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On Monday, at the suburban residence of Russian Prime Minister Vladimir Putin, the chief
executives of the US and Russian oil giants, ExxonMobil and Rosneft, signed a deal to collaborate in the development of oil and natural gas fields in Russia and North America. The agreement was officially announced on Wednesday and holds the potential for $500 billion to be invested in the exploration and production of oil in the Arctic and the Black Sea.
The joint venture will grant Exxon access to some of the world’s richest sources of crude oil and other hydrocarbons in the Russian Arctic and the Black Sea. Recoverable hydrocarbons in the Arctic fields around the Kara Sea, north of Siberia, are estimated to be in the region of 85 billion barrels of oil equivalent, with the first few exploratory wells to be drilled in 2014.
In turn Rosneft will take a minority stake in two of Exxon’s projects in the US and Canada, with an option of a further stake in a project in the Gulf of Mexico.
The Russian Deputy Prime Minister Igor Sechin promised that his government will support the deal in the belief that it will help to modernise the whole Russian economy. Although he admitted that the project will “to take several decades to implement.”
Industry analysts agree that extracting oil in the harsh Arctic environment will be a costly process and only profitable with heavy tax benefits. Sechin has promised that any Arctic project would be exempt from export duties and property tax, and only be charged oil extraction tax at flexible rates. Exxon’s CEO, Rex Tillerson said that these tax breaks “will allow us to develop these resources now.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com