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Russian Oil And Gas Project Misses Output Targets After Exxon Exit

Russian oil and gas output at the Sakhalin-1 project in the Far East is only half of what it was projected to be for 2022 after Russia’s invasion of Ukraine set off a series of Western sanctions that led to the departure of ExxonMobil.

In a televised meeting with Russian President Vladimir Putin, Sakhalin governor Valery Limarenko said production was less than 50% of that planned, Reuters reported.

"First, in May, oil production was practically stopped, and in September, it was gas production. We lost a large amount, more than half, of the annual plan," Limarenko was quoted as saying.

September last year saw oil production of around 84,000 barrels per day, which is less than half the figure projected.

The governor further clarified that the regional budget would lose an estimated $664 million due to the lower production levels, noting that two-thirds of the regional budget comes from oil and gas taxes.

“We will somehow get out, but this problem really exists," Limarenko told Putin, as reported by Reuters.

The televised lamentation was likely intended to draw further attention to Moscow’s attempts to leverage political capital related to Exxon’s withdrawal from the project. Russia’s General Prosecutor’s Office is attempting to wrangle some $220 million in unpaid taxes from Exxon.

In April 2022, Exxon declared force majeure on the Sakhalin-1 project due to Western sanctions against Moscow. Before the war in Ukraine, the project exported some 273,000 barrels daily of Sokol crude, with the main destination for the shipments being South Korea. Sakhalin-1 crude was also shipped to Japan, Australia, Thailand, and the United States.

In early January this year, Russia claimed that it had ramped up production at Sakhalin-1, expecting the field to start pumping 220,000 bpd soon, up from 150,000 bpd at the time. 

By Charles Kennedy for Oilprice.com 

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