Exxon to back Rosneft's Siberian search for 'tight' oil
TUAPSE, Russia |
TUAPSE, Russia (Reuters) - Rosneft (ROSN.MM) advanced an alliance with U.S. major ExxonMobil (XOM.N) on Friday that will help finance a push by Russia's top oil producer to drill in Siberia for tight oil - - oil held in non-porous rock which cannot be extracted by conventional drilling.
With ExxonMobil's chief executive on hand, the state oil company's head Igor Sechin presented a Rosneft strategy paper to President Vladimir Putin that envisaged 300,000 barrels per day of potential production from unconventional reserves in Siberia.
ExxonMobil will bear the cost of financing some exploratory drilling, to start in 2013, under an agreement signed by top executives from Rosneft and Exxon, advancing an exploration partnership centered on the promising but challenging Russian Arctic.
Their initial exploration agreement - followed by similar exploration pacts with Eni (ENI.MI) and Statoil (STL.OL) - established Sechin as the oil industry's top dealmaker. It set him up to move to Rosneft from his previous role at deputy prime minister responsible for energy in the government Putin headed as prime minister.
His leading political role in the industry was reaffirmed on Wednesday when Putin made him the secretary general of a committee on oil industry development and the environment following an informal gathering of an "oilman's club" at Rosneft earlier this month. Putin will chair the committee himself.
Together with Sechin's appointment, Rosneft's ambitious plans signal the importance of the state oil company to the Kremlin which relies on it not only to guarantee Russia's lead in world oil output, but to make much needed investments in refining to ensure stable fuel supplies and bring in revenue.
Putin called on Sechin to boost Rosneft's dividend payout, saying it would benefit the government.
"As I understand it, this decision, if it is approved by shareholders, would help the company's market value to rise, which is only in the interests of the government," Putin told Sechin.
Unlike Saudi Arabia, its nearest rival for the title of world's top oil producer, Russia has little spare capacity and the government is struggling to balance its dependence on oil revenues with the need for tax cuts to stimulate output.
But in his final weeks as prime minister before returning to the Kremlin as president Putin announced some tax concessions to encourage drilling in tight formations, saying the boost to Russia's output could be 1-2 million barrels per day.
Rosneft says it has 1.2 billion barrels of tight reserves in its licensed territory, though not all of its licenses allow it to drill to those depths.
Sechin, presenting Rosneft's strategy, said Rosneft would ramp up its drilling program to help the company maintain and expand its position as the holder of the world's largest liquid hydrocarbon reserves.
Additional exploration could double the reserves of Vankor, one of Rosneft's prize fields, which will raise production to 500,000 barrels per day to ensure Rosneft's output continues to grow from the current level of about 2.2 million barrels per day, nearly a quarter of Russia's output.
"Vankor's recoverable reserves will be about 1.1 billion tonnes," Sechin said. Current reserves are 432 million tonnes.
It will also expand the drilling of horizontal wells with multi-stage hydraulic fractures, similar to the technology used in U.S. shale fields to tap tight rock formations after encouraging results from such wells drilled last year.
It plans to drill 100 similar wells in 2012-14, it said.
(Reporting by Vladimir Soldatkin and Melissa Akin; Editing by Anthony Barker and Greg Mahlich)
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