ExxonMobil accuses Russia of 'expropriation'

ExxonMobil has pulled out of the country after the government "expropriated" its largest oil field in Russia, raising the possibility of a multi-billion dollar legal battle with the Kremlin.

The US oil company said President Vladimir Putin's administration had "unilaterally ended" its involvement in the Sakhalin-1 oil and gas project in Russia's Far East and transferred the field to a domestic operator.

Monday's announcement was the latest cut in energy ties between Russia and the West after Moscow's invasion of Ukraine, ending decades of efforts by American and European companies to develop Russia's vast oil and gas reserves.

Exxon announced in March that it would withdraw from Sakhalin-1, which it operates and has a 30 percent stake in. Putin earlier this month signed a decree creating a new operating company, to be managed by state oil company Rosneft, to take over the project.

The decree gave Exxon and other foreign investors a month to decide whether to keep their shares. Exxon has no plans to make such a request, said a person familiar with the company's decisions.

Other shareholders in the project include Rosneft, Indian state-owned ONGC Videsh and Japan's Sodeco. India and Japan are eager to maintain their energy ties with Russia and may seek to remain involved in the Sakhalin 1 project as they have in other oil and gas fields.

Sakhalin-1 was producing about 220,000 barrels of oil per day in Ukraine before the war, but production had dropped to about 10,000 b/d after Western sanctions against Russia halted operations.

Exxon had said it was flowing minimal amounts of oil and gas to keep fuel supplies to the local market, which could otherwise have been hit by power outages and shortages.

Exxon posted a $4.6 billion pre-tax loss in April on its Russia business, most of which was related to Sakhalin-1. The company announced on Monday: "After the expropriation, we safely withdrew from Russia."

Exxon's allegations that Russia pushed it out of Sakhalin-1 hinted at a possible push by the Texas-based company to claim its losses in international arbitration.

"We have made every effort to engage with the Russian government and other stakeholders," Exxon said.

Exxon has taken the Venezuelan government to international arbitration after the late leader Hugo Chávez seized assets in that country in 2007.