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The Russians are here — almost
A landmark alliance by Rosneft and ExxonMobil that could involve spending of US$500 billion over the long term will give the Russian giant 30 percent stakes in Exxon-owned projects in North America — tight oil reserves in West Texas, 20 deepwater blocks in the Gulf of Mexico, and, overlooked in the initial announcement, exploiting shale oil in Alberta.
On the flip side, the partnership will also study the feasibility of developing 1.7 billion metric tons of tight oil in Western Siberia.
The Canadian stake involves the hot Cardium tight oil play in central Alberta, where Rosneft subsidiary RN Cardium will participate in the Harmattan acreage covering 56,000 acres and operated by Exxon affiliate, Imperial Oil.
An Imperial spokesman told the National Post that “generally speaking, all the North American assets that Rosneft has farmed in on … are designed to help them develop technologies for use in unconventional reservoirs in Russia.”
“Western Siberia has a long-running conventional production area where they want to use unconventional resource development to capture what technically was not producible economically, similar to areas in North America where conventional production is depleting,” he said.
The spokesman said Rosneft is primarily anxious to gain know-how in the use of hydraulic fracturing with directional drilling.
New tax treatment Andrew Potter, an analyst with CIBC World Markets, said Rosneft’s arrival in North America seems to have been facilitated by new tax treatment for Russian companies investing outside their domestic confines.
He said it could stimulate even greater competition for strategic assets in Canada, where a host of Asian companies have acquired interests in the oil sands and shale plays.
The test will be whether, this time around, the Russians carry through with their plans.
Previously, plodding and erratic decision-making saw the collapse of a deal between Gazprom and Petro-Canada to export LNG from Russia to a regasification terminal in Quebec and no progress at all on Gazprom’s expressed desire to own infrastructure and exploration and development assets in Canada.
The Rosneft transaction will also test the outer limits of Canadian Prime Minister Stephen Harper’s eagerness to open the doors to foreign investment in Canada’s energy sector.
Gaining a stake in upstream development is one thing; gaining access to technology pioneered and developed in Canada might be seen as either problematic, or the price Canada must pay to diversify its oil and gas markets.
—Gary Park
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