Activity 4 - Due Date 15th & 16th November 2011 Groups will be informed of their presentation slot - First

Part of Assignment

PROJECT FUNDAMENTALS

Case: EXXON MOBIL COLLABORATION

AND

ROSNEFT

ARCTIC

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Session :

2011/2012 BSM084

Semester

Module Number : Module Title : CW (e.g. 1, 2, 3) Sub deadline: To Drop Box on Moodle

Project Fundamentals 1+2 Activities : As per Dates Provided Presentations: 15th & 16th November Report: 16th December at 13.00 hours Word Count: Report: minimum 2500 words and at maximum 2700 words

PLAGIARISM Plagiarism is the practice of presenting thoughts, writings or other output of another or others as original, without acknowledgement of their source(s). All material used to support a piece of work, whether a printed publication or from electronic media, should be appropriately identified and referenced and should not normally be copied directly unless as an acknowledged quote. Text translated into the words of the individual student should in all cases acknowledge the source. For further information please see http://www.rgu.ac.uk/academicaffairs/assessment/page.cfm?pge=7088 Before submitting the work, you should check through it to ensure that: all material that has been identified as originally from a previously published source has been properly attributed by the inclusion of an appropriate reference in the text; direct quotations are marked as such (using quotation marks at the beginning and end of the selected text), and a citation has been included in the list of references.

You will be expected to test your own work in the JISC Service before submission.

NOTE The penalty for late submission of a piece of coursework is that the coursework is failed. There is also a penalty for deviating substantially from the word length or for poor spelling and grammar (deduction of up to 1 grade point from final grade for poor spelling and grammar and deduction of 1 grade point for deviations in

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excess of +/- 10% of the specified word count). You must include a statement on the front cover of your work that gives the word count. A disc copy of your work should be available on request, to enable the marker to verify the word count. If you, for genuine reasons, are unable to meet the hand in date, please complete an absence form, seek verification from your Personal Tutor and inform the Module Co-ordinator.

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ASSESSMENT BRIEFING
Students will spend the module interacting with the theories and principles of Project Fundamentals and then will be required to complete the following Project Brief.

ASSIGNMENT OBJECTIVES
1. To identify the underpinning principles and concepts of project management; 2. To analyse and evaluate the value of these in delivering effective project management; 3. To model the critical factors that promote successful projects clarifying the role of planning and controlling the process; 4. To undertake some creative analysis and thinking.

PROJECT BRIEF
There are two parts to this assignment. Part 1 is a team Project Presentation due the 15th & 16th November 2011. Part 1 also includes the marks for the 5 activities of which the presentation is one element. Part 2 is an individual Project Report due Friday 16th Dec at 13.00 hours. For the individual Report everyone takes on the role of Assistant Director of International Operations for Exxon Mobil who has been charged by the Board of Exxon Mobil to assemble a multi functional project team to prepare a report for the Oversight Committee that will ensure acceptance of the Strategic Cooperation Agreement under which the companies plan to undertake joint exploration and development of hydrocarbon resources in Russia, the United States and other countries throughout the world, and commence technology and expertise sharing activities by the Oversight Committee and Exxon Mobil Stakeholders. You can use the Reuters Press Release (Appendix 2) and any updated materials on the subject matter that become available in the next weeks. For the team Presentation, the team must choose a project manager to be the Assistant Director of International Operations for Exxon Mobil and manage delivery of the presentation element of the assignment. Using the case study, Exxon Mobil and Rosneft Arctic Collaboration (Appendix 1), you are required to develop an overall project plan (or a Project Initiation Document (PID)) for submission to the Board of Exxon Mobile prior to submission to the Oversight Committee to achieve approval of the project plan which must alleviate some of the challenges identified in the case study itself (the achievement of the envisioned

