Russia Discovers Massive Arctic Oil Field Which May Be Larger Than Gulf Of Mexico

Tyler Durden's picture

In a dramatic stroke of luck for the Kremlin, this morning there is hardly a person in the world who is happier than Russian president Vladimir Putin because overnight state-run run OAO Rosneft announced it has discovered what may be a treasure trove of black oil, one which could boost Russia's coffers by hundreds of billions if not more, when a vast pool of crude was discovered in the Kara Sea region of the Arctic Ocean, showing the region has the potential to become one of the world’s most important crude-producing areas, arguably bigger than the Gulf Of Mexico. The announcement was made by Igor Sechin, Rosneft’s chief executive officer, who spent two days sailing on a Russian research ship to the drilling rig where the find was unveiled today.

The oil production platform at the Sakhalin-I field in Russia,
partly owned by ONGC Videsh Ltd., Rosneft Oil Co., Exxon Mobil
Corp. and Japan's Sakhalin Oil and Gas Development Co. on June 9, 2009.

Well, one person who may have been as happy as Putin is the CEO of Exxon Mobil, since the well was discovered with the help of America's biggest energy company (and second largest by market cap after AAPL). Then again, maybe not: as Bloomberg explains "the well was drilled before the Oct. 10 deadline Exxon was granted by the U.S. 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 today."

Which means instead of generating billions in E&P revenue, XOM could end up with, well, nothing. And that would be quite a shock to the US company because the unveiled Arctic field may hold about 1 billion barrels of oil and similar geology nearby means the surrounding area may hold more than the U.S. part of the Gulf or Mexico, he said.

For a sense of how big the spoils are we go to another piece by Bloomberg, which tells us that "Universitetskaya, the geological structure being drilled, is the size of the city of Moscow and large enough to contain more than 9 billion barrels, a trove worth more than $900 billion at today’s prices."

The only way to reach the prospect is a four-day voyage from Murmansk, the largest city north of the Arctic circle. Everything will have to shipped in — workers, supplies, equipment — for a few months of drilling, then evacuated before winter renders the sea icebound. Even in the short Arctic summer, a flotilla is needed to keep drifting ice from the rig.

Sadly, said bonanza may be non-recourse to Exxon after Obama made it quite clear that all western companies will have to wind down operations in Russia or else feel the wrath of the DOJ against sanctions breakers. Which leaves XOM two options: ignore Obama's orders (something which many have been doing of late), or throw in the towel on what may be the largest oil discovery in years. 

And while the Exxon C-suite contemplates its choices, here is some more on today's finding from Bloomberg:

“It exceeded our expectations,” Sechin said in an interview. This discovery is of “exceptional significance in showing the presence of hydrocarbons in the Arctic.”


The development of Arctic oil reserves, an undertaking that will cost hundreds of billions of dollars and take decades, is one of Putin’s grandest ambitions. As Russia’s existing fields in Siberia run dry, the country needs to develop new reserves as it vies with the U.S. to be the world’s largest oil and gas producer.


Output from the Kara Sea field could begin within five to seven years, Sechin said, adding the field discovered today would be named “Victory.”


The Kara Sea well -- the most expensive in Russian history -- targeted a subsea structure named Universitetskaya and its success has been seen as pivotal to that strategy. The start of drilling, which reached a depth of more than 2,000 meters (6,500 feet), was marked with a ceremony involving Putin and Sechin.


The importance of Arctic drilling was one reason that offshore oil exploration was included in the most recent round of U.S. sanctions. Exxon and Rosneft have a venture to explore millions of acres of the Arctic Ocean.

But what's worse for Exxon is that now that the hard work is done, Rosneft may not need its Western partner much longer:

“Once the well is plugged, there will be a lot of work to do in interpreting the results and this is probably something that Rosneft can do,” Julian Lee, an oil strategist at Bloomberg First Word in London, said before today’s announcement. “Both parties are probably hoping that by the time they are ready to start the next well the sanctions will have been lifted.”

And here is why there is nothing Exxon would like more than to put all the western sanctions against Moscow in the rearview mirror: "The stakes are high for Exxon, whose $408 billion market valuation makes it the world’s largest energy producer. Russia represents the second-biggest exploration prospect worldwide. The Irving, Texas-based company holds drilling rights across 11.4 million acres in Russia, only eclipsed by its 15.1 million U.S. acres."

