Russia’s state-owned oil company Rosneft just found oil in the Arctic.
Rosneft announced on Saturday that it discovered oil in the Universitetskaya structure — a 1,200 square kilometer area in the Kara Sea inside the Arctic Circle.
The announcement states that the entire resource base is estimated to be 87 billion barrels (or 13 billions tonnes of oil), larger than the Gulf of Mexico and potentially comparable to the resource base of Saudi Arabia.
Rosneft has been exploring three East Prinovozemelskiy areas of the Kara Sea under an agreement with ExxonMobil.
But there is a problem: after October 10, Exxon and Rosneft won’t be able to continue the joint exploration because of US sanctions against Russia.
According to a Bloomberg report:
“The well was drilled before the Oct. 10 deadline Exxon was granted by the US government under sanctions barring American companies from working in Russia’s Arctic offshore. Rosneft and Exxon won’t be able to do more drilling, putting the exploration and development of the area on hold despite the find announced [on Saturday].”
Rosneft doesn’t have the ability to drill in cold offshore conditions by itself, Standard Life Investments strategist Frances Hudson told Bloomberg.
And Rosneft can’t even rely on other state-owned companies because they don’t know how to do it either, according to Hudson.
But Russia really needs these Arctic oil reserves. “As Russia’s existing fields in Siberia run dry, the country needs to develop new reserves as it vies with the US to be the world’s largest oil and gas producer,” Bloomberg reported.
This is bad news for Exxon, too: Russia is the company’s second-biggest exploration area.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.