Exxon Mobile, in conjunction with a Russian state energy company, has announced that the joint venture between them is making progress in its exploration of the Arctic Ocean for oil and natural gas. An Exxon drilling rig will be prospecting in the Kara Sea, a body of water located between the northern coast of European Russia and the Novaya Zemlya island chain. The drilling expedition must occur during the summer months, when the Kara Sea is free of ice. Exxon and Russia-based Rosneft plan to drill one exploration well in the Kara Sea this summer, with an initial commitment to invest $3.2 billion in exploration.
In 2011, Exxon reached a deal with Rosneft that gave the company access to the Russian-controlled areas of the Arctic Ocean. It is estimated that the Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas. The Russian-held areas have less regulation and legal risk than drilling in the American and Canadian held areas of the far north. However, there are significant environmental risks to drilling in the area. If oil were spilled in the winter, cleanup would have to take place in total darkness, as there is little sunlight in the Artic during those months.
Russian energy companies have entered into several joint venture partnerships such as the Exxon agreement. Russia now ships more oil around the world than Saudi Arabia, making it very important to world oil supplies. About 60 percent of Russia’s export revenue comes from petroleum. The extraction of this natural resource depends on Western technical aid for offshore drilling.
Exxon’s joint venture has not been directly affected by the sanctions recently put into place against Russia for its actions in the Ukraine, although the energy company that it has partnered with has seen its long-term borrowing limited by the United States. Russia has been under increased international pressure since the downing of a passenger airliner in Ukraine blamed on rebels sympathetic to Russian interests in the area. Any new sanctions directed towards Russia could directly impact the country’s energy industry.
