Rosneft, Russian state oil firm, has finalized a joint venture with Exxon Mobil. ExxonMobil offered Rosneft a role in seven projects last year, in a deal that could open up 36billion barrels of oil offshore in the Arctic and maintain Russia’s place as the world’s top producer.
Rosneft is beginning with three projects that sources says are West Texas tight oil project La Escalera Ranch, a drilling venture in Alberta’s Cardium shale and 20 of the 144 ExxonMobil operated fields in the U.S. Gulf of Mexico. Rosneft would in minority interests in the projects and may pursue other projects including ventures in other countries in the future. Rosneft’s North American focus will be on unconventional hydrocarbons such as shale oil and gas.
The joint venture deal will mark Exxon’s increased presence in Russia. Rosneft intends to gain experience in developing hard-to-produce reserves and seeks to deploy the advanced recover methods at its own Siberian oil fields. Under the terms of the deal the pair will look in to joint development of tight oil in Western Siberia, where conventional oil production has declined.
Lukoil, the 2nd biggest oil producer in Russia, has also said it intends to pursue unconventional oil in the United States, but high asset prices have been a deterrent.
Rosneft has said that over 2.5billion tonnes of oil may be contained in shales of the Bazhenov formation in West Siberia and analysts believe that the tight oil may be brought to production earlier than the three offshore blocks in the Arctic Kara Sea. As Russia has not made a significant oil discovery since the Soviet era, unconventional fields and offshore development will be an important factor to the country maintaining it’s position as the largest producer and sustaining a 10 million bpd output.
The deal was dependent on a softened tax regime for Arctic offshore investment which won political backing earlier in the week.