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reciprocity; further clarity of exactly what Rosneft will get in terms of the share in the six Exxon Mobil projects in the United States, some solutions to the potential engineering problems and identification of any environmental challenges etc). Given Exxon Mobil's current financial position and the external environment a specific investment plan with some underpinning assurances is also required. You should consider three high level strategies for delivery of the first phase in opening oil and gas production in the Kara Sea, an arm of the Arctic Ocean tucked south of an island chain called Novaya Zemlya. Bear in mind that currently, the first well in Russia's arctic region where Exxon Mobil and Rosneft will be exploring for oil is expected to be drilled in 2015 and initial production to begin in the next decade (Market Watch 2011). You will be required to undertake an option appraisal using at least the criteria of cost, quality, schedule, environment , health and safety as well as taking into consideration economic and political considerations. This is clearly a project where costs could spiral and you need to ensure that there is more specific agreement on costs e.g. spiralling costs could make its crude too expensive to be commercially viable especially if oil prices drop back to the low levels seen in the 1990s. Drawing on all your studies and your career exposure and experience to date and using the attached case study, and Appendices 1 and 2 prepare an overall project plan or a Project Initiation Document (PID) which meets both the Statement of Requirements from the Exxon Mobil Board and the requirements of the presentation: 1. A Team Presentation

15th & 16th November 2011

STATEMENT OF REQUIREMENTS (SOR) FROM EXXON MOBIL BOARD

1. Identify any areas of further investigation/research necessary and any decisions that require to be resolved in order to obtain all the information required for the SOR. 2. How will you achieve the envisioned reciprocity with Russia? 3. Identify the most appropriate business and technical strategy for managing this project and document the specific reasons for choosing that solution. The presentation should focus on the option appraisal and the report should focus on the preferred solution. Both should identify the payback stage/time. 4. There are always risks in the partnership with a Russian statecontrolled entity, with all the underlying political risks, instability and
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inefficiencies that are implied. Russian companies operate in a vastly different universe from western corporations. Russia has reneged on deals with Western oil companies before. How would you alleviate stakeholders fears in this regard? 5. Given that the Rosneft deal would also be among the most significant attempts by a company from a country that is not an American ally to acquire United States oil fields since Cnooc what incentives could you put in place to ensure that Congress doe snot ban Russian part ownership of American oil assets. 6. How will you address stakeholders who suggest that Exxon Mobil has not got a truly strategic partnership with her 33% share especially when Russia's onshore fields in Siberia are in decline, threatening the prosperity and geopolitical clout that has come with oil wealth in the last decade. 7. It might be suggested that the heavy role of the Russian state may reduce the ability of the market by choosing the wrong company and stifling competition. Moreover, the Russian model with its larger state controlled companies doesnt fit with the deregulated US market. This needs to be addressed in the report. 8. Finally how would deal with the concern of environmentalists that existing technology does not allow you to quickly and effectively deal with spills on the shelf, regardless of depth, with depth is a complicating factor, especially in cold waters, as in the Arctic. Additionally there are concerns that there are possible negative consequences for future climate change negotiations in this deal.

THE REQUIREMENTS OF THE PRESENTATION ELEMENT

Read the Case Study: Exxon Mobil and Rosneft Arctic Collaboration (Appendix 1) several times before you do anything else. The team presentation (together with the other 4 activities) is worth 50% of the total module mark and will be marked on the basis of the contribution of the team. The teams will present the week commencing 14th November at a time to be advised. The presentation should be written for consideration by the Exxon Board prior to being submitted to the Oversight Committee for approval. The team presentation should last 15 minutes.

1. Option appraisal you must identify and summarise three potential but differing high level strategies which might be expected to deliver the

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project. Undertake a SWOT or PESTE analysis and cost benefit analysis of these options and then select the most appropriate strategy (or combined elements of two or more of the strategies identified) and document the specific reasons for choosing that solution. 2. A business case for the development of the project including financial planning. The business case should include critical success factors and some measurable targets. It should also include realistic financial estimates with details of expected payback stage/time. 3. An outline of the main considerations, assumptions and constraints taken into account by the team in formulating the core content of the project. Assumptions must be realistic do not assume all the problems away. 4. The presentation should define the project objectives and the project scope and describe deliverables, targets, dependencies and resource requirements. 5. A risk assessment of the project and project plan, identifying the controls required to minimise or eliminate these risks, including an outline of any potential environmental problems that you consider may be relevant. 6. The presentation should include a work breakdown structure (WBS) and a project schedule (Gantt chart) with descriptions of deliverables at each stage. For each deliverable: targets, controls, dependencies, resource requirements, responsibilities and authorities should be identified. 7. A full explanation of how the team decided who the Project Leader would be and how the team and team responsibilities were identified and allocated should be included. You should also use the Peer Assessment Grid on Moodle to evaluate the contribution of individual members of your team and sent the completed grid to s.rowley@rgu.ac.uk by 13.00 hours on 14 November 2011 The presentation MUST include the use of appropriate project tools such as Competency Frameworks, Risk Assessment Matrices, GANTT, and Critical Path Analysis, PERT etc.

