NEW YORK -- Exxon is teaming up with Russian oil giant Rosneft to develop oil and natural gas fields in Russia and North America.
The deal is a major score for Exxon, granting the Irving, Texas company access to some of the world's richest sources of crude oil and other hydrocarbons in the Black Sea and the Russian Arctic. In turn, Rosneft subsidiaries will take ownership stakes in three Exxon projects in the U.S. and Canada.
The companies agreed in August to form a partnership. They announced new details Monday in conjunction with a signing ceremony in Russia that was held at Russian Prime Minister Vladimir Putin's suburban residence.
As part of the agreement, Exxon will work with Rosneft to develop oil Russia's prized offshore reserves in the Black and Kara seas. Rosneft does not have its own technology for deep sea drilling, so it needed a partner to develop the offshore projects. Exxon already has experience drilling in the Arctic regions of Canada.
Exploration already has started in the region, and the companies said that the first test wells could be drilled in 2014. Exxon and Rosneft said initial work in the region will cost about $3.2 billion.
"We lay the foundation for long-term growth of the Russian oil and gas industry,'' said Eduard Khudainatov, president of state-owned Rosneft. A similar deal involving Rosneft and BP fell through last year.
Exploring the Arctic will be difficult and expensive. Russia's First Deputy Prime Minister Igor Sechin said the two companies plan to invest a total of $200-300 billion on projects in the Kara Sea and another $55 billion in the Black Sea, Russian news agencies reported.
Rosneft and Exxon also plan to work together to develop oil production technologies in western Siberia. This is the first step toward future ventures in Russia, the companies said.
In North America, Rosneft subsidiaries will acquire minority stakes in Exxon investments in oil projects in west Texas and Alberta, Canada, while also receiving the option to buy a minority stake in some of Exxon's oil fields in the Gulf of Mexico.
The agreements follow Russia's move to reform its tax system to make oil production more profitable for the industry.
Shares of Exxon Mobil Corp. added $1.33 to $84.29 in afternoon trading.
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The next link in the supply chain is refining. In order to turn thick, black crude oil into useful products such as gasoline, diesel, heating oil and jet fuel, it must be sent through a mind-boggling array of pipes and tanks, heaters and condensers to sort the components of the substance from lightest to heaviest. This is a complex and costly process, and is paid for by what is known as the "crack spread," or refining margin. This represents the difference between prices fetched for the products produced, and the cost of crude oil inputs.. (AP File Photo)
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Emily Corbett of Mechanicville, N.Y., pump gas at a station in Mechanicville, on Wednesday, May 11, 2011. New York, Indiana, Illinois and New Hampshire are among the first states talking about temporarily suspending part or all of the state and local taxes that can add 14 cents to nearly 50 cents to a gallon of gas. (AP Photo/Mike Groll)