Saturday, February 16, 2013

Exxon and ROSNEFT expand agreements

On February 13, 2013, Exxon and ROSNEFT of Russia expanded their 2011 Strategic Cooperation Agreement in what is being touted by Larry Persily, Federal Coordinator for Alaska Gas Transportation Projects, as a major development for the North Slope Point Thompson natural gas project owned by Exxon and as an indicator of a potential natural gas pipeline in the offing. However, what is being touted by Persily and in the Alaska press as a done deal is far from being a "done" anything.

Igor Sechin, president of ROSNEFT, said, "The agreements signed today bring the already unprecedented scale of ROSNEFT and ExxonMobil partnership to a completely new level. The acreage in the Russian Arctic subject to geological exploration and subsequent development increased nearly six-fold. That means the enormous resource potential of Russian Arctic offshore fields will be explored and developed in the most efficient manner with the application of cutting-edge technologies and expertise of our strategic partner, ExxonMobil, using state-of-the-art environmental protection systems. Participation in the Point Thomson project will increase ROSNEFT’s access to the latest gas and condensate field development technologies used in harsh climatic conditions".


Stephen Greenlee, president, Exxon Mobile Exploration Company, said the agreement builds on the ongoing successful cooperation between the companies. "This expansion is an illustration of the strength of the partnership that exists between ExxonMobil and ROSNEFT," said Greenlee. "We look forward to working together on these new projects."

Igor Sechin, president of ROSNEFT, and Stephen Greenlee, president of Exxon Mobil Exploration Company, signed several agreements under the watchful eye of Vladimir Putin, President of Russia. These agreements expand the relationship of Exxon and ROSNEFT, including an ongoing program of staff exchanges of technical and management employees.

Exxon and ROSNEFT are expanding their cooperation under a 2011 Strategic Cooperation Agreement that expands exploration to six times that existing to include an additional 150 million acres in the Russian Arctic.

A separate Memorandum of Understanding covers the intent to study the viability of an LNG export facility in the Russian Far East. Under this MOU, Exxon and ROSNEFT will form a working group to commence work to study the viability of the proposed LNG project.

Will this LNG project have any impact upon Exxon’s participation in AGIA with TransCanada?

Exxon and TransCanada are studying the potential of the Valdez natural gas pipeline LNG project to move North Slope gas to market. Under a separate Heads of Agreement ROSNEFT was given an option for a 25% interest in the Pt. Thompson field. An option for an interest, but no commitment from ROSNEFT for any intent to invest in the development of Pt. Thompson.

It appears that Mr. Persily and those touting the option for Pt. Thompson seem to be overlooking the nationalist aspects of any investments on the part of ROSNEFT. Russia will come first to any investment in Alaska. ROSNEFT is the national oil company of Russia. This deal with Exxon is not being done to benefit Exxon and much as it will benefit ROSNEFT.

It is assumed by Persily and others that ROSNEFT would want to move the North Slope gas to market as soon as possible. Therefore, the agreement with ROSNEFT regarding Pt. Thompson is considered a good omen with respect to a natural gas pipeline to move North Slope natural gas to market.

Pt. Thompson has approximately 8 trillion cubic feet of natural gas. Pt. Thompson has been a technically challenging development, as it is a high pressure field with approximately 8 trillion cubic feet of gas reserves. The North Slope holds an known reserves of 35 trillion cubic feet of natural gas and condesates and an estimated potential of greater than 125 trillion cubic feet.

ROSNEFT hopes to benefit in the technology sharing aspects of the agreements with Exxon.

Little explored offshore blocks in the Chukchi, Laptev, and Kara seas were included in the agreement expansion. These blocks are reported to have good potential for oil and gas.

Kara Sea blocks:

East Prinovozemelskiy-1, 2, and 3; 125,904 sq km, 31.1m acres, water depth is 10 meters-440 meters

Severo-Karsky, 196,000 sq km, 48.4m acres, water depth is 20 meters-480 meters

Laptev Sea blocks:

Ust’ Oleneskiy, 64,103 sq km, 15.8m acres, water depth is 19 meters to 90 meters

Ust’ Lensky, 46,851 sq km, 11.6m acres, water depth is 15 meters-90 meters

Anisinsko Novosirbirsky 140,981 sq km, 34.8m acres, water depth is 20 meters-2,000 meters

Chukchi Sea blocks:

Severo-Vrangelevskiy 1, 2, 115,176 sq km, 28.4m acres, water depth is 40 meters-370 meters

Yuzhno Chukotsky, 73,197 sq km, 18.0m acres, water depth is 40 meters-70 meters

The following cautionary note was included with Exxon’s press release:


Statements of future events and conditions in this release are forward-looking statements. The Strategic Cooperation Agreement represents a binding outline of terms, and closing of the transactions contemplated by the agreement is subject to execution of definitive final agreements, receipt of necessary regulatory approvals, and other customary conditions. Actual future results, including potential costs and benefits realized by the parties as a result of the transactions, could differ materially depending on the outcome of future negotiations; the actions of governmental authorities and regulators, including legal and legislative uncertainties; the outcome of exploration programs; changes in prices and other market and economic factors affecting the oil and gas industries; future technological developments; other technical and operating factors; actions of competitors; and other factors discussed under the heading "Factors Affecting Future Results" on the Investors page of ExxonMobil’s website at"

The news from ROSNEFT and Exxon sounds good on the surface. However, given Putin’s penchant for using Russia’s oil and gas as bludgeons to effect foreign policy with Russia’s neighbors, means that Alaska’s leadership should take this agreement with a grain of salt. It is not in Russia’s interest any more so than it is in Canada’s interest for Alaska North Slope natural gas to enter the Asian market.

The Pt. Thompson option offered to ROSNEFT may have just been chaff on the part of Exxon to further delay any progress to bring North Slope gas to market. The option may have just been an offering to the State to show compliance with Governor Sean Parnell’s demand and Exxon’s agreement to settle the State’s litigation that Pt. Thompson be in production by 2016.

In any case, any deal with Russia will certainly involve more benefit for Russia than for Exxon or Alaska.

For more information:

ROSNEFT press release:

EXXON Mobile Exploration Company press release:

The Maritime Executive:


The Alaska Dispatch:

The Miami Herald:

Subsea World News:

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