Russia buys in to Alberta oilpatch
Rosneft gains access to new technology
Russia has joined a growing list of countries seeking to glean technological know-how in Canada’s oilpatch, following stateowned oil giant Rosneft’s acquisition of a stake in Alberta’s emerging Cardium tight oil development.
The wide-ranging global energy pact with Exxonmobil Corp. was announced Monday.
Russia has joined a growing list of countries seeking to glean technological know-how in Canada’s oilpatch, following state-owned oil giant Rosneft’s acquisition of a stake in Alberta’s emerging Cardium tight oil development.
Through a wide-ranging global energy pact with Exxonmobil Corp announced Monday, Rosneft follows several Asian energy players that have bought into unconventional plays across North America, gaining access to breakthroughs in drilling and well-completion technology that can be applied at home.
Russia’s largest oil company has formed a Canadian subsid- iary, RN Cardium Oil Inc., and picked up a non-operated 30 per cent equity stake in Exxon’s early stage Harmattan tight oil play near Olds.
The investment, believed to be the first by a Russian firm in Canada’s oil and gas industry, speaks to the widespread success of horizontal drilling and multi-stage hydraulic fracturing technology and could speed up activity in the Cardium, observers said Monday.
The Exxon-rosneft deal — part of a technology-sharing trend among supermajors with state-owned firms — is akin to a global energy partnership that Royal Dutch Shell PLC signed with Chinese China National Petroleum Corp. in 2011, through which the Chinese firm has bought into Shell’s liquefied natural gas export proposal in British Columbia and upstream shale gas development in the province through its Petrochina Co. Ltd. public arm, among other investments.
The supermajor, in turn, gets access to oil and gas reserves in markets impossible to crack without government support. Shell signed the first production-sharing contract for shale gas in China last month with CNPC.
“It’s a global portfolio play for some of these supermajors,” said Gary Leach, president of the Small Explorers and Producers Association of Canada.
“It’s North American companies that are really the laboratory for the world,” Leach said.
Exxon, the world’s largest energy firm, based in Irving, Texas, gets access to vast offshore oil and gas riches in Russia’s Arctic through a joint venture exploration agreement at the core of Monday’s deal with Rosneft on three of the Russian firm’s Arctic Kara Sea blocks previously said to contain more recoverable oil and gas — 36 billion barrels — than Exxon’s entire reserve base, as well as a block in Russia’s Black Sea.
The partners are spending $3.2 US billion on offshore exploration, following up on an initial partnership last August, and will also study the feasibility of developing an estimated 1.7 billion tonnes of tight oil at three fields in Western Siberia.
Chris Lee, national energy and resources leader for Deloitte & Touche LLP in Calgary, said a lack of technological know-how was identified as a constraint to Russian oil and gas development at an industry conference he attended last November, in Moscow.
“What is missing is for them to have greater access to these reserves and to bring down their marginal cost of production is access to technology,” Lee said.
Exxon, through its Canadian subsidiary Imperial Oil Ltd., has drilled just nine wells into the Cardium formation on its land position of about 22,600 net hectares across Alberta, said Exxon spokesman Alan Jeffers, who would not disclose financial terms of the agreement with Rosneft. Rosneft spokespeople could not immediately be reached for comment. The companies may provide more information at a presentation to analysts planned for Wednesday, Jeffers said.
The Russian oil major could be eager for exploration in the Cardium to ramp up, to watch newer technology in action and reap financial rewards with U.S. benchmark oil selling above $100 a barrel, said analyst Brian Youngberg of Edward Jones & Co.
“You could see the exploration activity in the Cardium accelerated in this deal,” said Youngberg, who suggested Cardium development will compete for interest with the hottest oil play south of the border, in North Dakota. “Many think it could rival the Bakken.”
The Alberta farm-in is among three new 30 per cent equity positions for Rosneft in Exxon-owned North American projects.
A second new Rosneft subsidiary, Neftegaz Holding American Ltd., will partner on Exxon’s La Escalera Ranch project in West Texas and 20 deepwater blocks in the western part of the U.S. Gulf of Mexico.