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Russia Restores Output At Major Oil Project After Exxon’s Exit

Russia has ramped up oil production from the Sakhalin-1 project and expects the field to soon pump at the full level of 220,000 barrels per day (bpd) after the project’s previous operator, U.S. supermajor ExxonMobil, quit Russian operations, an industry source with knowledge of the situation told Reuters on Monday.

Currently, oil production at Sakhalin-1 is around 150,000 bpd, or 65% of its capacity, according to Reuters’ industry source. Output is set to hit the 220,000 bpd peak level in “three to four weeks,” the source added.

Exxon announced at the start of March 2022 that it was going to withdraw from Sakhalin-1 following the Russian invasion of Ukraine. Exxon said it would exit the venture, as well as all its Russian projects, and make no new investments in Russia. In April 2022, Exxon declared force majeure on the Sakhalin-1 project due to Western sanctions against Moscow. Before the war in Ukraine, the project exported some 273,000 barrels daily of Sokol crude, with the main destination for the shipments being South Korea. Sakhalin-1 crude was also shipped to Japan, Australia, Thailand, and the United States.

After Exxon abandoned the project, oil production at Sakhalin-1 collapsed. 

In October, Russia removed Exxon as a shareholder from the Sakhalin-1 oil and gas project and transferred its stake to a Russian business entity. Exxon had a 30-percent stake in Sakhalin-1, but Russian President Vladimir Putin signed a decree with which a new entity was set up to manage the operations of the Far East oil and gas project. The decree allowed the Russian government to distribute the stakes in the project and kick out foreign partners if they saw fit.  

Russia has decided to let Japanese firms keep their stake in the Sakhalin-1 oil project in Russia’s Far East as Moscow reshuffled ownership of domestic oil and gas projects after a mass exodus of Western firms following the Russian invasion of Ukraine.     

By Michael Kern for Oilprice.com

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  • George Doolittle on January 09 2023 said:
    Define *"major oil project"* as by way of example in just the Gulf of Mexico alone excluding onshore Baker Hughes and Halliburton *"major"* is a single project oil project pushing via pipeline 200,000 barrels of WTI into a single and only one of many oil and chemical refining complex to include shipping and Railroad tie ins.

    Specifically name the biggest oil refinery in all of Russia right now by way of example then do the same for Japan or even China at the moment.

    Long $ba Boeing strong buy
  • Mamdouh Salameh on January 09 2023 said:
    After all there is life for Sakalin-1 project after US supermajor Exxon Mobil quit Russian operations. Russia will ramp up production to its previous capacity of 220,000 barrels a day (b/d) in three to four weeks.

    A similar situation occurred when the very ExxonMobil quit its joint oil project with the Russian oil giant Rosneft in the Arctic under pressure from the US government in 2014 after the US imposed sanctions on Russia over the annexation of the Crimea. Rosneft went ahead with the development of the project with homegrown state-of-the-art technology and government funds.

    Russia neither needs Western technology nor its finance. It has both and can happily manage without them. A case in point is the $170 bn-Vostok project which is being developed by Rosneft and which is projected to start shipping 1.6 million barrels a day (mbd) of crude oil to China by 2024.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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