Igor Sechin, CEO of Rosneft, on right, and Exxon Mobil CEO Rex Tillerson shake hands after signing an agreement ion 2012.
ExxonMobil began drilling in the Russian Arctic on Saturday, defying both the spirit of recent U.S. sanctions and environmental opposition to oil exploration in the region.
According to Fuel Fix, the well is a joint $700 million project between ExxonMobil and Rosneft, Russia’s state-owned oil producer. Drilling is anticipated to take about 70 days, and will target the Universitetskaya — a geologic formation under the ocean floor that’s roughly the size of the city of Moscow. Rosneft estimates the formation could contain up to 9 billion barrels of oil, making it a major target for Russian oil exploration. Energy provides half the Russian state’s revenue, and the country has so far maintained its oil production at a post-Soviet high of over 10 million barrels per day. ExxonMobil’s output fell to a five-year low in the second quarter, so discovering new reserves in the Universitetskaya would also be a major boost.
“The well is very important, it’s probably one of the most interesting wells in the global oil industry for many years,” James Henderson, a senior research fellow at the Oxford Institute for Energy Studies, told Fuel Fix in a phone interview.
The West Alpha rig, which ExxonMobil leased from Bermuda-based Seadrill Ltd., is doing the drilling. It’s apparently the first of as many as 40 wells Rosneft plans to drill by 2018 to explore the potential of the Arctic Ocean for oil production. Gazprom, another Russian state-owned fossil fuel company, already has active wells in the Arctic Circle off Russia’s northern coast.
International environmental groups have long opposed drilling in the Arctic Circle, thanks to the region’s unique ecosystem and the immense problems the harsh conditions create for drilling rig safety and the integrity of the industry’s infrastructure. Simon Boxall — an oil spill expert from the University of Southampton, who played a key role in analysis of BP’s Deepwater Horizon oil spill — told the Guardian in November that if drilling in the Arctic went ahead “it is inevitable you will get a spill — a dead [certainty]. I would expect to see a major spill in the not too distant future.”
Gustavo Ampugnani, an Arctic campaigner at Greenpeace, said in an e-mailed statement that ExxonMobil and Rosneft’s plan “to drill in the ecologically sensitive Arctic is nothing less than absurd.”
“The West Alpha platform is fast becoming the most controversial oil rig in the world,” he continued.
Early this year, Shell Oil announced to would abandon plans to drill in the Arctic in 2014 after a federal appeals court ruled the U.S. government had not properly assessed the risks. Dangerous ice conditions, late permits, and a string of equipment failures also forced the company to scuttle offshore drilling near Alaska in 2013.
On top of all this, the Universitetskaya project is an added aggravation on top of tensions between the U.S. and Russia over the latter’s support for rebels in the Ukraine. America and the European Union (E.U.) have imposed an escalating ratchet of sanctions on Russia over the ongoing crisis, and Russia has responded with bans on agricultural products from the United States. and the European Union.
More recently, after a Malaysian passenger airliner was shot down over the Ukraine, the U.S. and E.U. pressed forward with sanctions on Russia’s oil and natural gas industries. And while the rules are not technically designed to halt joint projects between Russian and American companies — like what Rosneft and ExxonMobil are attempting in the Universitetskaya — they are meant to starve Rosneft of financing and access to modern technology.