Exxon declares force majeure on Russian Sakhalin-1 operations

EXXON Mobil said on Wednesday (Apr 27) that its Russian unit Exxon Neftegas has declared force majeure for its Sakhalin-1 operations, where it has become increasingly difficult to ship crude due to sanctions on Russia.

The Sakhalin-1 project produces Russian Sokol crude oil off the coast of Sakhalin Island in the Russian Far East, exporting about 273,000 barrels per day, mainly to South Korea, and to other destinations including Japan, Australia, Thailand and the United States.

Exxon is discontinuing its operations there - and in all of Russia - following Moscow's invasion of Ukraine on Jan 24.

Project stakeholders, which also include Japan's Sakhalin Oil and Gas Development consortium and India's Oil and Natural Gas Corp, are having difficulty chartering tankers to ship oil out of a region that generally needs ice vessels to navigate the journey.

That is because of growing concerns from shippers over reputation risk and the increasing difficulty for Russian assets to find insurance coverage.

"As a result, Exxon Neftegas has curtailed crude oil production," a spokesperson told Reuters.

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The latest tanker to load at Russia's De Kastri port this week was Aframax tanker Captain Kostichev, according to data on Refinitiv Eikon. The vessel is currently located off De Kastri port.

Japan's Sakhalin consortium, which owns a 30 per cent stake in the project, declined comment, citing confidentiality agreements with Exxon.

Exxon on March 1 decided to withdraw from its Russian operations, which amount to about US$4 billion in assets, including the Sakhalin-1 venture. A complete exit could be concluded by Jun 24, 2 sources familiar with plans told Reuters.

A full writedown will depend "on the terms of its exit from Sakhalin", Exxon said earlier this month, implying it will consider selling some assets. REUTERS