Energy Ink

Russia quietly enters Alberta’s cardium oil play

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April 16, 2012

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Add Russia to the list of countries taking a bite out of North American energy assets.

ExxonMobil Corp. confirmed today that it had reached a joint-venture agreement with Russian state-owned oil firm Rosneft. The deal gives the Irving, Texas-based giant access to exploration blocks in the Russian Black Sea and Kara Sea.

It will also see Rosneft subsidiary RN Cardium Oil Inc. gain a toehold in a tight oil prospect in Alberta’s Cardium formation. The independent subsidiary will gain a 30 per cent interest in Exxon’s Harmattan acreage in Alberta, according to a statement.

“The execution of that project may become a source for the development of technologies for unconventional reservoirs in Russia,” it reads, citing prospective activity in Western Siberia.

Canada’s National Energy Board estimates the Cardium play contains some 10.6 billion barrels of oil originally in place. Only 130 million barrels of proved and probable reserves has been publicly reported from new zones in the play (where newer technologies can crack dense rock), the board says. Since its discovery in the 1950s, the formation has produced 1.5 billion barrels of oil as of year-end 2010.

By far the bigger implication of the deal, Reuters reports, is that it secures for Exxon access to Russia’s offshore reserves in the Arctic.

“Today Rosneft and ExxonMobil enter offshore projects of unprecedented scale in the Russian Arctic and Black Sea regions, which are home to the world’s largest hydrocarbon resources base. In so doing we lay the foundation for long-term growth of the Russian oil and gas industry,” said Rosneft president Eduard Khudainatov, in a statement.

Analysts at Bank of America Merrill Lynch predict the deal is a harbinger of future activity in the offshore.

“We expect that multiple exploration joint ventures of Russian oil firms with foreign majors – similar to the one between Rosneft and Exxon – will follow,” Karen Kostanian wrote in a note today, Reuters reports.

Others caution that commercial development in Russia’s Arctic waters, estimated to contain some 36 billion barrels of oil, is a long way off.

But if the partnership with Rosneft pans out, and the BoA analysts are correct, one wonders how the deal might affect Exxon-controlled Imperial Oil Ltd.’s appetite for investment in Canada’s Beaufort Sea.

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