Exxon, Rosneft tie up in Russian Arctic, U.S. (Reuters)

SOCHI, Russia (Reuters) – U.S. oil company Exxon and state-owned Russian peer Rosneft are to develop oil and gas reserves in the Russian Arctic jointly, opening up one of the last unconquered drilling frontiers to the global industry No.1.

Tuesday's deal ended any hope British group BP had of reviving a pact with Rosneft to develop the same Arctic territory -- that deal was blocked in May by the billionaire partners in BP's existing Russian venture.

"New horizons are opening up. One of the world's leading companies, Exxon Mobil, is starting to work on Russia's strategic shelf and deepwater continental shelf," Russia's prime minister, Vladimir Putin, said.

Putin attended the signing of the deal in the Black Sea resort of Sochi by Exxon chief executive Rex Tillerson and Russia's top energy official, Deputy Prime Minister Igor Sechin.

Under the deal, Exxon and Rosneft will invest $3.2 billion developing 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 percent and Exxon 33.3 percent of a 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."

"RESET" RESULT

Rosneft said the Kara Sea blocks contained an estimated 36 billion barrels of recoverable oil resources. Total resources were estimated at 110 billion barrels of oil equivalent.

The Black Sea block was estimated to hold 9 billion barrels of oil reserves. First drilling was 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 marked a turnaround for Exxon in Russia. The U.S. oil giant was widely thought to be on the verge of taking over Yukos, then Russia's largest oil firm, before its head Mikhail Khodorkovsky was arrested in 2003.

Khodorkovsky was subsequently jailed for fraud and tax evasion and Yukos's prime assets bought at bankruptcy auctions by Rosneft, now Russia's industry leader and with enough reserves to cover 27 years of production.

"Politically, it is significant that this is an American company," said Clifford Kupchan, a Russia-watcher at the Eurasia Group. "Three years ago, American companies were being excluded. Here, an American company is at the center of a flagship announcement."

The deal also demonstrated that the "reset" in relations sought by President Barak Obama was working to reduce the significant political risk for U.S. business of investing in Russia, analysts said.

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-$300 billion.

U.S. UPSTREAM

Rosneft will be offered an equity interest in Exxon exploration projects in North America, including deep-water Gulf of Mexico and fields in Texas, as well as in other countries.

Thus, the deal fulfils the demand for reciprocity so 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.

"That is probably huge for them," said Allen Good, Exxon analyst at Morningstar. "Being able to expand in deepwater and gain some experience and some knowledge from Exxon Mobil will probably benefit them as well as they look to explore offshore in Russia."

There will be no exchange of equity, Sechin told reporters.

The BP deal had called for a $16 billion share swap in which BP would have exchanged a 5 percent stake for 9.4 percent in Rosneft.

"It is the same plan with very small modifications. Instead of exchanging equity stakes with each other, Exxon instead is going to JV them into some of their properties in the U.S.," said Gheit at Oppenheimer.

"Exxon is double or triple the size and market value of BP. So, obviously this would be much more important for a BP than it is for Exxon."

Exxon's coup deals a setback to other international oil majors, after Royal Dutch Shell was named earlier by Putin as a possible partner for Rosneft in the Arctic.

Rosneft shares closed up 1.4 percent in Moscow. Exxon stock traded 1.0 percent weaker.

(Additional reporting by Vladimir Soldatkin, Katya Golubkova, Michael Ermann and Ernest Schneyder; Writing by Douglas Busvine; Editing by Dan Lalor)

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Russian officer guilty of betraying spy ring in US (AP)

MOSCOW – A senior Russian intelligence officer convicted of working for the United States fled Russia on a train just before the Americans busted his 10 sleeper agents.

Details of Col. Alexander Poteyev's quick escape and farewell text message to his wife — asking her to "try to take it calmly" — were among evidence produced by the court Monday as it found him guilty in absentia of high treason and desertion.

Pinup spy Anna Chapman, one of the 10 agents deported from the U.S. in July, testified during the closed trial that only Poteyev could have provided the information that led to their arrest last summer, Russian news agencies reported, citing a summary of the evidence read by the judge as he issued his ruling.

Chapman testified that she was caught after an undercover U.S. agent contacted her using a code that only Poteyev and her personal handler knew, the reports said. She said she immediately felt during the meeting that something was wrong and called her handler in Moscow, who confirmed her suspicions. Chapman and others were arrested shortly after.

The agents, who were arrested a year ago Monday, were deported in exchange for four suspected Western agents who had been imprisoned in Russia. It was the biggest spy swap since the Cold War.

The Moscow military court sentenced the 59-year-old colonel to 25 years in prison and also stripped him of his rank and state medals.

The court said Poteyev got word that the agents were being rounded up in the U.S. and was in such a hurry to leave Russia that he rushed out of a meeting at intelligence headquarters, the Interfax news agency reported. It said Poteyev fled to Belarus, crossed the border into Ukraine and then moved west to Germany and, finally, on to the United States using a passport in another person's name.

He had no time to say goodbye to his wife and later bid his farewells in a text message: "Mary, try to take this calmly. I'm leaving not for some time, but forever. I didn't want to, but I had to. I will start my life from scratch and will try to help the children."

Poteyev's grown son and daughter reportedly have been living in the United States for years.

His court-appointed lawyer, Andrei Kucherov, said Poteyev's wife believes he is innocent and wants to join him in the U.S.

Mikhail Lyubimov, a veteran Soviet spy, described the court's ruling against Poteyev as "symbolic."

"He must be rubbing his hands together and laughing at that together with his family somewhere in the U.S." Lyubimov said, according to Interfax.

The court said Poteyev had overseen the Russian sleeper agents in the U.S. as deputy head of the "S" department of Russia's Foreign Intelligence Service.

In addition to Chapman, other agents also confirmed that only he had access to the sensitive information that allowed the U.S. authorities to apprehend them, the RIA-Novosti news agency said.

The court said Poteyev had begun working for American intelligence around 1999-2000 — betraying the agents, their means of communication and financial information. It said Poteyev had sought to hamper the agents' work by forcing them to meet in places that were unsafe and providing them with inferior equipment.

The Russian spies were given a hero's welcome when they returned home, and President Dmitry Medvedev bestowed them with the nation's highest awards in October.

Russia's Prime Minister Vladimir Putin, a 16-year veteran of the KGB, sang patriotic songs with the spies to celebrate their return. Putin warned in December that traitors come to a bad end and "whatever equivalent of 30 pieces of silver they get, it will get stuck in their throats."

Unlike other members of the spy ring who have stayed out of the limelight, Chapman has basked in the attention. She has stripped down to lingerie for a photo shoot by the Russian edition of Maxim under the caption "For Your Eyes Only," become the new celebrity face of a Moscow bank, joined the leadership of the youth wing of the main pro-Kremlin political party and hosted a TV program.

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