Rosneft and Eni signed a Strategic Cooperation Agreement jointly to explore fields in Russian sections of the Black and Barents Seas and exchange technology and staff. The agreement, which also envisages Rosneft’s participation in Eni’s international projects, is similar to the recent Rosneft-ExxonMobil partnership (earlier post).
The Eni agreement envisages cooperation between the parties to set up a joint venture to explore the Fedynsky and Central Barents fields in the Barents Sea and the Western Chernomorsky field in the Black Sea. Eni will hold 33.33% in the joint project. The agreement stipulates that Eni will finance comprehensive geological exploration work to confirm the commercial value of the fields.
The Fedynsky block covers an area of 38,000 square kilometres in the ice-free southern part of the Barents Sea. Sea depth at the block varies from 200 to 320 metres. 2D seismic uncovered 9 promising formations holding total recoverable hydrocarbon resources of 18.7 billion barrels of oil equivalent. To comply with license conditions, 6,500 kilometers of 2D seismic must be carried out at the Fedynsky block before 2017 and 1,000 square kilometres of 3D seismic by 2018. First exploration well should be drilled before 2020, and, if successful, second exploration well is to be drilled by 2025.
The Central Barents block adjoins Fedynsky to the north. Sea depth here varies from 160 to 300 meters. Earlier seismic work at the block identified 3 promising formations holding total recoverable hydrocarbon resources of more than 7 billion barrels of oil equivalent. 3,200 kilometers of 2D seismic are to be performed by 2016 and 1,000 square kilometers of 3D seismic by 2018. First exploration well is to be drilled by 2021, and if successful, second exploration well is to be drilled by 2026.
The Western Chernomorsky block in the Black Sea is the third area to be jointly explored. The block covers an area of 8,600 square kilometers at a sea depth ranging from 600 to 2,250 meters. Rosneft has carried out seismic works to study the area in its entirety and identified 6 promising formations holding total recoverable resources of approximately 10 billion barrels of oil equivalent. Two exploration wells are to be drilled in 2015-2016 in line with license conditions.
The deposits are estimated to hold total recoverable resources of 36 billion barrels of oil equivalent. The Barents Sea fields are very promising due to their proximity to an offshore area in Norway in which at least three large fields have been discovered in recent years, according to Rosneft. Seismic data and the recent discovery of hydrocarbons in the Romanian section of the Black Sea mean it is highly likely that oil and gas will be found at the Western Chernomorsky field.
The Government of the Russian Federation recently introduced tax incentives for offshore production, including canceling export duties and introducing a reduced Mineral Extraction Tax rate of 5-15% depending on project complexity. The government also offered guarantees that the favorable tax regime will remain in place for a prolonged period of time.
Technology exchange is a key element of the strategic partnership. Eni’s technological contribution to the joint venture is expected to be significant given the company’s extensive offshore experience in Norway and other countries. In addition, the agreement anticipates a program of staff exchanges at all levels. This will strengthen relationships between the companies and help share management experience.