Vladimir Putin, the president of Russia, issued an order yesterday that establishes a new operator for the Sakhalin-1 oil and gas project. This comes after similar actions were taken to seize other oil and gas enterprises with foreign participation.
Sakhalin-1, a project in Russia’s Far East, was run by Exxon Mobil Corp., which owned a 30% share.
Since March, a few days after Moscow invaded Ukraine, the largest US manufacturer has been attempting to end business there.
Exxon declined to comment on the ruling from yesterday.
Exxon exited its Russian operations in April, incurring an impairment charge of US$4.6 billion, leaving the Sakhalin-1 business vulnerable to a partner buyout.
Additionally, it went on to decrease oil and gas production rates and expel employees from the nation.
Putin signed Presidential Decree 520 in August, which according to Exxon hinders the corporation from concluding the exit safely.
The producer then took the conflict to a higher level and issued a letter of difference that might eventually lead to an arbitration proceeding.
Exxon was still discussing its exit with its partners, according to the company’s head of upstream operations on Tuesday.
For Exxon, a transfer of operations to a partner would be advantageous.
Along with India’s ONGC Videsh and the Japanese company Sodeco, Rosneft, a Russian company, is a partner in the project.
According to the decree, the Russian government was forming a new Russian limited liability corporation that would hold the interests of the investors, including Exxon Neftegaz Ltd.’s operator rights.
The foreign partners were instructed to apply to the government within a month of the new firm’s formation to inform it of their decision to take up shares in the new entity proportionate to their shareholding in the prior company.
The new company’s management is Sakhalinmorneftegaz-shelf, a Rosneft subsidiary.
Following sanctions placed on Moscow by western powers over its military operation in Ukraine, oil production at the Sakhalin-1 facility dropped to just 10,000 barrels per day (bpd) from 220,000 bpd.
Another oil and gas project in the Russian Far East, Sakhalin-2, was established on the basis of a production-sharing agreement negotiated in the 1990s. Putin also issued a decree in July assuming complete management of the project.