Proving just how major this finding is, and how it may have tipped the balance of power that much more in Russia's favor is the emergence of paid experts, desperate to talk down the relevance of the Russian discovery:

More drilling and geological analysis will be needed before a reliable estimate can be tallied for the size of the oil resources in the Universitetskaya area and the Russian Arctic as a whole, said Frances Hudson, a global thematic strategist who helps manage $305 billion at Standard Life Investments Ltd. in Edinburgh. Sanctions forbidding U.S. and European cooperation with Russian entities mean that country’s nascent Arctic exploration will be stillborn because Rosneft and its state-controlled sister companies don’t know how to drill in cold offshore conditions alone, she said.


“Extrapolating from a small data sample is perhaps not going to give you the best information,” Hudson said in a telephone interview. “And because of sanctions, it looks like there’s going to be less exploration rather than more.” In addition, the expense and difficulty of operating in such a remote part of the world, where hazards include icebergs and sub-zero temperatures, mean that the developing discoveries may not be economic at today’s oil prices.

Maybe. Then again perhaps the experts' time is better suited to estimating just how much longer the US shale miracle has left before the US is once again at the mercy of offshore sellers of crude.

In any event one country is sure to have a big smile on its face: China, since today's finding simply means that as Russia has to ultimately sell the final product to someone, that someone will almost certainly be the Middle Kingdom, which if the "Holy Gas Grail" deal is any indication, will be done at whatever terms Beijing chooses.

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OceanX's picture

" Arctic field may hold about 1 billion barrels of oil"


Big find!  should last, how long?

barre-de-rire's picture

so when they get more than warmed by us/eu they announce they have even more than what they are expected to have.


that soundz like the most biggest taunt ever to me.


obozo must be quad facepalm ( hands + feets )

SafelyGraze's picture

1. send in advisors (a.k.a. "spotters")

2. build coalition

3. bombs away!


Pinto Currency's picture



Awaiting ISIA (Islamic State in the Arctic).

Must bomb.

SafelyGraze's picture

+1 skateboarder

if that is your Real Name

BaBaBouy's picture

Well, EU Et AL, Bow To Russia...

SO, We Will Have VLAD, Who Is A Big Proponent Of PHYSICAL GOLD, Out On A Shopping Spree Pretty Soon...

Hmmmm, Wonder How Much Actual Physical GOLD Is Really Available, Soon Find Out...

Latina Lover's picture

Memo from Fed Reserve to Obama:


svayambhu108's picture

EROEI! Getting that out of there would loose most of its punch value. Also imagine black goo spilled over the Arctic. Not a game changer. Just a little bit to prolong US agony.

CrazyCooter's picture

Unless you are posting the information that shows the EROI doesn't work, you can't make that claim.

The quality of the crude (light vs heavy, etc) is a huge variable. I don't see that being clearly stated upthread.

The majors wouldn't be in the arctic if it wasn't economical given the right fields.

Furture oil was always going to be more expensive; economics dictates the cheapest/best fields are produced first.

If the premise of the article, which is there is a wide area with similar geology where at least one formation is proven to have substantial oil deposits, that is a big deal.

ANd it is certainly better than this shale/fracking stupidity we have going on over here ...



Funny Money's picture

Bullshit to this discovery.  I'll believe it when it's coming out of the gound.

Fractal Parasite's picture

Now y'all understand why Russia has established a force of Arctic paratroopers - the first of its kind in the world.
As explained by Nikolai Starikov (starting at 3:50).

Eco-movements - a tool for suppressing industrial competitors

max2205's picture

.Drilled by Russia financed by China with USmTreasuries as collateral and Barry BeHeading back to the golf course

clymer's picture

great. Now we'll never exploit zero-point energy, charge clusters, fuel cells or cold fusion.


(Chris Martenson releases denial article in 3..2..1..)

Calmyourself's picture

No worries pal, FBI froze Teslas head they will thaw it out any day now..  Problem is some dude encrypted the PW to the cryo vault and left it on his iphone..

Four chan's picture

whats milkshake in russian?

GetZeeGold's picture




Larger Than Gulf Of Mexico



Why aren't we drilling in the Gulf Of Mexico again?

Son of Loki's picture

Heck with those Spanish classes. I told my Dad today I'm switching to Russian. Much moar valuable.

Manthong's picture

What the frack?

