Exxon, Russia reach Arctic oil deal
Russia's state-owned Rosneft teamed up with U.S. company ExxonMobil on Tuesday in a multibillion deal to develop offshore oil fields in the Russian Arctic - one of the last regions with immense and untapped hydrocarbon deposits - in return for access to resources in the Gulf of Mexico.
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#1 Aug 31, 2011
Russian Prime Minister Vladimir Putin and Exxon chief Rex Tillerson have joined valued consequential considerations. NUMBER THREE
By Dwight Baker
August 31, 2011
On 27 January 2011, Rosneft and the American company ExxonMobil signed a deal to establish a joint venture for the purpose of prospecting and extracting oil from the Tuapse Trough deepwater area on the Black Sea shelf, near the coast of the Krasnodar Krai. The value of the deal is unknown, but ExxonMobil is expected to invest $1 billion in the project. The venture will be shared 50-50 between the companies during prospecting phase, and 2/3 - 1/3 in Rosneft's favour during the extraction phase. The Tuapse Trough is estimated to contain 7.2 billion barrels of oil equivalent. The first well could be drilled in 2012. The joint venture will benefit from ExxonMobil's innovative technology and Rosneft's resources and experience in the region, enabling production from the difficult-to-develop offshore area. The deal also contains options for additional cooperation, such as extended exploration and production, deliveries to Rosneft's oil refinery in Tuapse, development of transport infrastructure and research on offshore oil production technologies. According to analysts, offshore areas are central to Rosneft's expansionist plans, and the company is looking for foreign cooperation to bring in new technology and share risks.
#2 Aug 31, 2011
Russian Prime Minister Vladimir Putin and Exxon chief Rex Tillerson have joined valued consequential considerations. NUMBER TWO
By Dwight Baker
August 31, 2011
Russias economy depends heavily on petroleum exports, yet many of its oil fields in West Siberia are in decline. As such, the country is eager to tap into the vast unconventional oil resources of the Arctic. Yet the difficult environment means that Russian companies still rely on the expertise of Western producers such as Exxon, which has experience drilling in arctic regions of Canada.
Analysts note that the deal, while relatively small for Exxon in the near term, could be a boon over time.With the potential that those Russian fields hold, this is certainly a win for Exxon and opens them up for a lot of potential oil growth in the future, said Allen Good, an energy analyst at Morningstar.
An arctic exploration proposal between Rosneft and BP collapsed in May after BP failed to reach an agreement with its partners in its Russian venture. Analysts say the unexpected collapse of the BP deal, which had the blessing of Prime Minister Vladimir Putin, made the Exxon agreement all the more critical.
That earlier strikeout was an embarrassment for Russia, said Fadel Gheit, an oil analyst at Oppenheimer.If this deal had fallen through, it would be hard to find further foreign takers.
Putin was at the signing Tuesday, in the Black Sea resort of Sochi. According to Russian news services, he said the total value of the projects could be $200 billion to $300 billion, or even as much as $500 billion.
The deal also signals a thaw in U.S-Russian relations. Cliff Kupchan, director of the Eurasia Group, noted that just three years ago, U.S. energy firms were shut out of deals in Russia.Since then, he said,weve had a reset in the relationship under President Obama, from cooperation on Iran to the START treaty, and were seeing that improved relationship seeping into energy.
Exxon will take a 33 percent stake in the arctic and Black Sea projects. The details of Rosnefts reciprocal participation in the Gulf of Mexico and Texas were not spelled out Tuesday.
The Black Sea exploration will take place in the Tuapse License Block, where the water is more than a mile deep. A preliminary agreement on that venture was reached in February.
The two companies also agreed to open a jointly staffed an Arctic Research and Design Center for Offshore Developments in St. Petersburg, Putins home town.
Rosneft became Russias largest oil company after it acquired assets of Yukos, which was broken up when Russian authorities decided to imprison its chief, Mikhail Khodorkovsky, in 2005. The Russian government holds a majority stake in the firm.
On 15 January 2011, Rosneft and British Petroleum (BP) announced a deal to develop the East-Prinovozemelsky field on the Russian arctic shelf between the Yamal Peninsula and Novaya Zemlya island. As part of the deal Rosneft was to receive 5% of BP's shares (worth approximately $7.8 billion, as of January 2011) and BP would get approximately 9.5% of Rosneft's shares in exchange. According to the deal, the two companies would also create an Arctic technology centre in Russia to develop technologies and engineering practices for safe arctic hydrocarbons extraction.
The deal was blocked by BP's subsidiary TNK-BP, a joint venture with a group of Russian billionaires known as AAR, due to a dispute over Russian exploration rights between the two companies, and was nullified. On 30 August 2011, Rosneft announced that instead of BP the partner for EPNZ-1, EPNZ-2 and EPNZ-3 in the Kara Sea will be ExxonMobil. In exchange, subject to approval by U.S. regulators, in addition to a share in oil production in Russian fields, Rosneft was granted participation in U.S. fields in Texas and the Gulf of Mexico.
Black sea shelf deal with ExxonMobil
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