Rosneft and ExxonMobil Sign Partnership on Oil Production and Exploration

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russia's Rosneft Oil Company (Moscow,Russia) and Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) have formed an alliance that will grant Rosneft access to Exxon projects in North America. The agreement, which was signed in Moscow, will also confirm $3.2 billion of initial investment in oil projects in the Russian Artic and Black Sea. The companies will also form joint ventures for oil exploration and production in these areas, according to a Rosneft press release.

Exxon, the largest listed oil firm in the world, struck an initial partnership with Rosneft last August to search for oil in three blocks of Russia's Kara Sea, previously estimated by Rosneft to hold 36 billion barrels of recoverable reserves. Those offshore riches are larger than Exxon's entire reserve base at the end of last year, which totalled 24.9 billion barrels of oil equivalent. Finalizing the preliminary deal was contingent on Russia introducing a new tax regime that would make it economically viable for oil companies to shoulder the huge up-front costs of offshore exploration.

The companies said they began exploration activity in the Black Sea's Tuapse license block in September and that the seismic program is 70% complete. The program is expected to be completed in the second quarter, and drilling of the first exploration well is scheduled for 2014-15.

Neftegaz Holding America Limited, an independent, indirect subsidiary of Rosneft registered in Delaware, concluded separate agreements on the acquisition of a 30% equity in ExxonMobil's share in the La Escalera Ranch project in the Delaware Basin in West Texas. Neftegaz Holding America Limited will also be given the right to acquire a 30% interest in 20 blocks held by ExxonMobil in the U.S. Gulf of Mexico, one of the most oil- and gas-rich basins in the world.

Also, RN Cardium Oil Incorporated, an independent Rosneft subsidiary, acquired 30% of ExxonMobil's stake in the Harmattan acreage in the Cardium formation of the Western Canada Basin in Alberta, Canada. The Cardium formation is an active unconventional oil play in which ExxonMobil has a significant acreage position. The execution of that project may become a source for the development of technologies for unconventional reservoirs in Russia. Rosneft and Exxon also agreed to jointly develop tight oil production technologies in Western Siberia, positioning the companies for potential joint ventures in Russia.

Russian Deputy Prime Minister Igor Sechin, an architect of the deal, said investments in the three Arctic Kara Sea blocks could eventually run to $200 billion to $300 billion, and in the Black Sea to as much as $50 billion.

Russia, the world's largest oil producer, needs to develop its offshore energy riches to meet its long-term goal of sustaining output at above 10 million barrels per day.

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