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US and Russia assess Siberian shale potential

06th June 2012

US energy giant, Exxon is partnering with its Russian counterpart, Rosneft to explore to huge shale potential of the western Sibiera.

Areas surrounding the mountains of Western Siberia are potentially home vast shale gas reserves that western and BRIC energy markets are keen to quickly exploit

Exxon Mobil is starting work with Russia's OAO Rosneft in assessing what could be massive reserves of shale oil in Western Siberia, the US giant's chief executive Rex Tillerson

"There is huge shale potential in shale rocks in West Siberia...we just don't know what the quality is," Mr Tillerson said in an interview with Dow Jones.

The exploration work will take years to establish if the reserves are commercially viable, and are part of a strategic agreement Exxon reached earlier this year with state-controlled Rosneft, Russia's largest oil producer.

"Rosneft wished to participate in some resource development opportunities outside of Russia and we have invited them to farm into some areas in Canada and in Texas, in tight oil," Mr Tillerson said, adding the agreement also called for Exxon to also help evaluate similar tight resources opportunities in Western Siberia.

Tight oil is mostly, but not exclusively, oil trapped in shale rock formations that requires advanced fracturing technology to release.

"The shales are basically the source rocks for conventional production in the region and anywhere you have large existing conventional production you are going to find source rocks," he said.

Mr. Tillerson also said he didn't rule out Exxon joining the Russia Barents Sea Shtokman natural gas project.

"On the right terms," he said, when asked if Exxon might want to farm into the project, possibly by taking part of the stakes held by Statoil ASA  or Total SA  in the OAO Gazprom-led project.  "At this point, we don't have any discussions ongoing with them," Mr Tillerson said.

"We were engaged in the early days on discussions to participate in that project, we weren't selected," he said. "We had put forward our views on how that resource might be developed over the long term."

Exxon is also exploring shale gas opportunities in China, he said, where shale could potentially have as big an impact as it had in the US.

"We are in discussions with a couple of the Chinese national oil companies," Mr Tillerson said, without identifying them. "We are doing some joint studies. We haven't taken a position yet, we are still talking about that and the terms around that."

China's shale gas would have a slower lead-up process than in the US as "they don't have the existing infrastructure as in the US, built over a 50- or 60-year period that is needed to facilitate rapid commercialization, such as pipelines, gathering systems, distribution systems. It will be significant for China eventually," Mr Tillerson said


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