Rosneft and BP Exploration Operating Company Limited signed a Heads of Agreement on Domanik tight oil formations. The Heads of Agreement provides for implementation of a joint pilot project by Rosneft and BP relating to the Domanik formations and, in the event of success, the possible development of unconventional Domanik resources in the Volga-Urals region. The joint venture company (Rosneft 51%, BP 49%) will be incorporated in Russia.
In a talk at Imperial College London in October 2013, Dr. Michael C. Daly, Executive Vice President Exploration, BP plc, noted that the Domanik shales of the Volga Urals would likely be one of the world’s major tight-oil plays, along with the US; the Achimov/Bazenov region of West Siberia; and the Middle East.
|The Domanik region in Russia. Source: USGS. Click to enlarge.|
In BP’s Energy Outlook 2035, released in January, the company’s analysts suggested that Russia will become one of the world’s top tight oil suppliers, although far behind the US.
BP will compensate part of the historical costs to Rosneft for exploration of the Domanik formations and will provide carry financing of up to US$300 million for the pilot program, which will be conducted in two phases at licence blocks in the Orenburg Region.
The document was signed within the framework of the St. Petersburg International Economic Forum by Rosneft President and Chairman of the Management Board Igor Sechin and BP Russia President David Campbell. The signature ceremony was led by President of the Russian Federation Vladimir Putin.
In December 2013, Rosneft signed a Shareholders and Operating Agreement for a joint venture with Statoil to assess the feasibility of commercial production from the Domanik shale formation. The resulting JV will run a 3-year pilot program and assess the potential for commercial production. The JV will be established with equity interests of 51% for Rosneft and 49% for Statoil.