companies also plan
to drill in shale formations in Siberia and to build a liquefied
natural-gas plant in eastern Russia. Rosneft has acquired stakes in
some of Exxon's oil-and-gas properties in the Gulf of Mexico.
Exxon hasn't veered from its plans to drill in the Russian
Arctic's Kara Sea, beginning this August. The first target, the
University Prospect, could hold the energy equivalent of billions
of barrels of oil. The initial drilling alone is forecast to cost
more than $3.2 billion, and it is likely to take years before the
companies can coax meaningful amounts of crude from the Arctic.
Mr. Tillerson generally is opposed to sanctions, and Exxon has
made its views known to the highest levels of U.S. government, he
told reporters at the company's annual meeting recently. But last
month he skipped the St. Petersburg International Economics Forum,
a Russia-sponsored gathering where he was awarded the "order of
friendship" by Mr. Putin last year.
The World Petroleum Congress, by contrast, is run by an
independent organization and is held in a member country.
Mr. Tillerson's appearance at the summit "is an example of
public diplomacy that's at cross-purposes with what the Obama
administration would like to see," said Jim Crane, a fellow at Rice
University's Baker Institute for Public Policy. But the company
"can't pack its bags," he said, citing Exxon's considerable
investment in Russia.
Exxon's engagement with the Kremlin could ultimately help
accomplish U.S. goals of halting Russian aggression in Ukraine,
some analysts said. Exxon is using its cash and engineering muscle
to unearth new oil deposits, which would benefit the Russian
government. More sanctions could prevent Exxon from investing in
Russia and delay the Arctic drilling.
"I don't see that Rex Tillerson's actions are out of line with
U.S. foreign policy," said Amy Myers Jaffe, executive director of
energy and sustainability at the University of California, Davis.
"Having important corporate leaders keep a dialogue open with the
Russian leaders could be helpful."
Messrs. Tillerson and Sechin had high hopes when they announced
their companies' pact. "It cannot be anything but helpful to
broadening the relationship between the American people and the
Russian people," Mr. Tillerson told analysts at New York's St.
Regis Hotel in 2012.
Alexander Kolyandr in Moscow contributed to this article.
Write to Daniel Gilbert at daniel.gilbert@wsj.com
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