ExxonMobil to exit Russia operations as it condemns Ukraine invasion

ExxonMobil said on Tuesday it will exit a major oil and gas project and cease investing in Russia, making it the latest western oil company to cut ties with the country following its invasion of Ukraine.

The Texas-based energy supermajor said it was “discontinuing operations” at the Sakhalin-1 project in Russia’s far east, one of the largest foreign-operated oil and gasfields in the country. Exxon follows BP, Shell and Norway’s Equinor, which have said they will dump stakes in projects and sell out of Russian state-backed energy groups after Moscow was hit with a barrage of western sanctions.

“ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action,” the company said in a statement.

The move will add to pressure on a Russian oil and gas sector that has relied on outside investment and expertise. Exxon said it has more than 1,000 employees in the country where it has been operating for 25 years.

Exxon has operated Sakhalin-1, which produces around 220,000 barrels a day of oil, in partnership with state-backed Russian producer Rosneft and companies from India and Japan.

It had also been pursuing a potential $9bn liquefied natural gas export facility in the east of Russia that would have been linked to the field, but said it was halting new investment in the country.

“In response to recent events, we are beginning the process to discontinue operations and developing steps to exit the Sakhalin-1 venture,” the company said.

Exxon did not say what the financial hit to the company would be. In recent regulatory filings it disclosed “long-lived assets” valued at around $4bn in Russia at the end of 2021.

The US supermajor was forced to abandon a joint venture with Rosneft in 2018 after the US expanded sanctions initially imposed by former president Barack Obama in response to Moscow’s 2014 seizure of the Crimean peninsula.

The venture was a flagship effort from Rex Tillerson, Exxon’s chief executive at the time, who later went on to become Donald Trump’s secretary of state.

Russian president Vladimir Putin awarded Tillerson Russia’s Order of Friendship, the highest state honour given to foreigners, after the joint venture deal in a sign of the significance he saw in deepening ties with the iconic American company.

Exxon’s announcement will intensify scrutiny of other companies that have not announced an exit from Russia. Earlier on Tuesday, French oil major TotalEnergies and Switzerland-based miner and commodity trader Glencore said they were reviewing their businesses in the country.

Glencore owns a 0.5 per cent stake in Rosneft, plus a 25 per cent in Russneft, a smaller Russian oil producer, which it is poised to sell. It also has a 10.5 per cent stake in EN+, the metals group that in turn has a controlling interest in aluminium producer Rusal.

In addition to these investments, Glencore’s powerful trading arm has various marketing deals and offtake agreements with Russian commodity producers, although it has no operational footprint in the country.

“Our trading exposure is not material for Glencore,” it said in its statement. “The human impact of this conflict is devastating. Glencore is looking to see how we can best support humanitarian efforts for the people of Ukraine.”

Glencore’s investment in Rosneft is a legacy of a deal in 2016 masterminded by Ivan Glasenberg, its then chief executive, which saw the company join forces with the Qatar Investment Authority to buy a 19.5 per cent stake in the Kremlin-controlled oil producer.

The deal helped Glencore gain more access to Rosneft’s oil and, with that objective achieved, it sold most of its stake to the QIA two years later.

The announcements from oil and commodities groups followed another day of turmoil in energy markets.

Although western governments have excluded Moscow’s energy exports, the lifeblood of its economy, from sanctions, traders, banks and big consumers are acting as if they are already the subject of punitive restrictions.

Some European refiners passing up the opportunity to buy Russian crude and several banks are refusing to finance shipments of the country’s commodities.

Russia’s flagship Urals crude oil has been trading at a record discount of more than $11 to Brent amid a buyers’ strike. Traders reckon that as much as 70 per cent of Russia’s oil exports is struggling to find a home as fighting continues in Ukraine.