Exxon Confident of Right to Book Russian Arctic Oil Reserves
Exxon Mobil Corp. (XOM) says it will be able to book oil and gas reserves it finds in an Arctic and Black Sea venture with OAO Rosneft even though its Russian state-run partner owns the licenses.
“We see this as one of the most prospective areas for exploration in the whole world,” Glenn Waller, Exxon’s head of Russia, told reporters today at the Sakhalin Oil and Gas 2011 conference in Yuzhno-Sakhalinsk. “That is what is driving us. Access to new resources.”
Exxon agreed to form a venture with Rosneft on Aug. 30, pledging to spend $3.2 billion exploring for oil and gas in Russia’s Arctic Kara Sea and deep-water Black Sea. Prime Minister Vladimir Putin is encouraging partnerships with international explorers to maintain output at a world-leading 10 million barrels a day for the next decade. Putin said the Exxon- Rosneft alliance may lead to $500 billion in investment.
The west Siberian basin that’s the source of more than half Russia’s oil output extends north under the Kara Sea, according to Waller. Rosneft selected Exxon for the Arctic blocks after a planned venture and share swap with BP Plc collapsed in May.
Exxon Confident
“We are confident that we will be able to book those reserves that belong to us” under stock exchange rules, following the exploration period, Waller said. Rosneft holds the license, and almost 67 percent of the exploration venture, while Exxon has 33 percent.
Exxon and Rosneft aim to drill the first exploration well in 2015, according to a Rosneft presentation.
The partners will hold “step-by-step” talks with the state as they seek tax incentives to make the challenging project profitable, Waller said. The Kara Sea is icebound for much of the year, and projects in its Arctic waters will need to contend with nuclear waste from former test sites and dumps, according to Waller’s presentation at the conference.
The government understands it needs to change some taxes to make the projects effective, Waller said.
Rosneft, Russia’s largest oil producer, will decide in the first half on an offer from Exxon to join projects in areas including Texas, Canada and the Gulf of Mexico, he said. Rosneft and Exxon don’t plan to bring in other partners for now, he said.
To contact the reporter on this story: Yuriy Humber in Yuzhno-Sakhalinsk at yhumber@bloomberg.net
To contact the editor responsible for this story: Amit Prakash in Singapore at aprakash1@bloomberg.net
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