Exxon Mobil Corp. flagged it would join key rivals in exiting Russia as pressure grows on global energy giants to respond decisively to the invasion of Ukraine.
The company, which holds a 30% stake in the Sakhalin-1 offshore oil asset in Russia’s Far East, will begin steps to discontinue operations and leave the venture, Exxon said in a statement. No timeframe was given, and the fact Exxon serves as operator of the facility sets up a complicated, and potentially lengthy process to quit its only remaining oil-producing asset in the nation.
Exxon also signaled a wider severing of long-standing ties with a country that had once been viewed as a long-term growth engine. “Given the current situation, ExxonMobil will not invest in new developments in Russia,” the company said.
In a matter of days, the world’s top energy producers have set out plans to exit Russian investments at a likely cost of tens of billions of dollars, and have upended relationships with Moscow that have been cultivated over many decades. Exxon and partners invested at least $17 billion in developing Sakhalin-1, and former Chief Executive Officer Rex Tillerson had previously avoided finding fault with Russia during a 2014 incursion in Ukraine that led to the seizure of the Crimean peninsula.
Though energy was specifically excluded from initial sanctions announced last week by the U.S. and European powers, momentum has been building on major companies to shun Russia. U.S. President Joe Biden is also being pressed to ban imports of Russian crude to starve President Vladimir Putin’s government of cash.
Exxon’s announcement will add new pressure on lawmakers and executives in Japan. Sakhalin Oil and Gas Development Co., or SODECO, a consortium that includes Japan Petroleum Exploration Co., Japan National Oil Corp., Itochu Corp. and Marubeni Corp., has a 30% stake in Sakhalin-1. Units of Russia’s state-backed Rosneft PJSC and India’s ONGC Videsh Ltd. hold the remainder.
Japan will “appropriately deal” with ties to Russian energy projects and hold talks with G-7 nations, Industry Minister Koichi Hagiuda said Tuesday, without specifying exactly what action was being contemplated. A SODECO spokesperson declined to comment on Wednesday.
TotalEnergies SE, which has operations in Russia representing around $1.5 billion of its total cash flow, or about 5%, is also likely to face additional scrutiny. The France-based firm said Tuesday it won’t follow peers in immediately ditching its Russian operations, though confirmed it would no longer provide capital for new projects.
Sakhalin-1, which produced some 227,000 barrels a day last year and has two ice-breakers to maintain exports during winter months, is significant for Asia’s consumers, as it’s located close to Northeast Asian refiners and delivers a crude product that can yield a low-sulfur diesel. Regular buyers include GS Caltex Corp. and SK Innovation Co., while refiners in Japan, China and Hawaii are also customers.
The project is regarded as a technical marvel that involved drilling record-setting wells that bored down and sideways for up to seven miles to tap oilfields that had frustrated the Soviets when they discovered oil there in 1979.
Too deep and remote to be extracted by 1970s-era technology, the trove remained out of the Russians’ reach until the dissolution of the Soviet Union opened the nation’s oil sector to foreign supermajors such as Exxon. The U.S. company led the development and began pumping the first barrels of crude from those fields in 2005.
Exxon’s current CEO Darren Woods is scheduled to face questions from analysts Wednesday during the company’s annual strategy presentation to Wall Street.
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