Russian President Vladimir Putin is counting on Exxon Mobil Corp. (XOM) to help drill oil fields in Siberia that may hold almost half the proved reserves of the U.S., extending the petroleum boom that underpins his power.
Russia, which slipped behind Saudi Arabia as the biggest crude producer, BP Plc reported yesterday, is looking to use Exxon’s hydraulic fracturing technology in a venture with Kremlin-run oil company OAO Rosneft. They want to wring “tight oil” from shale rock in west Siberia. The partners plan pilot wells in areas Rosneft said may hold 13.2 billion barrels of oil, a prospect Putin needs for Russia to keep supplying about 16 percent of global exports for another decade.
Putin plans tax incentives and joint ventures for Western partners so that Siberia’s Bazhenov shale formation can someday rival the explosive output of North Dakota’s Bakken shale that cut U.S. oil imports. He promised to unveil tax breaks by October that drillers say are needed to make Russian projects profitable, even as they cut into the state’s petroleum revenue that accounted for half of its $350 billion in income last year.
“If the government is serious about promoting tight oil production, it is within their grasp,” said Ronald Paul Smith, a Moscow-based oil and gas analyst at Citigroup Inc.
Smith said extraction taxes that were around $24 a barrel last quarter may need to be almost eliminated to stimulate output of what’s also called unconventional oil, squeezed from shale rock similar to the Bakken or Eagle Ford discoveries in South Texas.