Exxon Mobil will start drilling a $700million well in the Arctic Ocean on Saturday, Russia’s government said, showing that for all the talk of action against Vladimir Putin’s oil industry, the largest US energy company is undeterred.
As Russia’s relations with Europe and the US deteriorated to the lowest point since the Cold War over the conflict in Ukraine, the European Union imposed a third round of sanctions last week, restricting the export of equipment used for offshore oil production.
That does not impact Exxon’s plans because the contract to hire the rig was signed before the measures were announced.
Developing the Arctic is vital for Russia, where energy provides half the state’s revenue, to maintain oil production near a post-Soviet high of more than 10million barrels a day.
For Exxon, where output fell to a five-year low in the second quarter, a discovery would offer a vital new source of crude.
After more than two year’s planning, Exxon and its partner Rosneft, Russia’s state oil producer, will start drilling the Universitetskaya prospect on Saturday, the Kremlin said in a statement.
Putin will give the signal to start Russia’s northernmost well accompanied by Rosneft chief executive Igor Sechin, who is subject to US sanctions himself, and Exxon Mobil Russia head Glenn Waller.
Universitetskaya is the first of as many as 40 offshore wells Rosneft plans by 2018 to test the potential of the unexplored the Arctic Ocean.
The geological structure targeted by the drilling is roughly the size of the city of Moscow and may contain as many as 9billion barrels of oil, enough to supply the world for almost three years, according to a presentation on Rosneft’s website.
Drilling will take about 70 days, a period that should be sufficient to assess the reserves of any discovery, said Zeljko Runje, Rosneft’s head of offshore. The area is relatively free of icebergs, meaning work is ready to start, he said.
The Exxon-Rosneft cooperation also includes $300million investment in Russian shale pilot projects, which now risk being suspended, Rosneft chairman Alexander Nekipelov said on July 29.
Exxon has come under pressure and showed surprising perseverance, Nekipelov said at the time.
Exxon and Rosneft have also invested in a new platform this year to expand oil production at the Sakhalin-1 project in Russia’s Far East.
Recommended for you
