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Discovers Kara Sea oil a week before sanctions hit

Kara Sea drilling with the "West Alpha" rig.

Exxon and Rosneft have found oil at the first well drilled, but the unanswered question is how to exploit it as sanctions halt Arctic offshore cooperation.

In a statement this weekend, Rosneft says the company together with ExxonMobil discovered more than 100 million tons of oil.

The well drilled with the Norwegian own rig “West Alpha” at the Universitetskaya-1 in Russia’s Arctic Kara Sea has got lots of attention this autumn. Not only because it is the first joint drilling in the Kara Sea, an area that potentially holds huge resources, but also because the current sanctions imposed by the U.S. includes a ban on technology assistance to Russian Arctic offshore oil-drilling.

ExxonMobil said in a statement on September 19 that the company is complying with all U.S. sanctions and was granted a two-week prolongation of its drilling in the Kara Sea to ensure a safe and environmental responsible winding down at this exploration well.

West Alpha” is now preparing for departure from the Kara Sea and all operations will be ended by October 10. After that, the ban on assisting Russia with deep sea or Arctic offshore oil drilling enters force.

In Russia, the implications the U.S. and EU ban on Arctic offshore techonology have on the future cooperation are not mentioned in the media releases.

Head of Rosneft, Igor Sechin, made the proud announcement. “I can inform you about the discovery of the first oil/gas-condensate field in the new Kara Sea oil province. The first oil was extracted,” Sechin said.

Igor Sechin himself is a target of U.S. sanctions.

“This is an outstanding result of the first exploratory drilling on a completely new offshore field. This is our united victory, it was achieved thanks to our friends and partners from ExxonMobil, Nord Atlantic Drilling, Schlumberger, Halliburton, Weatherford, Baker, Trendsetter, FMC. We would like to name this field Pobeda,” Igor Sechin said.

Pobeda is Russian for victory.

While the Rosneft boss voices huge optimism with the discovery, a spokesman for Exxon is more reluctant. 

“We have encountered hydrocarbons but it is premature to speculate on any potential outcome regarding the University-1 exploration well,” says Alan Jeffers, Exxon spokesman to the Wall Street Journal.

The estimates of more than 100 million tons of oil makes the discovery a bit larger than the Johan Casteberg discovery by Norwegian Statoil in the western part of the Barents Sea, believed to hold 86 million tons. 

In addition to oil, Rosneft says the Pobeda field holds 338 bcm of gas.

This autumns drilling by Exxon and Rosneft in the Kara Sea has a price tag of more than $600 million, while the larger exploration agreement between the two partners is estimated at $3,2 billion. The exploration area in the Kara Sea is in size bigger than the Mexican Gulf.

Citing unnamed sources, the newspaper Kommersant reports on Monday that ExxonMobil is suspending its cooperation with Rosneft on offshore drilling in the Arctic due to sanctions.

Rosneft has posted a promotion video from the Kara Sea drilling operation at the company’s Russian language portal.