Big Oil Exodus From Russia Continues As Exxon Announces Exit From Sakhalin-1 Project

U.S oil supermajor Exxon Mobil on Tuesday announced that it would exit Russia oil and gas operations that it has valued at more than $4 billion and halt new investment as a result of Moscow's invasion of Ukraine.

"ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people." the company said in a statement.

The company added that it had “an obligation to ensure the safety of people, protection of the environment and integrity of operation”

“Our role as operator goes beyond an equity investment. The process to discontinue operations will need to be carefully managed and closely coordinated with the co-venturers in order to ensure it is executed safely," the statement added.

The company said that it is initiating the process to discontinue operations and exit the Sakhalin-1 venture.

ExxonMobil has 30% stake in Sakhalin-1 project through its subsidiary Exxon Neftegas Limited. It is the primary project operator.

Sakhalin-1 is owned by a consortium that includes members from three other countries:

• Two Rosneft affiliates: RN-Astra (8.5%) and Sakhalinmorneftegaz-Shelf (11.5%)

• Japanese SODECO Consortium (30%)

• ONGC Videsh Limited, India's Oil and Natural Gas Corporation (20%)

ExxonMobil, together with SODECO, Rosneft, and Sakhalinmorneftegas-Shelf signed the Sakhalin-1 project Production Sharing Agreement in 1995. ONGC Videsh joined in 2001.

The project operates three fields in the Okhotsk Sea: Chayvo, Odoptu and Arkutun-Dagi. It is located off the northeastern coast of Sakhalin Island in the Russian Far East.

The project sits on an estimated reserves of 2.3 billion barrels of oil (307 million tons) & 17.1 trillion cubic feet of natural gas (485 billion cubic meters). Over 885.3 million barrels (118,2 million tons) of oil and condensate exported since the project commenced. 939 billion cubic feet (over 27 billion cubic meters) of natural gas delivered to Russian Far East customers.

The first Sakhalin-1 production wells were drilled at the offshore Chayvo field in 2003 using the powerful land-based Yastreb rig, and early oil production began in 2005. In 2010, the Odoptu field was put on stream, and 5 years later, in 2015, first oil flowed from the Berkut platform in the Arkutun-Dagi field. Currently, all of the Sakhalin-1 license blocks are producing.

The total project is estimated to cost US$10–12 billion, making it the largest direct investment in Russia from foreign sources.

The project achieved its planned peak production rate of 34 thousand tons per day shortly after the start of development – in 2007.

Sakhalin-1 also holds the record for extended reach wells: 9 of the 10 longest wells in the world were drilled here, including the longest O-5 well (15 thousand meters) at the Chayvo field. The project uses four of the most powerful drilling rigs in the world.