The decree signed by the Russian President provides the government to establish a new local company to control the rights in Sakhalin-1, and decide whether foreign shareholders can retain stakes in the project
Russia to assume full control of Sakhalin-1 oil and gas project. (Credit: David Mark from Pixabay)
Russian President Vladimir Putin has signed a decree to establish a new operator for ExxonMobil’s Sakhalin-1 oil and gas project in Eastern Russia.
The decree provides the Russian government with the authority to decide whether foreign shareholders can retain stakes in the project, reported Reuters.
It orders the formation of a new Russian company, under Rosneft subsidiary Sakhalinmorneftegaz-shelf, to control the rights in Sakhalin-1.
Once the new company is established, foreign partners can procure shares in the new entity through the Russian government within a deadline of one month, the publication said.
Exxon holds a 30% stake, and is the operator of Sakhalin-1, alongside Russia-based Rosneft, India-based ONGC Videsh and Japan’s SODECO as partners.
Since March this year, the company has been trying to exit Russia by divesting its stake in Sakhalin-1 to a partner, after the west imposed sanctions on Moscow.
Exxon disagreed with the Russian government and threatened to widen the case to international adjudication.
The publication said: “Oil production at the Sakhalin-1 project dropped to 10,000 barrels per day (bpd) in July from 220,000bpd before Russia invaded Ukraine.
“Exxon took an impairment charge of $4.6bn in April for its Russian activities and said it was working with partners to transfer Sakhalin-1’s operation. It also reduced energy production and moved staff out of the country.”
The move, which affects the US-based operator’s largest investment in Russia, resembles Kremlin’s strategy to seize control of other energy assets in the country, reported Reuters.
Earlier this year, President Putin signed a decree, allowing the Russian government to take full control of the Sakhalin-2 oil and gas project.
Sakhalin-2 was owned by Russia’s Gazprom with a 50% plus one share stake, alongside its foreign partners Shell, with 27.5%, Mitsui with 12.5%, and Mitsubishi with a 10% stake.
The decree enabled the government to decide if the foreign partners can continue to take part or not in the Sakhalin-2 integrated oil and gas project.