Russia Seizes Control of Sakhalin-1 Oil and Gas Project

(Reuters) — A senior Russian lawmaker said on Thursday that Moscow would take control of the Sakhalin-1 oil and gas project in which Exxon Mobil, Japan's SODECO and India's ONGC Videsh are partners, a week after taking over the neighboring Sakhalin-2.

Pavel Zavalny, head of the energy committee in Russia's lower house of parliament, said the move was an obvious next step.

However, Kremlin spokesman Dmitry Peskov told reporters no decision had been taken on Sakhalin-1.

Russian President Vladimir Putin signed a decree last week seizing full control of the Sakhalin-2 gas and oil project, a move that could force out Shell and Japanese investors. 

Rosneft is a partner in the Sakhalin-1 group of fields. Exxon Mobil decided to pull out of the project in March after Moscow sent its forces into Ukraine. 

Lawmaker Zavalny told an online briefing: "We were forced to make a decision to move Sakhalin-2 from the (production sharing agreement) regime to Russia's jurisdiction amid sanctions... Obviously, the same will happen to Sakhalin-1."

He added: "When sanctions are being introduced, when the companies are effectively unable to take an active part in a project, this creates various risks for us and we are forced to make such decisions."

Earlier on Thursday, Russian Deputy Prime Minister Yury Trutnev said that oil output at Sakhalin-1 had plummeted to just 10,000 barrels per day (bbl/d) from 220,000 bbl/d due to "restrictions", a reference to sanctions. 

The Japanese government is gathering information to confirm the facts and Moscow's intentions on the Sakhalin-1 project, an official at the industry ministry said. 

Japanese trading houses Marubeni and Itochu, part of SODECO, were not immediately available for comment.

India's Oil and Natural Gas Corp ONGC.NS hopes that any takeover of the Sakahlin-1 project by Russia will not impact its stake in the asset, as New Delhi has strong ties with Moscow, its chairperson told Reuters. 

ONGC Videsh, the overseas investment arm of state-run ONGC, has a 20% stake in the project.

Japan said in May it would phase out Russian oil imports after agreeing on a ban with other Group of Seven (G7) nations to counter Moscow's actions in Ukraine. 

Russia was Japan's fifth-biggest supplier of crude oil in 2021, but the nation's biggest oil refiner, Eneos Holdings Inc., has already stopped buying Russian crude while second-ranked Idemitsu Kosan Co. Ltd. has also said it had no plan to purchase Russian crude. 

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