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ASSIGNMENT MARKING CRITERIA

You are expected to USE SECONDARY REFERENCES to validate your work and create synthesis. All references should be clearly cited within the text and summarised in a Reference and Bibliography section.

INSTRUCTIONS
1. Read the - the Case Study in its entirety (Appendix 1) 2. Refer to the STATEMENT OF REQUIREMENTS. These must be covered in both the Report and the Presentation along with the prescribed requirements for each element. 3. Familiarise yourself with a Project Plan or a Project Initiation Document (See www.prince2.com) but remember this just provides a framework. Establish clearly what has to be done before attempting to discuss how? (Project Strategy). 4. Consider the various factors of your established technical basis and the Project Business Case and Strategy you would propose to the Board and the oversight Committee If you think there are factors affecting the Project Strategy (and that's what the exercise is all about), which are not adequately covered, make intelligent but realistic assumptions.

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APPENDIX 1

CASE STUDY EXXON COLLABORATION

MOBIL

and

ROSNEFT

ARCTIC

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THE ARCTIC OIL EXPORATION AGREEMENT

US oil major Exxon Mobil has clinched an Arctic oil exploration deal with Russian state-owned oil firm Rosneft. Russia has been the worlds biggest oil producer, delivering 10.2 million barrels per day last year, the highest annual average production since the Soviet Union collapsed in 1991(Brodrick 2011). Moreover, Rosneft is Russias largest oil producer although it is plagued by a lack of capital and technological expertise. Exxon and Rosneft will now collaborate on the Kara Sea project - home to what is believed to be one of the biggest untapped oil and gas reserves on the planet although it may take. ExxonMobil agreed to invest $3.2billion in opening oil and gas production in the Kara Sea, an arm of the Arctic Ocean tucked south of an island chain called Novaya Zemlya (Washington Post 2011). ExxonMobil, the worlds largest oil company, also received rights for a joint venture in the deep waters of the Black Sea. In return, Rosneft will get a chance to take part in Exxons operations in the Gulf of Mexico and Texas while the pair could also team-up in Western Siberia. Rosneft will take a 66.7 per cent stake in the blocks, while ExxonMobil which will finance the majority of exploration costs at the blockswill have the remaining 33.3 per cent. The agreement calls for at least USD1 billion to be invested in the Tuapse block, for which ExxonMobil and Rosneft reached a preliminary agreement back in January, and a further USD2.2 billion to be spent on exploration in the EPS 1, 2, and 3 blocks, which ExxonMobil said were "among the most promising and least explored offshore areas globally, with high potential for liquids and gas." (Engineer Live 2011). The details of Rosnefts reciprocal participation in the Gulf of Mexico and Texas were not spelled out. The two companies also agreed to open a jointly staffed an Arctic Research and Design Centre for Offshore Developments in St. Petersburg, Putins home town. Rosneft said that exploration in the arctic area will be done in water depth of between 40 meters and 350 meters, under complicated ice conditions, with winter temperatures as low as minus 50.8 F. The Hibernia offshore project in Canada, in which Exxon Mobil participates, is reportedly similar in terms of its climatic conditions (Market Watch 2011). The agreement, signed in Sochi, by Rosneft President Eduard Khudainatov and ExxonMobil Development Company President Neil Duffin, will see Exxon funding exploration of East Prinovozemelskiy Blocks 1, 2 and 3 in the Kara Sea, in the Russian Arctic, and the Tuapse License Block in the Black Sea (Figure 1).

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Figure 1 Map of Operations Areas - (Source: The Washington http://www.washingtonpost.com/world/exxonmobil-signs-russian-oilpact/2011/08/30/gIQApIvypJ_story.html?wprss=rss_homepage).

Post

Rosneft has intimated the Kara Sea blocks contain an estimated 36 billion barrels of recoverable oil resources. Total resources are estimated at 110 billion barrels of oil equivalent -- more than four times Exxon's proven worldwide reserves. The first well in Russia's arctic region where Exxon Mobil and Rosneft will be exploring for oil is expected to be drilled in 2015 and initial production to begin in the next decade (Market Watch 2011). Despite the fact that Exxon and Rosneft need at least four years to start drilling in the remote, hostile Arctic region and that the venture may not see any production until the end of the decade, the potential huge output make it a worthwhile investment. There is disparity between the two in terms of the investment required though both seem to agree its very large (Engineer Live 2011). Russia's Prime Minister Putin has suggested that the Exxon-Rosneft deal could ultimately call for the investment of $500-billion -- including a direct investment of between $200 billion to $300 billion (Market Watch 2011).

