Putin presses on with search for buyer of Sakhalin 1 stake after ExxonMobil exit

President Vladimir Putin has urged the Russian government to take more time to find a buyer for a 30% stake in Sakhalin 1 oil and gas development project in the country’s far east.

According to his decree that was officially published in Moscow on Wednesday, the government has been given additional time until October this year to find a buyer for the equity, previously in hands of US supermajor ExxonMobil.

Putin ordered the effective expropriation Sakhalin 1 assets from ExxonMobil-led operator Exxon Neftegaz in the beginning of October 2022 after Western companies pulled back from their Russian investments, and this equity interest was transferred to Russian registered operator Sakhalinmorneftegaz-Shelf.

The remaining non-Russian Sakhalin 1 shareholders, a subsidiary of Japan’s Sodeco and India’s ONGC Videsh, opted to take up their own 30% and 20% stakes in the new operator, after this was offered by Russian authorities.

ExxonMobil declined the same offer after the Kremlin blocked the company’s plan to pass its interest in the project to an unidentified party following its own decision to withdraw from Russia.

The Russian government was left holding a 30% stake in Sakhalin 1, leading to Putin’s ordering for the interest to be sold to a new investor in the project. A deadline was set for February, but no buyer was announced.

Article continues below the advert

Russian authorities have since tried to facilitate a future acquisition by determining the minimal amount of funds that they would like to receive for their Sakhalin 1 shareholding.

The authorities have also said they will assess if the exit of former operator ExxonMobil’ from Sakhalin 1 has “inflicted damage” on the project, with implications for any compensation or consideration that might be paid to the US company for the loss of its former interest in the project.

In March, a city court in the Sakhalin capital of Yuzhno-Sakhalinsk slammed a $207 million fine on now defunct operator Exxon Neftegaz for the alleged non-payment of back taxes.

Earlier this week, Russian largest gas producer Novatek revealed that it may bid for the governmental stakeof 27.5% in neighbouring Sakhalin 2 oil and gas development that Moscow expropriated from British major Shell last year.

Russian media reports suggest the Russian share of the equity in Sakhalin 1 is likely to increase as just potential buyers from inside the country are welcomed.