Putin authorizes the seizure of the Exxon-led Sakhalin 1 oil and gas project

Friday, Vladimir Putin signed a decree appointing a new operator for the Exxon Mobil-led Sakhalin-1 oil and gas project in Russia's Far East.

Putin's approach regarding Exxon's largest investment in Russia resembles a strategy he adopted to grab control of other energy assets in the country.

The order authorizes the Russian government to evaluate whether foreign investors may keep their holdings in a project.

Exxon, along with Russian business Rosneft, Indian company ONGC Videsh, and Japanese company SODECO, holds a 30% operator ownership in Sakhalin-1.

In July, oil production at the Sakhalin-1 plant decreased from 220,000 barrels per day (bpd) prior to the Russian invasion of Ukraine to 10,000 barrels per day (bpd).

Since the imposition of international sanctions against Moscow in March, Exxon has sought to quit its Russia activities and transfer its role in Sakhalin-1 to a partner.

Exxon and the Russian government are in conflict, with Exxon threatening international arbitration.

Exxon declined to comment on the Friday-issued order.

A representative of the ministry of industry, which owns a 50% share in SODECO, claimed that the ministry was gathering information and consulting with partners. Japan has halted acquiring crude from Russia as of June.

In April, Exxon recorded a $4.6 billion impairment charge for its Russian operations and claimed it was collaborating with partners to transfer Sakhalin-1's operation. It also reduced energy output and personnel exports.

According to Exxon, a decision signed by Putin in August impeded a secure and environmentally safe evacuation from Sakhalin-1. The U.S. manufacturer then issued a "notice of difference," a legal requirement prior to arbitration.

A Russian corporation administered by the Sakhalinmorneftegaz-shelf subsidiary of Rosneft will own Sakhalin-1 investor rights, according to a decision signed by the Russian government on Friday.

The order provided that foreign investors have one month following the foundation of a new firm to obtain shares from the Russian government.

Putin employed a similar strategy in a July decree to grab complete control of Sakhalin-2, an additional gas and oil project in the Russian Far East, in conjunction with Shell (LON:RDSa), Mitsui & Co, and Mitsubishi Corp.

Per their applications, Russia has permitted two Japanese trading firms to transfer their holdings to a new operator.