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"The scale of the investment is very large, Putin said during the signing ceremony (Washington Post 2011; Engineer Live 2011). Rosneft has signalled that the licensed blocks in East-Prinovozemelsky, which could be a gigantic undeveloped arctic oil and gas field located on the continental shelf of Russia in the south Kara Sea, have estimated recoverable oil resources of 4.9 billion tons of oil, or about 36 billion barrels of oil. "If that figure is correct and Exxon is able to produce the fields, we are talking about one of the world's largest oil discoveries in the last 50 years," says Fadel Gheit, an analyst at Oppenheimer & Co. "But it remains to be seen how much of that oil is economically recoverable" (Market Watch 2011).

SOME OF THE CHALLENGES

Once seen as a useless, ice-clogged backwater, the Kara Sea now has the attention of oil companies. That is partly because the sea ice is apparently receding possibly a result of global warming which would ease exploration and drilling. This summer, Gazprom, the Russian natural gas giant, moved a rig into a shallow part of the sea (Engineer Live 2011). Still, Russian scientists say the extent of the ice floes varies greatly from summer to summer, and conditions remain formidable during the polar night, which lasts months. In Alaska, drilling has remained largely off limits because of environmental restrictions and lawsuits by conservation organizations. Ironically, global warming may have played a role in making the Kara Sea more accessible to petroleum engineers. The sea ice in the area has been receding in recent years, enabling future drilling in the once-immobile region. Moreover, while drilling is strictly forbidden in other areas of the Arctic due to environmental concerns, Russia has no such limitations. However there remains much risk in the Kara Sea exploration and BP predicted several billion dollars of exploration expenditures in this area (New York Times 2011). Rosnefts attempt to strike a similar pact with BP this year fell apart because the British company had a joint venture with a separate group of private Russian investors, who blocked the Rosneft deal in an international court (New York Times (2011). Fortunately Exxon Mobil has no exclusivity agreements. Critics might suggest that much of Exxon Mobil's agreement with Rosneft is about potential but for ExxonMobil this is a step forward, considering it has suffered a series of its own setbacks in Russia over the past decade, from being stripped of the right to develop the Sakhalin-3 block in 2004 (after a decade and millions of dollars spent on exploration) to losing out on a potential deal to acquire part of YukosSibneft before that Russian company merger was reversed and Yukos itself was subsequently liquidated (Engineer Live 2011). Exxon Mobil could face

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similar problems with its new deal, but optimists will suggest that not only is the US partnering with state-run Rosneft, but the agreement comes with the blessing of Prime Minister Putin, which would seem to help ExxonMobil avoid any potential political hiccups. Yet BP assumed it had sorted potential political problems in its own deal with Rosneft. There are always risks in the partnership with a Russian state-controlled entity, with all the underlying political risks, instability and inefficiencies that are implied. Russian companies operate in a vastly different universe from western corporations. Russia has reneged on deals with Western oil companies before. In 2006, for example, it compelled Royal Dutch Shell to sell 50 percent of a Sakhalin offshore development to Gazprom, a state company after Shell spent a decade and more than $20 billion of its own money and that of other investors to build the projects infrastructure. Moscow has been notoriously unreliable in fully meeting with terms of agreements and generally lacks rules of corporate governance. Exxon despite delivering record revenues has seen company shares drop c15 percent since reaching a 2011 high in April. Part of that decline is related, of course, to falling crude oil prices and fears of another global economic recession. However, investors are also clearly concerned that Exxons days of growth are coming to an end, fossil fuel may still be the dominant energy source in the world, but eventually they will run out. Until now, Exxons principal investment in Russia has been a production sharing agreement on Sakhalin Island, on Russias eastern coast. That arrangement, which waives local taxes and provides the Russian government a share of the oil produced, is regarded as less risky than the current proposed agreement. Under the new agreement, the state-owned Rosneft could become a part-owner of drilling operations in the United States. Those operations could include two of the industrys most contentious oil extraction methods drilling for oil in the deep waters of the Gulf of Mexico and using the so-called hydraulic fracturing, or fracking, technique on land. The Russians want to learn about both types of drilling for use at home. Rosneft, which is 75 percent owned by the Russian state, will get shares in at least six Exxon Mobil projects in the United States. However the shares remain unspecified and Exxon executives may tell themselves that they are immune to petty bribes at one extreme, or political attempts to strong-arm them at the other. Yet they should be wary. Russian news agencies report that prime minister Vladimir Putin expects Rosneft to develop oil fields in the Gulf of Mexico and Texas as part of the deal (Inman 2011). Deputy Prime Minister Igor Sechin told the Interfax news agency. "I'd like to emphasize the exclusiveness of these decisions for Russian companies ... that until today were not able to develop existing deposits in the U.S." (Vasilyeva 2011). But, if Rosnefts participation in American projects leads to objections in the United States - this deal has still to go through

