The U.S. and Russian giants executed a Strategic Cooperation Agreement, calling for them to jointly explore and develop hydrocarbon resources in Russia, the U.S. and elsewhere. It also includes "technology and expertise sharing activities," in a release.
The agreement was signed by Rosneft President Eduard Khudainatov and Exxon Mobil Development Co. President Neil Duffin, with Russian Prime Minister Vladimir Putin in attendance. It includes about $3.2 billion to be spent on Kara Sea and Black Sea exploration, described as being "among the most promising and least explored offshore areas globally, with high potential for liquids and gas."
Bloomberg News noted that Exxon and Rosneft had signed on a preliminary accord on Jan. 27 for a $1 billion exploration project in the Black Sea's deepwater Tuapse Trough.
Bloomberg's report also noted that it was Putin who had said that as much as $500 billion of investments could flow from the deal. "It's scary to utter such huge figures," Putin said after discussing the potential for outlays, which would involve all the associated infrastructure to be built.
The agreement provides Rosneft with opportunities for equity interest in a number of Exxon's exploration opportunities in North America, including deep-water Gulf of Mexico and oil fields in Texas, the release said. The agreement involves conducting a joint study of developing oil resources in western Siberia, also. The companies will create an Arctic Research and Design Center for Offshore Developments in St. Petersburg, to be staffed by Rosneft and Exxon employees.
"Today's agreement with Rosneft builds on our 15-year successful relationship in the Sakhalin-1 project," Exxon's Duffin said. "Our technology, innovation and project execution capabilities will complement Rosneft's strengths and experience, especially in the area of understanding the future of Russian shelf development."
Exxon Chairman and CEO Rex Tillerson, who also attended the ceremony, said the "large-scale partnership represents a significant strategic step by both companies," and that the "agreement takes our relationship to a new level and will create substantial value for both companies." The agreement provides for constructive dialogue with the Russian government about the creation of a fiscal regime based on global best practices.
Exxon replaces BP Plc as Rosneft's partner at three blocks in the arctic Kara Sea, Bloomberg noted, after some of UK explorer's partners blocked that agreement this year. Prime Minister
"Access to new resources is the life blood of oil companies," Fadel Gheit, an analyst at Oppenheimer & Co. in New York, told Bloomberg. "Russia is one of the largest resources that's still available. It's like Exxon is now dating the girlfriend BP had a few months ago."
As global oil giants compete for new oil and gas reserves, many of the easiest-to-reach hydrocarbons are exhausted. The Kara Sea fields are about the size of the UK's North Sea and may hold as much as 100 billion barrels of oil equivalent, according to BP. London-based BP spokesman Mark Salt declined to comment to Bloomberg on the new deal, however.
Russia's government will support the Exxon-Rosneft alliance "in every way," Putin said. Houston-based Exxon Mobil will be a "reliable, strategic and good partner."
The agreement allows Rosneft a chance to participate in Exxon's unconventional fields in the U.S., where oil and gas are extracted by grinding rocks with sand, water and chemicals. The two companies said they'll study similar fields in western Siberia.
Royal Dutch Shell Plc, Europe's largest oil company, may have let the opportunity slide, after Putin said in May that it would be a "comfortable partner" to replace BP in the Kara Sea, according to Bloomberg. Shell, which works with state-controlled OAO Gazprom in Siberia and Sakhalin Island, agreed to further expand cooperation with the gas producer in June.
Also in the Rosneft-Exxon deal, the two will implement a program of staff exchanges of technical and management employees which will help strengthen the relationships between the companies and provide valuable career development opportunities for personnel of both companies.