ExxonMobil to spend $300 million on Rosneft venture

MOSCOW Fri Dec 7, 2012 5:20pm IST

The company logo at a Rosneft petrol station in St.Petersburg October 23, 2012. REUTERS/Alexander Demianchuk

The company logo at a Rosneft petrol station in St.Petersburg October 23, 2012.

Credit: Reuters/Alexander Demianchuk

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MOSCOW (Reuters) - ExxonMobil (XOM.N) agreed to spend $300 million on advanced horizontal drilling and fracking at Russian state oil company Rosneft's (ROSN.MM) Siberian fields in a project designed to help Russia realize its vast tight oil potential.

The two companies will form a joint venture, split 51-49 between Rosneft and Exxon, to carry out the pilot program and launch commercial production if they find sufficient oil in the Bazhenov shale and the nearby Achimov formations of Western Siberia.

The Bazhenov is the world's largest source rock. However, Russia, still rich in conventional reserves, has yet to follow in the footsteps of the United States in deploying advanced horizontal drilling and hydraulic fracturing technologies, which is known as fracking, on a commercial scale.

With the core fields of Western Siberia in decline, however, the government of Russia, the world's largest crude producer, has offered tax breaks for companies who drill into "tight" formations where hydrocarbons are trapped in non-porous rock.

Several oil companies are drilling the Bazhenov on a limited scale to test the economics of these more expensive production techniques in Western Siberia.

(Writing by Melissa Akin; Editing by Alison Birrane)