The Chief Executive Officer of Russian state oil producer OAO Rosneft Igor Sechin said that US sanctions imposed on Russia due to its intervention in Eastern Ukraine will not bar the exploration and discoveries of oil wells in the Arctic Ocean.
Mr. Sechin, a close ally to President Vladimir Putin, announced on Saturday that Rosneft, in a controversial collaboration with the biggest US oil company Exxon Mobil Corp, has discovered what could be major amounts of oil and natural gas in their first well drilled in the Arctic Oceans Kara Sea region.
The $700-million well, the most expensive in Russian history, has been one of the most closely eyed projects in the oil industry, as scientists believe the Arctic Ocean to be the last major unexploited resource. According to Rosneft, the well found around 750 million barrels of oil and almost 340 billion cubic meters of natural gas, and similar geology surrounding it suggests the area could hold more crude than the US part of the Gulf of Mexico.
The development or Arctic wells, one of Putins major ambitions as Russia tries to remain the worlds leading energy exporter amid drying Siberian fields, will cost hundreds of billions of dollars in the upcoming decades. Rosnefts Sechin said earlier this month that the oil producer could invest $400 billion to tap these reserves over the next 15 years.
“We expect to open a new oil province there, with reserves comparable to the developed reserves of Saudi Arabia”, Sechin told Der Spiegel.
Although the first estimates of the wells abundance were not conclusive, Mr. Sechin said it would be named Pobeda (Russian for Victory). A person familiar with the project said that a second round of drilling would be required next year to test the wells oil flow, which will help assess the amount of retrievable resources, while some other people close to the project warned that striking oil in one well in a huge area does not guarantee similar findings in others wells.
However, Rosneft faces a more urgent problem to solve as US sanctions bar Exxon Mobil, on whose money and expertise the Russian company relies for development of Arctic oil reserves, from continuing its operations with the Russian company after the well is safely sealed. This also may be the reason why the US oil giant released a more cautious assessment of the wells possible yield.
“We have encountered hydrocarbons, but it is premature to speculate on any potential outcome,” said Exxon spokesman Richard Keil.
US sanctions pose a problem for Exxon as well, as it will be prohibited from entering any co-operation with Russian oil companies in the Arctic Ocean after a deadline imposed by the US Treasury expired on September 26th, barring US companies participation in joint ventures in the Russian Arctic. Exxons partnership with Rosneft was seen as its brightest prospects of future growth, with the Russian state oil company saying that the two allies had planned to invest more than $3.2 billion together on exploration in the Black and Kara Seas.
Rosneft OAO rose by 0.20% to RUB232.86 by 09:49 GMT in Moscow. The company is valued at RUB2.463 trillion.
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