Exxon Mobil said the Russian government has “unilaterally terminated” its stake in the Sakhalin-1 oil and gas project, the largest field the company has developed in the country. The share was transferred to the local operator.
The company stated:
The departure of Exxon Mobil under such circumstances increases the likelihood of billions of dollars in legal claims against Russia. In April, the company wrote off $4.6 billion in pre-tax losses from ceasing its business in Russia; this write-off was largely related to Sakhalin-1.
In March, Exxon Mobil said it intended to exit the project, where it was the operator and owned a 30% stake. And on October 7, Vladimir Putin signed a decree on the creation of a new operator, which will be managed by Rosneft.
Foreign shareholders of Sakhalin-1 must notify the government within a month whether they agree to retain their shares in the property. Exxon Mobil has no plans to do so, said a person familiar with the company’s decision.
Other shareholders are Rosneft, India’s ONGC Videsh and Japan’s Sodeco. India and Japan are trying to maintain energy ties with Russia and may remain in the project.
Before the war in Ukraine, production at Sakhalin-1 was about 200,000 barrels per day, but after Western countries imposed sanctions on Russia, it fell to about 10,000 barrels. Exxon Mobil previously said it was maintaining minimum production levels to ensure fuel supplies to the local market.
The company also said it intended to sell its stake. Her expropriation claim hints at a possible attempt to litigate the losses in international courts. “We have made every effort to find common ground with the Russian government and other shareholders,” she said in a statement. It also notes that the company retains legal options under the production sharing agreement and international arbitration law.
Exxon Mobil was suing the Venezuelan government after then-President Hugo Chavez seized the company’s assets in 2007.