Decree on Sakhalin-1 amended with conditions for foreign investors to obtain stake in new project operator
MOSCOW. Aug 15 (Interfax) - Foreign participants of the Sakhalin-1 production sharing agreement (PSA) project may receive their stakes in the new project operator subject to several conditions.
The corresponding presidential decree amending decree no. 723 of October 7, 2022, has been published on the official internet portal of legal information.
In particular, a foreign consortium member must conclude contracts for the supply of foreign-made equipment and spare parts necessary for PSA implementation, as well as technical cooperation agreements.
Another condition is "actions a foreign party of the consortium that lead to the lifting of political and economic sanctions imposed by foreign states that negatively affect the implementation of the PSA, including, if necessary, challenging them in court."
In addition, a foreign party must, independently or through other entities, transfer funds to the Sakhalin-1 LLC liquidation account in an amount equal to the funds that were previously accumulated by this participant in the PSA liquidation fund.
Sakhalin-1 LLC has been operator of the Sakhalin-1 LLC PSA project since October 2022, when the Russian president signed a decree according to which the project's previous operator, Exxon Neftegas Ltd. was replaced by a Russian LLC managed by JSC Sakhalinmorneftegaz-Shelf.
JSC Sakhalinmorneftegaz-Shelf, which is a Rosneft subsidiary, was due 11.5% of the new operator, in proportion to its stake in the production-sharing agreement, and another 8.5% is managed by JSC RN-Astra. The foreign PSA participants Japan's SODECO (30%) and India's ONGC (20%) gave their consent to take up their pro-rata stakes in the new operator. Exxon Mobil (30%) said it had decided to terminate its participation in the PSA and exit Russia entirely.
It was reported that ONGC was having problems registering its stake in the new operator of the Sakhalin-1 project. The Indian company received its share of the project's liquidation fund - 143.24 billion rupees or around $1.4 billion - back in April 2023, but was unable to transfer it to Sakhalin-1 LLC due to sanctions imposed on Russian banks and counter-sanctions measures from Russia.
Sakhalin-1 includes three oil and gas fields: Chaivo, Odoptu and Arkutun-Dagi off the northeast coast of Sakhalin Island. Their combined reserves are estimated at 307 million tonnes of oil and 485 billion cubic meters of natural gas. The project reached peak oil production of 12.96 million tonnes in 2019, after which output declined to 12.44 million tonnes in 2020 and 11.3 million tonnes in 2021. Exact data on the project's oil production at the project in 2022-2024have not been published.
