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Readers of Dr. Kent Moors' intelligence briefings over at Energy Capital Research Group – an energy data analytics and price forecasting firm co-founded and chaired by Kent – recently saw his piece on how the incoming administrations pick for secretary of state could shake global oil markets.
To get these briefings as soon as Kent releases them, click here. But the implications here are so huge that Kent had to share them with all of you. Here he is…
Assuming he is confirmed as U.S. Secretary of State, Rex Tillerson will almost immediately begin a process of rolling back sanctions against Russia. And the megalith he runs has been active behind the scenes in making this happen.
Tillerson is still technically CEO of international energy major ExxonMobil Corp. until the Senate confirms his cabinet appointment. There is bipartisan senatorial opposition to that appointment brewing, and the Russia card is already one of the main reasons why.
The political maelstrom surrounding President-elect Donald Trump's refusal to hold Moscow culpable in the election/political party hacking scandal is about to engulf the Tillerson appointment. That confirmation process is about to act like the proverbial "other shoe" falling.
Several years ago, ExxonMobil and Russian state oil major Rosneft signed a joint development agreement. That accord put Exxon on the northern Russian continental shelf and in Black Sea development. But what it gave to Rosneft was far more important. In addition to needed access to Exxon's expertise and deep pockets, it provided the Kremlin with something much more important – high-end technology for heavy oil recovery.
The accord provided that the two companies would combine work at projects both inside and outside Russia. The strategic pairing provides Rosneft with access as a minority partner to Exxon projects in North America and elsewhere. Every one of the more than two dozen Exxon projects earmarked by the Russian major are heavy oil. Additionally, Exxon agreed to move into heavy oil projects in Western Siberia, the single most important domestic target for Russian energy officials.
By the time U.S. and European sanctions hit over Moscow moving into Ukraine, Exxon had committed more than $1 billion to fields inside Russia. The ultimate company exposure could easily move north of $3 billion.
Tundra + Steam = Oil Slushie
Money is one thing, yet from the Russian perspective, access to technology is something else entirely.
There is considerable heavy oil available in Russia, both in new operating areas, such as the continental shelf, and Eastern Siberia. But the Western Siberian target is currently center stage. It is here that the Kremlin's need is both crucial and immediate.
For the past two years, I have been writing about the major declines in production from mature Western Siberian fields. These have been the mainstay of Russian production now for decades. But they are becoming exhausted.
My analysis about a year ago concluded that, at present extraction rates, the decline in extractable Western Siberian reserves could be approaching …
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.