Oil major ExxonMobil and Russia's Rosneft unveiled an offshore exploration partnership on Wednesday that could invest upward of $500 billion in developing Russia's vast energy reserves in the Arctic and Black Sea.
The deal, between the world's largest listed oil firm and
the world's top oil producing nation, was the product of nearly a year of talks
and came about despite a history of mutual distrust between Washington and
Moscow dating back to the Cold War and recent difficulties for other Western
firms in Russia.
"Experts say that this project, in terms of its
ambitions, exceeds sending man into outer space or flying to the moon," Russian
Deputy Prime Minister Igor Sechin, a key architect of the partnership, told a
briefing for analysts in New York, according to a Reuters report.
Under the deal, signed in Moscow on Monday, ExxonMobil and
state-controlled Rosneft will seek to develop three fields in the Arctic with
recoverable hydrocarbon reserves estimated at 85 billion barrels in
A final investment decision on the projects in the Kara Sea,
in the centre of Russia's north coast, is expected in 2016-17, Rosneft said in
a video presentation at the event, which was hosted by ExxonMobil chief
executive Rex Tillerson and Rosneft president Eduard Khudainatov.
3D seismic surveys of 20 "promising structures" in
the Tuapse block of the Black Sea have, meanwhile, found estimated recoverable
reserves of 9 billion barrels of oil, the presentation said.
Tillerson said the Russian government's commitment to
reforming offshore energy taxation by abolishing export duty and slashing
mineral extraction tax, and to keep taxation stable for 15 years, had been
crucial to unlocking the deal.
"There is a clear commitment to see these areas
developed," he said in webcast remarks.
The deal is likely to prove transformational for ExxonMobil,
which like other global oil majors is under pressure to add to its 25 billion
barrels of oil-equivalent reserves as resource-rich states seek greater control
over their energy resources.
Sechin, a close ally of Russian Prime Minister and
President-elect Vladimir Putin, hailed the partnership, saying it had already
added $7 billion to ExxonMobil’s and Rosneft's combined market capitalisation
since it was announced.
The deal – by far the largest between Russia and a foreign
oil company – was possible, he said, despite a history of "excessive
politicisation and historic stereotypes" that has long hampered bilateral
Sechin later said that, should the project experience
force-majeure it would then be exempted from all Russian taxation.
For ExxonMobil, the partnership secures an Arctic prize that
was coveted by British oil major BP before its own talks with Rosneft collapsed
ExxonMobil moved quickly to seal an outline deal in August
to create a joint venture that would plough an initial $3.2 billion into
exploring the Kara Sea and Black Sea.
Rosneft will have a two-thirds stake in the venture, while
ExxonMobil would own a third and shoulder the initial exploration costs. If the
reserve base is confirmed, total investments could exceed $500 billion in the
coming decades, Rosneft said.
Under the more comprehensive deal announced on Monday,
Rosneft will get 30% minority stakes in ExxonMobil-led projects to develop
hard-to-recover reserves in West Texas, the Canadian province of Alberta and
the US Gulf of Mexico.
Further international projects could follow, Tillerson said.
The partners will also seek to transfer the know-how they
gain in North America to western Siberia, where Rosneft controls an estimated
1.7 billion tonnes in reserves of tight oil, trapped in non-porous rock.
Rosneft, Russia's top oil producer, will increase
hydrocarbon output by 4% per year to 3.7 million barrels per day of oil
equivalent in the decade to 2020 as it seeks to develop new projects,
Khudainatov said that the forecast rise from 2.5 million bpd
in 2010 assumed an oil price of $90 per barrel in real terms as well as a favourable
The rise was underpinned by a rapid rise in gas output.
Including associated gas, state-controlled Rosneft expects gas output to rise
to 45 billion to 55 billion cubic meters in 2020 from 12 Bcm in 2010,