Exxon Leaves Russia Empty-Handed
(RightWing.org) – In the 1990s, Exxon Mobil and its partners enacted a production-sharing agreement in Russia. The US oil company owned 30% of the Sakhalin-1 oil and gas project. After Russia invaded Crimea and annexed it from Ukraine in 2014, the US’ largest oil company began reducing its presence in Russia. Now, it’s exiting the country entirely.
On Monday, October 17, Reuters reported President Vladimir Putin stripped Exxon’s stake and properties in operation. The organization had been discussing a pullout over the last seven months. Now that Russia unilaterally terminated a long-held agreement, the oil giant is leaving Russia empty-handed.
Exxon Leaves After Russia Wipes Its Stake in Oil Project
The Sakhalin-1 oil and gas project was located near Sakhalin Island in the Russian Far East. It has three offshore fields and was operated by a subsidiary of Exxon Mobil. The operation was challenging and highly technical due to the harsh arctic climate. It holds approximately 2.3 billion barrels of oil and is the largest in the country.
After Russia invaded Ukraine in late February, the oil conglomerate said it wouldn’t make any more investments in Russia. When Putin annexed Crimea in 2014, the massive oil enterprise withdrew from 10 or more other joint ventures when the US imposed sanctions on the former Soviet state. Still, Sakhalin-1 wasn’t part of the sanctions.
The company’s withdrawal from the project was considered complicated. Not only was it responsible for the site’s operations in extreme weather conditions, but it was also accountable for safety and environmental precautions. The site still produces oil and gas for Sakhalin Island, a sensitive ecological region. The Wall Street Journal noted it was difficult to find another outfit that could handle the complex and unique operation.
Exxon spokeswoman Meghan Macdonald said the company always sought to be a “responsible operator by protecting employees, the environment and the integrity of operations.” The corporation said it safely exited after Putin “unilaterally terminated” its interests.
Putin Gives US Oil Giant’s Operations to Russian Company
Putin signed an order in October that gave Exxon’s 30% stake to a new Russian firm. The decree said the US corporation and other foreign partners could apply for ownership in the new business. The US company’s exit suggests it will not join the new venture.
In August, Exxon forwarded a notice of difference to Russia, a standard step in a commercial contract to find a solution before litigation begins. Macdonald said the corporation did everything possible to engage with Moscow and all those involved. In April, the company said it took a $3.4 billion accounting charge in the first quarter due to its exit.
So, will one of the world’s largest oil companies dispute the unilateral decision by Russia? If so, it could take years to resolve. For now, it’s empty-handed.
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