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oversight - Exxons investment in Russia could also be vulnerable. Russian officials say reciprocity, or mutual dependence, is a condition for foreign investment in their petroleum fields. Under the agreement, which also includes investment in the Black Sea, final investment decisions for the projects would be taken between 2017 and 2020 (New York Times 2011). Prospecting wells will be drilled starting in 2015, after a decision has been made regarding the introduction of a new tax regime for offshore projects. However, Rosneft expects to start participating in ExxonMobil's deepwater projects in the U.S. Gulf of Mexico and in unconventional projects in Texas by the end of this year or the beginning of 2012. (Market Watch 2011). Although Exxon claim that most of the projects in which Rosneft is going to participate are in the exploratory stage. The Rosneft deal would also be among the most significant attempts by a company from a country that is not an American ally to acquire United States oil fields since Cnooc, the large Chinese oil company, tried to buy the California oil company Unocal. Although it was not formally banned, that deal fell apart in 2005 after members of Congress criticized the potential Chinese ownership of American oil assets (The New York Times 2011). The Exxon-Rosneft deal, if completed, would further a long-held goal of the Russian petroleum industry to diversify internationally. It would allow Russia to do that by using access to reserves at home to gain the necessary capital and technological expertise. Despite the potential the US oversight committee could refuse to allow a Russian state oil company to take equity stakes in oil and gas projects in the US Gulf of Mexico and/or Texas. It is unclear if any investments by Rosneft in ExxonMobil projects in the US would require approval from the Committee on Foreign Investment in the United States, but this is clearly an issue that will have to be addressed in order for the Russian oil firm to realise the full potential from the ExxonMobil strategic agreement (Engineer Live 2011). Russias economy is dependent on petroleum for about 60 percent of its export revenue. Policies here are also important for world oil supplies, as Russia now pumps more oil than Saudi Arabia. Yet Russias onshore fields in Siberia are in decline, threatening the prosperity and geopolitical clout that has come with oil wealth in the last decade. But regulators worry about the special challenges in the Arctic. The ice pack and icebergs pose threats to drilling rigs and crews. And if oil were spilled in the winter, cleanup would take place in the total darkness that engulfs the region during those months. Yet, the United States Geological Survey estimates that the Arctic holds one-fifth of the worlds undiscovered, recoverable oil and natural gas (New York Times 2011). Oil and gas development beneath the Arctic seas creates a need for underwater pipelines. The thaw settlement and frost heave problems essentially disappear, because the upper boundary of the permafrost rapidly drops away from the shore, and because the seabed temperature

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regime is far more stable and little affected by the seasons. The principal problems with Arctic underwater pipelines are ice gouging and construction (Pipelines International 2009).

ICE GOUGING
Ice gouging of the seabed occurs when large ice masses, mostly ridges formed by collisions between different ice sheets (and not technically icebergs), drift into shallow water, run aground, and are then pushed along by more ice behind them. They cut deep gouges into the seabed, often 5 m deep and 50 m or more wide. A rapid calculation shows that the force required to cut such a gouge is thousands of tonnes. If a pipeline were in the way, the force would be transferred to the pipeline, and it would be damaged. If a ships anchor is accidentally dragged into it, and the force that gouging ice might apply is ten times larger. The solution is to trench the pipe so that the ice passes harmlessly over it, but it has to be safely below the deepest gouge, and somewhat further because the seabed soil beneath the ice is heavily deformed, though it may be practicable to protect a pipeline from that by placing a weak layer directly above it (Pipelines International (2009).

