Exxon Mobil Corp (XOM) is reportedly preparing to spend a whopping $735 million to drill two deep-water wells offshore Ukraine, in the Black Sea.
The deal involves a $335 million signing bonus for the government of Ukraine, plus a commitment by Exxon to spend another $400 for seismic surveys and the drilling of two wells. The full exploration agreement between the government of Ukraine and Exxon should be signed later this year, and then we should see more offshore blocks on offer to other super majors willing to take the expensive plunge, according to Bloomberg, citing the Ukrainian Energy Ministry.
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The deal implies enormous confidence on the part of Exxon in the virtually unexplored Black Sea, where waters as deep as 1.4 miles and fewer than 100 wells have been drilled. No one has any idea how much oil and gas lies beneath these waters.
Part of the optimism stems from success in neighboring Romania, where Exxon and Austria’s OMV have the Neptun block and the 2012 Domino-1 gas discovery and its potential output of about 630 million cubic feet a day.
For Black Sea exploration, we’re looking at Ukraine, Romania, Bulgaria and Turkey. Turkey’s already spend over $2.5 billion on offshore exploration in the Black Sea and is banking in this to be where it makes its one big find.
By. Charles Kennedy of Oilprice.com