Russia Restores Output At Sakhalin-1 Oil Project After Exxon Exit | Black Sea Shipping Rates Jump 20%

Read Time:3 Minute, 41 Second

Russia Restores Output At Major Oil Project After Exxon’s Exit

Russia has ramped up oil production from the Sakhalin-1 project and expects the field to soon pump at the full level of 220,000 barrels per day (bpd) after the project’s previous operator, U.S. supermajor ExxonMobil, quit Russian operations, an industry source with knowledge of the situation told Reuters on Monday.

Get uncensored news and updates, please subscribe to our FREE newsletter!


Currently, oil production at Sakhalin-1 is around 150,000 bpd, or 65% of its capacity, according to Reuters’ industry source. Output is set to hit the 220,000 bpd peak level in “three to four weeks,” the source added.

Exxon announced at the start of March 2022 that it was going to withdraw from Sakhalin-1 following the Russian invasion of Ukraine. Exxon said it would exit the venture, as well as all its Russian projects, and make no new investments in Russia. In April 2022, Exxon declared force majeure on the Sakhalin-1 project due to Western sanctions against Moscow. Before the war in Ukraine, the project exported some 273,000 barrels daily of Sokol crude, with the main destination for the shipments being South Korea. Sakhalin-1 crude was also shipped to Japan, Australia, Thailand, and the United States.

After Exxon abandoned the project, oil production at Sakhalin-1 collapsed.

Bypass the big tech censorship
Get uncensored news and updates, please subscribe to our FREE newsletter!

In October, Russia removed Exxon as a shareholder from the Sakhalin-1 oil and gas project and transferred its stake to a Russian business entity. Exxon had a 30-percent stake in Sakhalin-1, but Russian President Vladimir Putin signed a decree with which a new entity was set up to manage the operations of the Far East oil and gas project. The decree allowed the Russian government to distribute the stakes in the project and kick out foreign partners if they saw fit.  

Russia has decided to let Japanese firms keep their stake in the Sakhalin-1 oil project in Russia’s Far East as Moscow reshuffled ownership of domestic oil and gas projects after a mass exodus of Western firms following the Russian invasion of Ukraine.  


Black Sea Shipping Rates Jump 20%

Shipping rates in the Black Sea have risen by 20% since the start of the year as war risk insurance premiums increase, Reuters reported, citing unnamed industry sources.

What’s more, some insurers have stopped providing coverage for ships and planes moving goods to and from Belarus, Russia, and Ukraine. Reinsurers have also pulled out of the region on heightened risks, the report noted.

The Black Sea, which is shared by Romania, Bulgaria, Ukraine, Russia, Georgia, and Turkey, is a major oil and oil product shipping artery.

“The effect of (the exit of reinsurers) is reducing (underwriting) capacity in the market for war risk and will mean people will pay more this year,” one of the Reuters sources explained.

These higher rates and limited availability of reinsurance coverage add to industry woes related to the G7 price cap imposed on Russian oil exports. Per the rules of the cap regime, Western insurers, which constitute about 90 percent of all maritime insurers, are banned from providing coverage for vessels carrying Russian crude sold at over $60 per barrel.

According to a recent FT report, about a quarter of Russian oil shipments in December had Western insurance coverage, suggesting at least this quarter was sold at less than $60 per barrel. Indeed, Russia’s Urals has been trading below $60 per barrel for more than a month.

Higher freight rates for Black Sea shipping, however, would add to the costs of the goods being shipped through the chokepoint.

“For shipments going in and out of Russia you will find premiums going up. It could easily rise by 50% (from the end of last year) to reflect the cost of capital from not being reinsured,” another Reuters source said.

On the flip side, tanker rates have declined despite expectations of a spike after the EU embargo on Russian crude went into effect. Among the reasons is the embargo itself: European refiners ramped up their intake of Russian crude before December 5 and after that date came the buying spree subsided and died out, effectively reducing demand for tankers.


Please support us by following our social media:
Contributor posts published on Russia Truth do not necessarily represent the views and opinions of Russia Truth, and are not selected, edited or screened by Russia Truth editors.

Bypass the big tech censorship
Get uncensored news and updates, please subscribe to our FREE newsletter!

If you would like to help support us further, please consider a donation.
Any amount is greatly appreciated as it helps cover the cost of our server and web-hosting fees, and also enables to fund projects and plan for expansion.

(You can cancel at any time).