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A Rosneft station in Moscow in July 2014.
Reuters/Sergei Karpukhin
ExxonMobil’s Russian partner.

ExxonMobil reportedly finds oil in the Russian Arctic

This post has been updated with Rosneft confirming the discovery and declaring the quantity found.

ExxonMobil and its Russian partner have found oil in an Arctic well where drilling was to have stopped today but for a US extension granted to prevent a possible environmental accident. In a statement on Sept. 27, Russia’s Rosneft said the two companies discovered about 930 million barrels of oil and gas, one of the world’s largest finds in years.

The oil was found at Universitetskaya, a 7,700-foot well in the Kara Sea that ExxonMobil’s partner, Rosneft, believes holds about 9 billion barrels of oil. The find seems certain to create tension with the US government, which two weeks ago slapped new sanctions on Russia that forbid US companies from participating in Russian Arctic drilling. Lobbied by Exxon, the Obama administration granted the company an extension through Oct. 10 in order to allow the safe cementing and abandonment of the well.

The company proceeded with the drilling, as Quartz noted late yesterday, and it struck oil. The news was first reported by the Financial Times. ExxonMobil will be able to continue to participate only if tension between the West and Russian president Vladimir Putin subsides, and the sanctions are eased.

ExxonMobil declined to comment on the report of the oil find.

It has been clear that ExxonMobil would have time to finish drilling

Since the new sanctions were announced, ExxonMobil has said little more publicly than that Washington had extended a Sept. 26 deadline, allowing for safe withdrawal from the well. Given the sanctions, analysts cast doubt on whether the company had time to produce the well logs necessary for an initial determination as to whether Universitetskaya contained oil. If the company fell short, this drilling season would have been all but wasted, since it would not meet the objective of discovering what lay below the surface.

But on Sept. 24, Kirill Molodtsov, Russia’s deputy energy minister, said drilling will come to a halt on Oct. 10. Since ExxonMobil spudded the well Aug. 9, and drilling was to take 70 days, that meant that drilling, cementing, plugging, and abandoning the well was to finish by Oct. 18. Unless the company experienced unusual difficulty, there was little chance that eight days would prevent completion. That made it appear likely that ExxonMobil would meet its aims for the well despite the sanctions, which are directed at hobbling Russia’s next-generation oil production.

Universitetskaya is an important field not only for Russia, but for ExxonMobil. Like all of the major oil producers, the company has had a difficult time finding new reserves to replace what it drills every year. The Russian Arctic, if successful, could be a source of a large part of its production in the 2020s and beyond. As for Russia, it hopes that its Arctic underpins production for the next several decades, since oil revenue funds more than 40% of the state budget..

The sanctions are intended to threaten Russian hopes and pressure Putin into concessions on Ukraine.

In a statement yesterday, ExxonMobil told Quartz:

Given the complexity of the University-1 well and the sensitive arctic environment in the Kara Sea, ExxonMobil sought, and was granted, limited relief from the recently issued Treasury Department sanctions to enable a safe and orderly wind down of operations related to this exploration well.

The Kara Sea project and the University-1 well was the subject of our application for a slightly extended compliance period because operations were at a critical stage and additional time was required to safely wind down activity, especially given the sensitive arctic environment.

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