SUBSEA ARCTIC PIPELINES

Finding a reliable and economical construction method for underwater pipelines is a harder problem. It depends on location: the Arctic is a huge area, with widely varying climates, and it makes no more sense to think of a unique Arctic environment than it would to think of a unique tropical environment. The engineer has some freedom to choose the season of the year. In some places there is a long open-water season, and there a pipeline might be constructed by conventional lay barge, reeling, or tow methods. A difficulty is to be confident that the construction vessel can be brought to site, can lay the pipeline, and can get out before the ice consolidates, so that the vessel is not expensively trapped over the following winter. In other areas the winter ice is stable and fixed in position, and there a pipeline can be made-up on shore and dragged by an ice-based winch along the seabed under the ice, if necessary into a pre-excavated trench. In yet other locations, there is too much sea ice in summer to use a lay barge, and the winter ice is not stable enough for ice-based construction, usually because the site lies close to constantly moving ice pack (Pipelines International 2009).

CONCLUSION
Putin hailed the deal as "a truly strategic partnership," the RIA Novosti news agency reported. The prime minister estimated the total investment in the project at a massive $500 billion, a figure he described as "scary," over an unspecified number of years. The reciprocity envisioned in the

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ExxonMobil-Rosneft agreement holds much potential to generate mutual benefits for the two companies and the two host governments, but realising this potential will require further co-operation, both between the oil companies and between the US and Russia.

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APPENDIX 2 Reuters Press Release. (Online): http://www.reuters.com/article/2011/08/30/idUS159107+30-Aug2011+BW20110830Rosneft and ExxonMobil to Join Forces for Development of Arctic and Black Sea Resources, Expand Technology Sharing and Implement Joint International Projects * Reuters is not responsible for the content in this press release. Tue Aug 30, 2011 10:12am EDT Rosneft and ExxonMobil to Join Forces for Development of Arctic and Black Sea Resources, Expand Technology Sharing and Implement Joint International Projects US $3.2 billion exploration program planned for Kara Sea and Black Sea Establishment of a joint Arctic Research and Design Centre for Offshore Development in St. Petersburg Rosneft participation in ExxonMobil projects in the U.S. and other countries with a focus on building offshore and tight oil expertise Joint operations to develop Western Siberia tight oil resources Companies form partnership to undertake projects in the Russian Federation and internationally

Rosneft and ExxonMobil have executed a Strategic Cooperation Agreement under which the companies plan to undertake joint exploration and development of hydrocarbon resources in Russia, the United States and other countries throughout the world, and commence technology and expertise sharing activities. The agreement, signed by Rosneft President Eduard Khudainatov and ExxonMobil Development Company President Neil Duffin in the presence of Russian Prime Minister Vladimir Putin, includes approximately US $3.2 billion to be spent funding exploration of East Prinovozemelskiy Blocks 1, 2 and 3 in the Kara Sea and the Tuapse License Block in the Black Sea, which are among the most promising and least explored offshore areas globally, with high potential for liquids and gas. In the course of these projects, the companies will use global best practices to develop state-of-the-art safety and environmental protection systems. The agreement also provides Rosneft with an opportunity to gain equity interest in a number of ExxonMobils exploration opportunities in North America, including deep-water Gulf of Mexico and tight oil fields in Texas (USA), as well as additional opportunities in other countries. The companies have also agreed to conduct a joint study of developing tight oil resources in Western Siberia.

