- The Sakhalin-1 project saw production tumble after Exxon refused to accept local insurance for tankers, sourced told Reuters.
- Western firms stopped insuring tankers operated by state-run Sovcomflot after Russia invaded Ukraine.
A Russian oil project led by Exxon Mobil saw production tumble after the US company refused to accept local insurance for tankers, offering a potential clue on what could happen to Moscow's energy sector after new European sanctions take hold.
Sources told Reuters that output at the Sakhalin-1 Russian Pacific project cratered to just 10,000 barrels per day this year from 220,000 bpd before Russia invaded Ukraine.
Production collapsed after Western companies stopped insuring tankers operated by state-run Sovcomflot, which was targeted by an earlier round of sanctions, according to Reuters.
Exxon's Russian unit, Exxon Neftegas, has had trouble chartering tankers because of the sanctions and has refused to work with Sovcomflot, the report said.
An Exxon spokesperson told Insider that the company announced in March its intent to take the steps required to exit the Sakhalin-1 project, discontinue its role as operator, and no longer invest in projects in Russia.
"Exiting has been a complex process, and we have remained committed to operating in a manner that protects the safety of employees, the environment, and the integrity of the Sakhalin-1 project," Exxon said in an emailed statement. "With its two recent decrees, the Russian government unilaterally terminated our interests in Sakhalin-1, and the project has been transferred to a Russian operator. We are reserving our legal rights under the production sharing agreement and international law."
Earlier this year, Russian President Vladimir Putin signed a mandate that gave control of the Sakhalin-1 to Sakhalinmorneftegaz-Shelf, a subsidiary of Rosneft. Exxon said in August the company would transfer its 30% stake of Sakhalin-1 to a third party.
The production collapse at the Sakhalin project precedes a new round of European Union sanctions, which will include a broader ban on insurance for Russian oil tankers, that go into effect on December 5.