US supermajor ExxonMobil is scaling back its operations on its flagship offshore development project in Russia's Sakhalin Island region in response to the fallout from the crisis in Ukraine, according to the Sakhalin Online news website.
A consortium source cited by the Russian website claimed that foreign managers have been told to leave the project for an initial period of one month.
The operator has also reportedly instructed employees at to prepare two extended reach development wells for shutdown in the coming two weeks. The wells are currently being drilled into producing reservoirs.
These moves are seen as a consequence of the geopolitical shock waves caused by Russian military operations in Ukraine.
US contractor Parker Drilling has been in charge of almost all drilling operations on the project, with a significant presence of foreign staff reported on the project.
ExxonMobil has relied on other US and international contractors in operating the development.
With Russia banning flights by almost 30 international airlines in response to the closing of European airspace for Russian carriers, the country’s aviation authority Rosaviatsiya has recommended that residents refrain from non-business foreign travel.
ExxonMobil has a 30% interest in the Sakhalin 1 oil and gas project, which it operates via its Russian subsidiary Exxon Neftegaz. The operator has not yet commented on the reported scaling back in operations.
Exxon Neftegaz is developing three oil and gas fields off Sakhalin — Odoptu, Chayvo and Arkutun-Dagi — with reservoirs exploited through extended-reach deviated wells from shore and two offshore stationary platforms, Orlan and Berkut.
Besides ExxonMobil, Japanese consortium Sodeco has a 30% interest in Sakhalin 1, with India’s ONGC Videsh and Russian producer Rosneft each holding 20%.
According to the Russian Energy Ministry, Sakhalin 1 produced almost 83 million barrels of oil and condensate and over 12 billion cubic metres of natural and associated gas in 2021.
The project is operated under a production sharing agreement with the Russian government, with foreign partners responsible for investments that brought the project onstream in 2005.
ExxonMobil and Rosneft have also been working on a plan to commercialise remaining natural gas reserves by exporting them to international markets as liquefied natural gas, with front-end engineering design studies for a liquefaction train already completed.
Upstream recently reported that ExxonMobil was all set to launch a major bid process for the construction of liquefaction facilities for its 6.2 million tonnes per annum Russia Far East (RFE) LNG project.
The multi-billion dollar liquefied natural gas development will see non-associated gas from the Chayvo field sent by a new pipeline to a greenfield liquefaction complex to be built at the port of De Kastri on the Russian mainland.
Biting the bullet
Shell holds a 27.5% stake in the Sakhalin 2 LNG project, where Russian gas giant Gazprom has a 50% stake and Japanese groups Mitsui and Mitsubishi hold minority interests.
The focus is now falling on another major foreign major in the Russian upstream sector, TotalEnergies.
The French supermajor has so far released a statement condemning the Russian aggression and saying that it will no longer provide new capital to projects in Russia.
However, TotalEnergies has stopped short of announcing a plan to exit investments in the wake of Russia’s invasion of Ukraine, as was the case with BP, Shell and Equinor.
TotalEnergies is a minority shareholder in Russian largest independent gas producer Novatek and in two Novatek-led LNG developments. It also holds an interest in the Kharyaga oil development in the north of Russia.
Russian Prime Minister Mikhail Mishustin said in Moscow on Tuesday that President Vladimir Putin is preparing a decree, aimed at temporarily restricting the ability of foreign investors to exit their projects in Russia.
Mishustin said he thought that pressure from sanctions will ease soon after Russia concludes the military phase of its operation in Ukraine. He warned that those investors who leave are likely to be "sorry" about this in the long run, as their places will be taken up by competitors.
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