Sanctions catch up to Russian energy project

Oil production at Russia’s far-eastern Sakhalin-1 oil and gas project has decreased significantly due to sanctions imposed by the West, according to Russian Deputy Prime Minister Yuri Trutnev.

“As for the Sakhalin-1 project, due to the restrictions imposed … oil production at the project has decreased by 22 times - from 220,000 barrels per day to 10,000 barrels per day,” Trutnev said.

The Sakhalin-1 project produces Sokol grade crude oil off the coast of Sakhalin Island in Russia’s Far East, exporting about 273,000 barrels per day, mainly to South Korea, but also to other destinations including Japan, Australia, Thailand, and the US.

In May, US oil giant ExxonMobil’s Russian unit Exxon Neftegas declared force majeure for its Sakhalin-1 operations due to sanctions. It had become increasingly difficult to ship crude to customers, the company explained.

Project stakeholders, which also include Japan’s Sakhalin Oil and Gas Development consortium and Indian explorer ONGC Videsh, were reportedly having difficulty chartering tankers to ship oil out of the region.

Exxon had earlier announced it would exit about $4 billion in assets and discontinue all of its Russia operations, including the Sakhalin-1 project.

On Thursday, Reuters reported the head of the energy committee in Russia’s lower house of parliament, Pavel Zavalny, as saying that the Sakhalin-1 oil and gas project would be put under Moscow's jurisdiction, just as the neighboring Sakhalin-2 has.

Last week, President Vladimir Putin ordered the re-organization of the Sakhalin-2 LNG project, transferring ownership to a new, domestic, company.

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