Rosneft (OTC Markets: RNFTF) and ExxonMobil have signed a pilot development agreement establishing a joint project to assess the possibility of commercial production of tight oil reserves at the Bazhenov and Achimov formations in Western Siberia.
The agreement was signed by Igor Sechin, president and chairman of the management board at Rosneft, and Stephen Greenlee, president of ExxonMobil Exploration Company. Rex Tillerson, chairman and chief executive officer of Exxon Mobil Corporation (NYSE: XOM), was present for the signing, as well as the senior management of both companies.
The document is another step towards implementation of the long-term strategic cooperation agreement the companies signed in August 2011.
The companies will set up a joint venture to run a pilot program and potential commercial production with equity interests of 51% for Rosneft and 49% for ExxonMobil. Work will be carried out at Rosneft’s 23 license blocks covering a total area more than 10,000 square kilometers.
Rosneft and its production subsidiaries will provide staff and access to existing infrastructure.
ExxonMobil will provide financing of up to $300 million for the pilot program, as well as state-of-the-art technologies and specialists in geology, development and well engineering and completion. ExxonMobil will also provide production management services for drilling complex horizontal wells so as to evaluate and commercially develop these tight oil reserves.
The pilot program will encompass broad-reaching work across a number of areas, including drilling new horizontal and vertical wells using the latest fracturing technologies, deepening existing wells and re-development of idle wells. The companies also plan to run an advanced core survey program that will include geomechanical surveys. Drilling will begin in 2013.
Upon completion of the pilot program, Rosneft and ExxonMobil will jointly select blocks for commercial development in 2015. The two companies will draw on their technical and production experience to ensure commercially viable development and potential production growth in Russia’s West Siberian basin.
“Maximizing production efficiency at every field and exploring new technologies to exploit the potential of tight reservoirs is a strategic priority for Rosneft,” said Sechin. “I am certain that our experience and infrastructure in Western Siberia, coupled with the state-of-the-art technologies of our partner ExxonMobil, will allow us to begin developing large tight oil reserves.”
Tillerson said ExxonMobil would use experience gained in North America resource development.
“The strategic combination of Rosneft’s operational experience in the area and ExxonMobil’s advanced technology gains from tight oil experience in North America and elsewhere provides a strong capability to fully evaluate and potentially develop this large tight oil resource,” said Tillerson.
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