How dare the Rooskies claim to have more security?

I sense war on the horizon.

Volkodav's picture

Russian Accelerator

forget the others for learn

Acidtest Dummy's picture

But the .gov over unity financial system has been such a success.  /s

SAT 800's picture

Looks like its time for the pigeon to shit on the chess board and claim he won.

Torgo's picture

Russians wash their balls in ice water!

NeoclassicalSuiGeneris's picture

I've a doubt. If almost 1 million of barrels have found in the RUSSIAN ARCTIC, all this oil will be sold in dollars or ruble?

Debt-Is-Not-Money's picture

It'll be ok if they just keep BP outa there!

post turtle saver's picture

... and by BP you mean Transocean

not to worry, the only folks capable of getting that stuff out are Texans, that's why Exxon and Parker Drilling are there showing hunters of squirrel and moose how it's done... the same guys that taught the bunch of drunks running the Siberian fields to not drop it all on the ground and actually get it into the pipeline instead...

Putin wouldn't have an oil and gas economy to talk about if it wasn't for Texas... they simply don't have the engineering & logistics chops for it...

post turtle saver's picture

lol @ the downvotes with no counter... knee jerk much? face it you know I'm right, it must burn your hides

magnetosphere's picture

remember when shell tried to drill in the alaskan arctic and failed miserably?  nobody knows how to drill there yet

Parrotile's picture

Seeing as Russia held the record for the deepest "hole in the ground" for a considerable time, I'd be a little cautious in suggesting they haven't got the technology or knowledge, 'cause they clearly demonstrated that they did.

They CAN do it, and they WILL do it. They do NOT need Texan (or for that matter anyone else's) help.

post turtle saver's picture

... which was bypassed by an actual productive well... Sakhalin-1 Odoptu OP-11 Well... drilled by (wait for it)

Parker Drilling out of Houston

why? because just putting a hole in the ground as a glorified science project is a far cry from boring a production well

thanks for proving my point, btw

escapeefromOZ's picture

 Were they using Texan Know how and experience ?

escapeefromOZ's picture

 Were they using Texan Know how and experience and engineering ?

post turtle saver's picture

last time I checked Prudhoe Bay is well north of the Arctic circle, and there's this thing called the Trans-Alaska pipeline that was built for it...

I've seen more of Dalton Highway than I care to tell, please do go on and tell me what can't be done oil-wise north of the Arctic circle...

Escrava Isaura's picture


The level of misinformation by some commentators are disturbing.


“P.S.P.S.  I deeply value wisdom of some economists.  In particular, Professor Nicholas Georgescu-Roegen has changed my life forever.  My two-year study of his magnum opus, "The Entropy Law and the Economic Process," 1971, Harvard University Press: Cambridge, Massachusetts, and the dozens of monographs he quoted there, changed my outlook on everything, and made me a different scientist.  The writings of Professors Filip Mirowski and Herman Daly have also impressed me greatly.  The problem is that these giants of science have been thoroughly ignored by the mere technicians and dilettantes, who also call themselves main-stream economists.” — Tadeusz (Tad) Patzek


Livermore Legend's picture

"The level of misinformation by some commentators are disturbing.".....

But Par for the Course...

BTW, Nice Reference..

VAD's picture

The inability of an "author" to conjugate a verb is disturbing.

Bangalore Equity Trader's picture

Listen VAD. Let me be real clear here. You are right. The "AUTHOR" is in fact, "DISTURBING".

A sick mo-fo.

Escrava Isaura's picture


Talking about authors

By James B  

1. I was jogging today thinking about Edward Baptist's new book "The Half Has Never Been Told: Slavery and the Making of American Capitalism", where he makes the case that the rise of industrial society in the US did not wash slavery away, but rather that it was built on top of it. That tells me that from the founding of the US in the 18th century until today, our wealth was based first on slaves, and second on burning fossil fuel that is loading carbon in the atmosphere. That is very sad.

2. What is a better storyline? That peak oil pervades the narrative, and gives it a foreboding sense of doom; or rather that by continually delaying the end of fossil fuel by fracking, shale oil, drilling in the deep ocean, drilling in Greenland, and finally mining methane hydrate on the ocean floor, that in fact we can keep burning fossil fuel until carbon in the atmosphere exceeds 1,000 ppm?

Which should we fear more? Running out of oil, or not running out of oil?