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The companies will create an Arctic Research and Design Centre for Offshore Developments in St. Petersburg, which will be staffed by Rosneft and ExxonMobil employees. The centre will use proprietary ExxonMobil and Rosneft technology and will develop new technology to support the joint Arctic projects, including drilling, production and ice-class drilling platforms, as well as other Rosneft projects. We have a clear vision for Rosnefts strategic direction building worldclass expertise in offshore business and enhancing oil recovery, said Rosneft president Eduard Khudainatov, following the signing ceremony. The partnership between Rosneft with its unique resource base, and the largest and one of the most highly capitalized companies in the world reflects our commitment to increasing capitalization of our business through application of best-in-class technology, innovative approach to business management, and enhancement of our staff potential. This venture comes as a result of many years of cooperation with ExxonMobil and brings Rosneft into large scale world-class projects, turning the company into a global energy leader." ExxonMobil Development Company President Neil Duffin said: "Today's agreement with Rosneft builds on our 15-year successful relationship in the Sakhalin-1 project. Our technology, innovation and project execution capabilities will complement Rosnefts strengths and experience, especially in the area of understanding the future of Russian shelf development. Rex Tillerson, chairman and chief executive officer of Exxon Mobil Corporation (NYSE:XOM), who attended the ceremony, said ExxonMobil will benefit Russian energy development by working closely with Rosneft. This large-scale partnership represents a significant strategic step by both companies, said Tillerson. This agreement takes our relationship to a new level and will create substantial value for both companies. The agreement provides for constructive dialogue with the Russian Federation government concerning creation of a fiscal regime based on global best practices. Additionally Rosneft and ExxonMobil will implement a program of staff exchanges of technical and management employees which will help strengthen the relationships between the companies and provide valuable career development opportunities for personnel of both companies. NOTE TO EDITORS: The East Prinovozemelskiy License Blocks have a total area of 126,000 square kilometers (30 million acres) in water depths ranging between 50 and 150 meters (165 feet and 500 feet). Tuapse Block in the Black Sea has the total area of 11,200 square kilometres (2.8 million acres) and water depths ranging from 1,000 to 2,000 meters (3,300 feet and 6,500 feet). Rosneft equity interest in both joint ventures will be 66.7 per cent, while ExxonMobil will hold 33.3 per cent.

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CAUTIONARY NOTE: Statements of future events and conditions in this release are forwardlooking statements. The Strategic Cooperation Agreement represents a binding outline of terms. Closing of the transactions contemplated by the agreement is subject to execution of definitive final agreements and other customary conditions. Actual future results, including potential costs and benefits realized by the parties as a result of the agreement, could differ materially depending on the outcome of future negotiations; the actions of governmental authorities and regulators, including legal and legislative uncertainties; the outcome of exploration programs; changes in prices and other market and economic factors affecting the oil and gas industries; future technological developments; other technical and operating factors; actions of competitors; and other factors discussed under the heading Factors Affecting Future Results on the Investors page of ExxonMobils website at exxonmobil.com.

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REFERENCES
BRODRICK, S., 2011. Ten Great Reads to Kick of 2011. (Online): http://blog.uncommonwisdomdaily.com/10-great-reads-to-kick-off-20116031 Accessed 15 August 2011 ENGINEER LIVE 2011. Exxon Mobil strikes Arctic exploration deal with Rosneft. (Online) : http://www.engineerlive.com/Oil-and-Gas- Accessed 3 September 2011Engineer/Exploration_Drilling/ExxonMobil_strikes_Arctic_exploration_ deal_with_Rosneft/23663 INMAN, P., 2011. ExxonMobil-Rosneft oil deal unlikely to open the taps of transparency. Where there's oil, there's corruption and Russia. guardian.co.uk. (Online) : http://www.guardian.co.uk/business/2011/aug/30/exxonmobil-rosneftdeal-transparency. Accessed 3 September 2011 MARKET WATCH 2011. Wall Street Journal. Rosneft: Exxon Deal Expected to Close in 2012. (Online) : http://www.marketwatch.com/story/rosneftexxon-deal-expected-to-close-in-2012-2011-08-31 Accessed 1 September 2011 PIPELINES INTERNATIONAL, 2009. Overcoming the Challenges of Arctic Pipelines (Online): : http://pipelinesinternational.com/news/overcoming_the_challenges_of_ar ctic_pipelines/008037/ Accessed 2 September 2011 THE NEW YORK TIMES 2011. Exxon Reaches Arctic Oil deal with Russians. (Online) : http://www.nytimes.com/2011/08/31/business/global/exxonand-rosneft-partner-in-russian-oil-deal.html?pagewanted=all Accessed 3 September 2011 THE WASHINGTON POST WITH BLOOMBERG. 2011. Exxon Mobil signs Russian Oil Pact. (Online): http://www.washingtonpost.com/world/exxonmobil-signs-russian-oilpact/2011/08/30/gIQApIvypJ_story.html?wprss=rss_homepage. Accessed 1 September 2011 VASILYEVA, N., 2011. Russian oil teams up with Exxon Mobil. Forbes.com (Online) : http://www.forbes.com/feeds/ap/2011/08/30/general-energyeu-russia-exxonmobil_8651154.html Accessed 1 September 2011

Senga Briggs The Robert Gordon University 2011/2012

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