(XOM) ExxonMobil , Russian State Oil Company Rosneft to Explore Siberia

Energy major ExxonMobil Corporation (XOM) has joined hands with Russian state oil company Rosneft for the appraisal of huge shale oil reserves in Western Siberia. The quality of the reserves, however, remains unknown.

The joint exploration is part of an agreement that was inked between the two companies in early 2012, and includes determination of commercial feasibility of the reserves. The process is lengthy and is expected to take years for completion.

Exxon is said to have farmed out some areas of Canada and Texas– that contain tight oil – to the Russian oil producer after it came to know of Rosneft’s keenness to participate in a few resource development prospects outside Russia. An unconventional source of energy, tight oil is similar to shale deposits and is locked in rock formations that must be cracked open to exploit oil reserves.

This transaction will also allow Exxon to partake in the assessment of other similar tight resources in Western Siberia. Per Exxon’s chief executive, the company may even participate in the Russia Barents Sea Shtokman natural gas project. This is subject to Exxon receiving required approvals from the existing stakeholders – Statoil ASA (STO) and Total SA (TOT) in the OAO Gazprom-led project.

Exxon is also examining shale gas prospects in China and is in talks with a couple of Chinese national oil companies. The company is carrying out some joint assessment and has not settled upon any contract. The discovery of shale in China is expected to have as big an effect as it had in the U.S.

In China, the initiation of shale gas process would be slower than in the U.S. due to the absence of adequate infrastructure that aid speedy commercialization.

Exxon holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.

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