Acidtest Dummy's picture

You've neglected the genocidal capture of enormous land and resources just as the industrial revolution launches.

Escrava Isaura's picture

Actually, I did… If you were referring to North America.


SAT 800's picture

I don't read novels; but of course, all global warming enthusiasts do; their entire body of literature consists of "novels" and can be classified as fiction. You're not so much a victim of fairly professional propaganda, as a person who stumbled across a story line with good financial backing that satisfied your emotional needs. None of this has anything to do with reality, of course.

Escrava Isaura's picture

SAT 800

Good morning,

Its 8:41 AM in Washington, D.C. and NO one above your comment used the word "Global Warming" but, you.


Did you mean to say Pollution, Resource Depletion, or perhaps, Human Stupidity?

GooseShtepping Moron's picture

I read Philip Mirowski's book Machine Dreams and was fascinated by it. The man is certainly a devastating genius and he seems to have read everything ever published in the field of economics, but I was not always able to get a clear idea of the point he was actually making. If you have some light on this, please share.

Citxmech's picture

Amonzon's page made it sound like he was projecting the effect AI, including Kurzweil's "singularity," to economics/trading.

What did you take away from it?   

GooseShtepping Moron's picture

What I took away was that the book was part history, part conclusion which did not follow from the arguments. The hero of the book is John von Neumann, a figure who certainly deserves respect and attention. In the first half of the book Mirowski *seems* to be arguing against the over-mathematicization, reification, and systemization present in economic thinking and I thought "I'm really going to like this." By the end, however, it turns out that this isn't quite the case.

Mirowski believes that traditional economics (of whatever school) has failed because it has adopted an overly physicalist view of the subject matter. The principal debates among economists heretofore have concerned themselves with how entropy is to be managed within the system. Mirowski elucidates this in a chapter titled "From MAD to MOD."

These two idiosyncratic acronyms describe conflicting views of "Maxwell's Demon," which in Mirowski-speak refers to the force necessary to rise above economic stagnation and actually thrive. MAD stands for the Maxwell's Augustinian Demon, in which suboptimal economic arrangements are seen as a sort of privation to be overcome by perfecting the system (e.g. Pareto Optimization, the Walrasian General Equilibrium). MOD stands for the Manichaean Other Demon, a much more sinister force of low entropy eating evil which must be fought tooth and nail (e.g. Keynesianism, Marginalism). Those who are familiar both with economic history and Christian theology (as I am) will more quickly see the application here.

Mirowski's thesis, I believe, is that in the development of economic thought opinions shifted from MAD to MOD until John von Neumann (who is scarcely ever mentioned as an economic thinker) came along and settled the matter in favor of MAD with his novel techniques of Monty Carlo integration, square integration, and the ergodic hypothesis.

He concludes by pronouncing the "Socialist Calculation Debate" (i.e. the purported inability of Socialist markets to provide a means of true price discovery, discussed by Hayek and others) moot after the advent of stored-program computers, and declaring that decision bots can discover true prices by engaging in Dutch auctions with one another, hence the subtitle of the book, "Economics Becomes a Cyborg Science."

I had originally thought Mirowski's take on "cyborg science" was critical, but it turns out to be laudatory. I found the book to be both anticlimactic and incorrect, and I'm not sure why anyone would think he was on to something with his thesis.

GooseShtepping Moron's picture

One more thing. Here is a review of Machine Dreams from the Ludwig von Mises Institute which agrees with my general assessment.

Escrava Isaura's picture


Thanks for the link. Going to check it.


However, Austria economics is part of the Neoliberal policies...By opposing Neoclassical Economics.


Divide and rule, remember?


Escrava Isaura's picture

GooseShtepping Moron,

Sorry, I just noticed your post and not sure you addressed your question to me.

Anyway, did not read "Machine Dreams" but here’s in PDF:


And here is Philip Mirowski, at his best:

The thought collective was of two minds concerning orthodox neoclassical economics: Chicago and the Virginia public choice crowd—followers of James Buchanan and Gordon Tullock—were in favor, whereas the Hayekian Austrians and the postmodern neoliberals were opposed. The solution was instead for them to promulgate a new shared epistemology and a related set of double truths for their own true believers. Their philosopher’s stone maintained that everyone should be free to believe whatever florid nonsense caught their fancy because the vast mass of humanity was irreparably condemned to ignorance.