) has formed an alliance with Russian State-owned company OAO
Rosneft to develop tight oil reserves in Western Siberia and
establish a joint Arctic Research Center for offshore
This move is part of a $3.2 billion agreement that was inked
between the two companies for joint exploration in the Arctic and
the Black Sea. The latest accord will expedite the companies'
efforts to develop oil reserves in tight, low-permeability
formations in Western Siberia utilizing technology − horizontal
drilling and hydraulic fracturing, or fracking − that ExxonMobil
has already deployed in unconventional oil and gas formations in
The partnership is also an addition to a technical research
program the duo signed in April. That program allowed Rosneft to
explore North American unconventional sources as well as gain
access to the know-how for developing unreachable resources.
In the near future, Exxon and Rosneft will approve geological
studies and drilling for selected Rosneft license blocks that
include the Bazhenov and Achimov reservoirs. ExxonMobil will
contribute geological studies and exploratory drilling, expected to
start in 2013 and will own about 33.33% in a potential development
phase. Rosneft will have the remaining 66.67% interest.
In recent years, the U.S. energy behemoth has been busy in
tapping hydrocarbon deposits in the shale rock formation. An
unconventional source of energy, tight oil, is similar to shale
deposits and is locked in rock formations that must be cracked open
to exploit oil reserves. In the past few months,
) have also showed interest with Russian companies for the
development of Arctic fields.
As an effort to strengthen its grip over unconventional oil and
gas development across the globe, ExxonMobil is examining shale gas
prospects in China and is in talks with a couple of Chinese
national oil companies. The discovery of shale in China is expected
to have as big an effect as it had in the U.S. The company is also
exploring shale oil and gas in Germany and Argentina and is also
expected to develop tight oil in Colombia.
With the XTO acquisition, ExxonMobil is enjoying access to
significant unconventional resources and is now getting a major
handle on North America's newest energy discoveries. It will help
the company to look forward to the growth of natural gas in
expanding its share of the world's largest energy market. The
company is gaining its foothold in Canada, Argentina and
In a separate pact, ExxonMobil and Rosneft also decided to
establish a joint Arctic Research Center for offshore developments.
The center will facilitate all stages of oil and gas development on
the Arctic shelf, comprising design of ice resistant offshore
vessels and pipelines, ice monitoring, logistics and safety.
ExxonMobil holds a Zacks Rank #3, which is equivalent to a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation on the stock.
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