ExxonMobil thinks Russia’s decree on Sakhalin-1 violates rights

MOSCOW, Oct 28 (PRIME) -- U.S. company ExxonMobil does not expect any new costs from withdrawal from the Sakhalin-1 project, but thinks that Russia’s decree on creation of a national operator of the project violates its rights, CEO Darren Woods said in a conference on Friday.

Even though the decree violates the company’s rights in Russia defined by the Sakhalin-1 production sharing agreement and even though it disrupts the withdrawal started by the company, it did not prevent ExxonMobil from safely winding down operations in the country. ExxonMobil expects no new material costs connected to the withdrawal, he said.

The U.S. company already formalized the impairment of U.S. $3.4 billion from the withdrawal in March, he said.

On October 7, Russian President Vladimir Putin issued a decree ordering the government to set up a new Russian operator of the Sakhalin-1 project, which will take over the rights and responsibilities of Exxon Neftegaz Limited.

A subsidiary of ExxonMobil was the project’s operator with a 30% stake, Russian oil major Rosneft had 20%, Japan’s Sodeco had 30%, and India’s ONGC had 20%. ExxonMobil said in March it will leave the project and announced a force majeure event in April, which almost stopped production at Sakhalin-1. In August, the company said that was working on a transfer of its stake in the project to another company.

Sakhalin-1 develops the Chaivo, Odoptu and Arkutun-Dagi fields on the Sakhalin Island’s shelf with the total estimated resources standing at 307 million tonnes of oil and 485 billion cubic meters of gas.

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