Rosneft and ExxonMobil have struck oil at their controversial joint well in the Arctic, according to people familiar with the matter.

The Universitetskaya-1 well in the Kara sea has become emblematic of Russia’s ambitions to develop its enormous Arctic oil development in the face of western sanctions.

Rosneft and Exxon started drilling in the summer and continued even as the US treasury imposed financial sanctions on the Russian oil group over Moscow’s actions in Ukraine.

Under pressure from new US sanctions in September, Exxon announced last week it would wind down drilling at the well. The $70 million well has been one of the most closely watched projects in the oil industry, as geologists believe the Arctic is the last great unexploited resource.

The discovery of “liquids” – industry terminology for oil and condensed gas – is positive since there had been concerns the drilling campaign may have hit only natural gas, a far less profitable find.

Igor Sechin, Rosneft's chief executive and an ally of Russian president Vladimir Putin, said earlier this month the company could invest $400 billion in the Arctic in the next 15 years. "We expect to open a new oil province there, with reserves comparable to the developed reserves of Saudi Arabia," he told Der Spiegel.

Exploratory drilling

However, people familiar with the project cautioned the results were unlikely to be conclusive. “They’ve drilled one well in a huge area, so you can’t make any definitive statement,” said one. Another said the project would need a second round of exploratory drilling to test the flow of oil.

That could put Exxon in an uncomfortable position: without a change in US sanctions prohibiting co-operation with Russian oil companies in the Arctic, the company would not be able to participate, analysts and lawyers said.

Exxon’s strategic alliance with Rosneft, valued at more than $3.2 billion, was seen as a most promising prospect. – (Copyright The Financial Times Limited 2014)