Rosneft and ExxonMobil expected to invest USD 1 trillion in Arctic shelf oil extraction projects

Today’s edition of Gazeta.ru complements yesterday’s news about the amendments to the Continental Shelf Act and Gazprom’s announced investments in gas extraction and transport projects. Gazeta.ru reports on Rosneft’s and ExxonMobil’s planned investments in oil extraction in the Arctic shelf, which are expected to reach USD 1 trillion, or almost twice the amount planned at the beginning of the companies’ joint partnership in the project. The actual figure will depend on the reserves, but Rosneft’s President of the Management Board has no doubts that these investments will provide a significant positive impulse for the local industry, primarily shipbuilding.

Rosneft and ExxonMobil signed contracts for the development of three oil fields in the Kara Sea with estimated reserves of 4.9 billion tons of oil and 8.3 billion cubic meters of gas (total annual global consumption of oil is around 4.4 billion tons of oil and 3.3 million cubic meters of gas). ExxonMobil will also participate in the development of the Tuapse Through field in the Black Sea with estimated reserves of 1.2 billion tons of oil. Rosneft will hold a majority stake (66.7 percent) in both the Arctic and the Black Sea joint venture projects. In accordance with the contract, U.S. investors will bear the cost of initial exploration and pay out an extraction premium to Rosneft in case of positive results. Exploration drilling is expected to begin in 2019-2020.

In exchange for its participation in Russian projects, ExxonMobil will allow Rosneft’s U.S. daughter company Neftegaz Holding America Ltd. to acquire a 30 percent stake in the hard-to-recover oil extraction project in western Texas and 20 Exxon’s facilities in the Gulf of Mexico. Furthermore, Rosneft’s Canadian daughter company RN Cardium Oil Inc. will acquire a 30 percent stake in a Canadian shale gas extraction project.

Neither Rosneft nor ExxonMobil were available to comment on the reasons for the doubling of the initially planned investments. Analyists estimate that the development of the oil fields in the Kara Sea might take as long as 25 years – consequently, Rosneft and ExxonMobil will annually invest approximately USD 40 billion into the project. However, these figures should be treated as rough estimates, as the preliminary geological surveys haven’t been completed yet. Analysts believe that the figures were published primarily to attract public attention to the size of the project.

 

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