ExxonMobil Vows to Sue Russia Over Megaproject Exit

ExxonMobil Corp has threatened Russian officials it will sue the Russian government unless Moscow allows the company to exit the joint major oil and gas project in Russia, people familiar with the matter say.

The company has reportedly been trying to exit the massive Russian oil project Sakhalin-1 in the country’s Far East since March when it announced that due to Western sanctions, it would exit about $4 billion in assets and discontinue all its Russia operations.

Noting that it would not be making new investments in Russia, either, ExxonMobil added that it’ll coordinate the process of discontinuing operations with its co-owners in the consortium.

However, it was recently prevented from doing so after Russian President Vladimir Putin signed a decree preventing investors from so-called “unfriendly states” to sell their shares in certain strategic enterprises – including energy projects and oil and gas production sharing agreements like the Sakhalin ventures, by the end of the year.

Exxon was managing the Sakhalin-1 project on behalf of its partners in the consortium – Japanese Sodeco, India’s ONGC Videsh, and Russia’s oil giant Rosneft – but announced recently it is in the process of transferring the 30% stake to a third-party entity it didn’t identify.

Several days later, Putin tightened his control over Russia’s finance and energy sectors to protect national interests by halting foreign companies from disposing of their assets as part of measures.

According to Exxon’s spokesman Casey Norton, the company has subsequently sent a notice of difference to the Russian federal government, arguing that the decree inhibits its rights and impedes its ability to exit operations safely.

A representative of the Russian party in the project, the Rosneft, said it believes that all contentious issues could be resolved if normal production activities at Sakhalin-1 are restored.

With regard to the Sakhalin-2 project, Putin ordered back in July the rights and obligations of Sakhalin Energy Investment Co., the joint venture running the project, be transferred to a newly created state Russian company.

Sakhalin-2 minority foreign investors Shell and Japan’s Mitsui & Co and Mitsubishi were given one month to claim their stakes in a new entity.

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