Replies to post #4728 on The Rising Influence of Rising Affluence

[DewDiligence]

XOM—No prices given for the three 30% stakes in north american assets XOM is selling the russians? How much did they leave on the table there to make this JV happen?

There was no precise answer to your question on the CC, but the CC was well worth a listen, IMO. There was a video focusing on the Kara Sea project at the 24-minute mark; this project was described as being more technically challenging than sending a man to the moon.

Russia’s Deputy Prime Minister, Igor Sechin, spoke on the CC through and interpreter and sounded to me as though he was protesting too much by saying that US companies unjustifiably mistrust Russia due to the Cold War past. Sechin conveniently omitted mention of Russia’s contribution to such mistrust by, for instance, its mistreatment of Shell in the Sakhalin project (http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/05/8399125/index.htm ).

I don’t know whether the Rosneft collaboration will ultimately make money for XOM, but I’m pretty sure XOM is the only oil company with the wherewithal to make a collaboration of this magnitude work.

[DewDiligence]

More on the XOM-Rosneft deal (addendum to #msg-74565025):

http://online.wsj.com/article/SB10001424052702304331204577356172630990902.htm

Igor Sechin, Russia's deputy prime minister and a close ally of President-elect Vladimir Putin, estimated that by 2030, up to 40% of Russia's oil output would stem from untapped sources in the Arctic waters and the Black Sea—which it needs foreign assistance to unlock.

A joint venture between state-run Russian giant OAO Rosneft and Exxon could eventually recover about 90 billion barrels of oil equivalent in oil and gas in those areas, the partners estimate. But first they will have to find oil in hostile climates and then set up massive airports, pipelines and dozens of iceberg-resistant offshore platforms. The deal, finalized earlier this week, gives Exxon a one-third stake in production companies in the Black Sea and the Arctic offshore.

…Exxon's landmark deal with Russia is a boon for the world's largest publicly traded oil company [well, maybe, but it seems too soon for such an assertion], which needs to replace the vast amounts of crude it extracts from the ground every year with new reserves. The "flagship" Exxon-Rosneft effort could generate investments of $200 billion to $300 billion by the partners over several decades, Mr. Sechin said.

To reduce risk, the Russian government is softening the taxes that will be imposed on such projects. [On last week’s CC, there was some limited information on the reduced mineral royalties payable to Russia: there will be four categories, defined by technical difficulty, with a sliding 5-15 year “guaranteed” period of lower royalties for the given categories. Export taxes will also be eliminated.] CEO Rex Tillerson, who was based in Russia earlier in his career, personally asked Mr. Putin for more favorable terms, Mr. Sechin added.