ExxonMobil and Hungary's MOL challenge Gazprom in Europe

Implications: In a press release at Irving, Texas on April 14, ExxonMobil Exploration and Production Hungary Limited, a subsidiary of Exxon Mobil Corporation (XOM) announced an agreement with MOL Hungarian Oil and Gas to commence an exploratory campaign in blocks 106 and 107 in the Mako Trough, southeast Hungary. XOM will fund the program and earn 50% in the acreage. The program covers 387,000 acres with wells drilled to 14,000 feet. XOM will use its in house technology to drill faster and make complex completions in unconventional exploration and development. The first wells will be spudded in 2008. Reservoir evaluation will be made over two to three years. The aim is to evaluate potential for commercial production of unconventional oil and gas. This is the next phase under an agreement signed in 2007. XOM is the largest natural gas producer in Europe and continues its search for new partners and hydrocarbon sources.

Analysis:  For several years now XOM has been testing two new technologies in the Piceance Basin of western Colorado and the Barnett shale of the Newark East Basin in Texas. One technique is called “Fast Drill Process” and the other is “Multi-Zone Stimulation”. Both are proprietary technologies. With this experience, XOM can make an accurate preliminary assessment based on a limited suite of data. One of XOM’s claim to fame is that are the most cost efficient operator in the business. No one has challenged that. Another claim to fame is that they are ever on the search for new oil and gas opportunity. The only caveat is that the new projects must have the potential to meet the XOM rigorous economic standards. Taken together, the two licenses cover 571,300 acres. On the sales side, the European demand for natural gas is huge and growing at a rate that worries the Energy Commissioner of the European Union. Without doubt, the entry of XOM into Hungary is a welcome event. XOM is known to move fast and chances are good they will be able to produce Mako Trough natural gas into the European markets as early as 2009. With MOL’s pipeline system already in place, hook-up of new wells will be rapid. XOM has been an important operator in Europe for many years and this latest effort shows they have no intention of surrendering this important region to Gazprom. Mr. Andris Pielbags, European Union Minister of Energy will be pleased.