Russia to take Sakhalin-1 project under its control

Russian lawmaker on Thursday said that Moscow would take control of Sakhalin-1, an oil and gas project.

Pavel Zavalny of Russia’s lower house said that the move was an obvious step.

Dmitry Peskov, a Kremlin spokesperson, said that Sakhalin-1 had not been decided.

Russian President Vladimir Putin signed last week a decree securing full control over the Sakhalin-2 oil and gas project. This could result in Shell (SHEL.L.) being forced out and Japanese investors.

Rosneft (ROSN.MM ) is a partner in the Sakhalin-1 field group. ExxonMobil pulled out of the project after Moscow sent its troops into Ukraine in March.

Zavalny, a lawmaker, gave an online briefing: “We were forced into a decision to move Sakhalin-2 out of the (production sharing arrangement) regime to Russia’s jurisdiction under sanctions… Obviously, it will happen the same to Sakhalin-1.”

He said, “When sanctions are introduced when companies are effectively ineligible to participate in a project. This creates many risks for us, forcing us to make such decisions.”

On Thursday, Yury Trutnev, Russian Deputy Prime Minister, stated that Sakhalin-1’s oil production had dropped to 10,000 barrels per hour (bpd), from 220,000 bpd. This was due to “restrictions”, which refers to sanctions.

A Japanese official said that the Japanese government is collecting information to verify the facts and Moscow’s intentions regarding the Sakhalin-1 project.

Marubeni and Itochu were Japanese trading houses that are part of SODECO. They could not be reached immediately for comment.

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