You may not have known this but Russia vies with Saudi Arabia for the title of biggest crude oil producer. According to a June Bloomberg posting, oil and gas provided half of Russia’s income in 2011. So Putin is pushing for more oil discoveries to keep his government afloat. Exxon has been invited to help drill oil fields in Siberia. These Siberian oil fields are estimated to hold something like half the proven reserves of the US. Exxon will joint venture with the Russian government run oil company, OAO Rosneft. Exxon’s fracking technology is to be used on the Bazhenov shale formation in west Siberia. Rosneft said these deposits might hold 13.2 billion barrels of oil. As part of the alliance with Exxon, Moscow-based Rosneft in April said it acquired a 30 percent stake in a Texas tight oil¹ project to gain experience with the technology. Exxon will be able to book reserves in a mature oil province without taking on the exploration or environment risk it faces in its offshore projects with Rosneft, which will require an initial $3.2 billion investment to explore in the Arctic Kara Sea and the Black Sea. Exxon is also working with Romania’s Petrom in the Black Sea where they have discovered a major gas find.
But Exxon is not the only player. According to Bloomberg:
“Non-state Russian oil companies, including its second-largest producer OAO Lukoil and fourth-biggest OAO Surgutneftegas, also have resources in the billions of barrels in the Bazhenov formation.”
Ronald Paul Smith a Moscow-based oil and gas analyst at Citigroup Inc said: “Lukoil is already using horizontal wells and multistage fracking to support its West Siberian production, and therefore may be the earliest, clearest beneficiary” of the tax breaks. Lukoil subsidiary Ritek produces about 2,000 barrels a day from the Bazhenov formation……”
“Another competitor, Gazprom Neft, together with Royal Dutch Shell Plc plan to drill an extended reach horizontal well with multistage hydrofractures next year to tap tight oil at their Siberian Salym Petroleum Development venture, Gazprom Neft Deputy Chief Executive Vadim Yakovlev told journalists at June 8 press conference.”
As noted in earlier postings, Exxon has other fracking joint ventures besides these in Russia and Romania. They are active in China and have projects in Argentina’s Vaca Muerta formation. It is my understanding that they have backed out of ventures in Poland saying that there are too many governmental hurdles.
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¹ I am seeing the words “tight oil” being used frequently. Here is a definition of those words. Tight oil is a play that consists of light crude oil contained in petroleum bearing formations of relatively low porosity and permeability (shales). It uses the same horizontal well and hydraulic fracturing technology used in recent boom in production of shale gas. The North Dakota’s Bakken field is a tight oil play.