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Rosneft, ExxonMobil sign strategic cooperation agreement, pledge joint mining

August 30, 2011, 22:01 UTC+3
Rosneft and ExxonMobil do not plan a swap of assets within the strategic partnership deal signed on Tuesday
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SOCHI, August 30 (Itar-Tass) —— Rosneft and ExxonMobil signed a strategic cooperation agreement in the presence of Prime Minister Vladimir Putin on Tuesday.

Rosneft CEO Eduard Khudaynatov and ExxonMobil Development President Neil Duffin signed the document.

ExxonMobil Chairman and CEO Rex Tillerson, Deputy Prime Minister Igor Sechin and members of the Rosneft Board of Directors attended the meeting.

“Rosneft and a world leader, ExxonMobil, have agreed on the joint work and signed a strategic partnership agreement,” Putin said. “Their joint work will be interesting and extensive. The world energy market will positively respond to the project, because it will open new horizons for operation of world leading companies on the Russian Arctic shelf and in deepwater sectors,” he said.

“Direct investments may amount from $200 billion to $300 billion. Together with investments in the infrastructure, the total spending may reach $500 billion,” he said.

Rosneft will have an access to ExxonMobil fields in the Gulf of Mexico and Texas, Putin said.

“The project opens up broad vistas for Rosneft. In addition, Rosneft will take part in joint projects in third countries,” he noted.

Apart from joint works on the shelf, the agreement stipulates the establishment of a center for Arctic research, personnel training and interaction with fiscal institutions. “The Russian government will assist this work,” Putin said.

Rosneft and ExxonMobil agreed on the joint development of hydrocarbons on the Russian Black Sea shelf on January 27, 2011.

They will start with geological survey and production of oil on the Tuapsinsky Progib field. The deepwater shelf sector with an area of 11,200 square kilometers stretches along the Black Sea coast in the Russian Krasnodar territory. The sides said they would establish a company to operate the project. Geological survey will cost up to $1 billion. Rosneft will have 66.7% in the joint venture, while the stake of ExxonMobil will reach 33.3%. It was agreed to coordinate final details of the project before the end of this year.

Meanwhile, Rosneft and ExxonMobil are cooperating in the Sakhalin-1 project on the Sea of Okhotsk shelf. That is the first large-scale shelf project Russia is implementing on production sharing terms. The agreement was signed in 1996. ExxonMobil has 30% in the project, Rosneft has 20%, Japanese Sodeco has 30%, and Indian ONGC has 20%.

ExxonMobil said that the agreement implied the investment of about $3.2 billion in geological survey and development of three licensed fields of Rosneft – East Prinovozemelskiy Blocks 1, 2 and 3 in the Kara Sea and the Tuapse License Block in the Black Sea, which are among the most promising and least explored offshore areas globally, with high potential for liquids and gas.

“The agreement also provides Rosneft with an opportunity to gain equity interest in a number of ExxonMobil’s exploration opportunities in North America, including deep-water Gulf of Mexico and tight oil fields in Texas (USA), as well as additional opportunities in other countries. The companies have also agreed to conduct a joint study of developing tight oil resources in Western Siberia,” the ExxonMobil press release said.

“The companies will create an Arctic Research and Design Center for Offshore Developments in St. Petersburg, which will be staffed by Rosneft and ExxonMobil employees. The center will use proprietary ExxonMobil and Rosneft technology and will develop new technology to support the joint Arctic projects, including drilling, production and ice-class drilling platforms, as well as other Rosneft projects,” the press release said.

ExxonMobil Development Company President Neil Duffin said: "Today's agreement with Rosneft builds on our 15-year successful relationship in the Sakhalin-1 project. 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.”

Rex Tillerson, chairman and chief executive officer of Exxon Mobil Corporation said ExxonMobil will benefit Russian energy development by working closely with Rosneft.

“This large-scale partnership represents a significant strategic step by both companies,” said Tillerson. “This 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 Federation government concerning creation of a fiscal regime based on global best practices.

“Additionally Rosneft and ExxonMobil 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,” the press release said.

Russian Deputy Prime Minister Igor Sechin said the ExxonMobil bid to Rosneft was better than those of other world companies.

“The terms offered by ExxonMobil were much better than not only those offered by BP but also those offered by other companies,” he said.

“This agreement is not analogous with the one considered with BP,” he said.

He also said that the agreement signed Tuesday was a legally binding document, which applied to no less than six projects in Russia.

In exchange, Rosneft will have a share in at least six projects proportionately to the shares of ExxonMobil in Russian projects, he said.

Rosneft and ExxonMobil do not plan a swap of assets within the strategic partnership deal signed on Tuesday, Sechin said.

“There is no need for a swap of assets now,” he said. “Rosneft can use the stake it already has.”

“In fact, Rosneft and ExxonMobil have reached a new level of cooperation,” he said, referring to the earlier deal with BP that stipulated a swap of assets.

ExxonMobil may become a Rosneft partner in other Black Sea projects if the Tuapse project proves successful, Sechin said.

“We do not rule out joint work in projects of mutual interest,” he said.

He noted that Rosneft had not offered ExxonMobil to replace Chevron in the Val Shatsky project and said that other partners were being considered.

“No offer has been made, as far as I know,” he said. “Chevron needs to decide whether to remain a partner to this project.”

Meanwhile, Rosneft and ExxonMobil are considering a joint venture to develop difficult fields in East Siberia, Sechin said.

He said ExxonMobil had such technologies and could share them.

ExxonMobil asked Prime Minister Vladimir Putin on Tuesday for additional tax benefits for difficult fields, including those on the Arctic shelf, Sechin said.

“This work will be done,” he noted.

In the words of Sechin, Rosneft and ExxonMobil will create a center for Arctic studies to support their shelf projects apart from the joint development of fields in the Kara and Black Seas.

He said the center would be headquartered in St. Petersburg.

“The spending on the Arctic research center may exceed $500-600 million, according to the preliminary estimates,” he said.

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