Russia removes Exxon from major oil and gas project

Source

Russia has removed Exxon as a shareholder from the Sakhalin-1 oil and gas project and transferred its stake to a Russian business entity.

Exxon said this amounted to expropriation and that it had pulled out from Russia as a whole, the Wall Street Journal reported.

Russia removes Exxon from major oil and gas project

Exxon had a 30-percent stake in Sakhalin-1 but a week ago President Vladimir Putin signed a decree with which a new entity was set up to manage the operations of the Far East oil and gas project. The decree allowed the Russian government to distribute the stakes in the project and kick out foreign partners if they saw fit.

Exxon was on its way out anyway, however. Shortly after Russian troops entered Ukraine in February, Exxon said it was going to pull out from Russia and make no more investments there.

In April, the U.S. supermajor declared force majeure at the Sakhalin project, cutting output from some 220,000 bpd to just 10,000. Production was also affected by Exxon’s refusal to accept local insurance coverage for the tankers transporting the crude from Sakhalin Island.

Meanwhile, Reuters reported on October 17 that India’s ONGC was considering taking a stake in the new entity operating Sakhalin-1. The Indian state oil major was a shareholder in the consortium running Sakhalin-1 before Exxon’s pullout and wanted to retain its interest in the project, Reuters reported, citing unnamed sources.

“ONGC Videsh will protect its share in the project, which means it will take a stake in the new entity,” one of the sources said.

The Sakhalin-1 project is also important for Japan. Despite a sanction drive among its Western partners, Japan has stated it could not afford to stop buying oil and gas from the Sakhalin development. Two Japanese companies are also shareholders in Sakhalin-1 and have been offered to retain their stakes in the new entity, managed by a subsidiary of Rosneft.