Oil major
ExxonMobil Corporation
(
XOM
) is set to form a joint venture (JV) with Russian state oil
company Rosneft. The JV will allow Rosneft to explore North
American unconventional sources as well as gain access to the
know-how for developing unreachable resources.
ExxonMobil has interests in unconventional projects in the
Permian basin in West Texas and several unconventional fields in
Canada. The U.S. company had offered Rosneft to participate in
various projects under a $3.2 billion deal, which included joint
exploration in the Arctic and the Black Sea. This contract could
help Rosneft to maintain its leadership position as it is likely to
unlock about 36 billion barrels of oil reserves in the unexploited
Russian offshore province.
However, Rosneft decided to participate in three projects in
West Texas, the U.S. Gulf of Mexico and in Canada's Alberta
province, while it may take part in other projects eventually.
According to the deal terms, Rosneft will concentrate on
exploring unconventional hydrocarbons -shale oil and shale gas - in
North America and aims to employ the advanced recovery methods used
in those regions in its own fields in Siberia. As the Russian
companies are inexperienced in developing mature oilfields, their
partnership with ExxonMobil will help them in expanding these
resources by acquiring those advanced technologies.
Further, the deal also calls for joint development of mature oil
fields in Western Siberia. These fields have regained demand due to
rising oil prices. Per the Rosneft estimations, the shales at the
Bazhenov formation in West Siberia are estimated to hold 2.5
billion tons of oil reserves.
Earlier, ExxonMobil had beaten
BP Plc
(
BP
) in the race to attain the Rosneft partnership that gave it the
first mover access to Russia's abundant Arctic resources.
ExxonMobil's continuous effort to build an unconventional
resource portfolio both in North America and overseas aims at
increasing production through greater exposure to large energy
resources with longer reserve life and low field declines. The
company's strength is in its balanced operations, strong financial
flexibility and continuous improvement on efficiency and cost
control.
For the long term, we maintain our Neutral recommendation.
BP PLC (
BP
): Free Stock Analysis Report
EXXON MOBIL CRP (
XOM
): Free Stock Analysis Report
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