Putin orders seizure of Exxon-led Sakhalin 1 oil and fuel challenge

MOSCOW/HOUSTON, Oct 7 (Reuters) – Russian President Vladimir Putin on Friday signed a decree that creates a brand new operator for the Exxon Mobil Corp-led (XOM.N) Sakhalin-1 oil and fuel challenge in Russia’s Far East.

Putin’s transfer affecting Exxon’s largest funding in Russia mimics a method he used to grab management of different power properties within the nation.

Friday’s decree provides the Russian authorities authority to determine whether or not overseas shareholders can retain stakes within the challenge. Exxon holds a 30% operator stake in Sakhalin-1, with Russian firm Rosneft (ROSN.MM), India’s ONGC Videsh (ONVI.NS) and Japan’s SODECO as companions.

Oil manufacturing on the Sakhalin-1 challenge fell to only 10,000 barrels per day (bpd) in July from 220,000 bpd earlier than Russia invaded Ukraine.

NAVIGATING AN EXIT

Exxon has been attempting to exit its Russia operations and switch its position in Sakhalin-1 to a associate since March, after worldwide sanctions had been imposed in opposition to Moscow. Russia’s authorities and Exxon have clashed, with the oil producer threatening to take the case to worldwide arbitration.

Exxon declined to touch upon Friday’s decree.

Exxon took a $4.6 billion impairment cost in April for its Russian actions and mentioned it was working with companions to switch Sakhalin-1’s operation. It additionally diminished oil and fuel manufacturing and eliminated personnel from the nation.

In August, Putin issued a decree that Exxon mentioned made a safe and environmentally protected exit from Sakhalin-1 troublesome. The U.S. producer then issued a “be aware of distinction,” a authorized step previous to arbitration.

Friday’s decree mentioned the Russian authorities was establishing a Russian firm, managed by Rosneft subsidiary Sakhalinmorneftegaz-shelf, that may personal buyers’ rights in Sakhalin-1.

International companions could have one month after the brand new firm is created to ask the Russian authorities for shares within the new entity, the decree mentioned.

Putin used the same technique in a July decree to grab full management of Sakhalin-2, one other fuel and oil challenge within the Russian Far East, with Shell (SHEL.L) and Japanese firms Mitsui and Mitsubishi as companions.

Reporting by Reuters; Enhancing by Kevin Liffey, Marguerita Choy and Cynthia Osterman

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