Exxon Mobil Corp. said late Tuesday it is halting operations of its Sakhalin-1 oil and gas venture in Russia, and is taking steps to exit the project as a response to Russia’s invasion of Ukraine.
“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 that violates the territorial integrity of Ukraine and endangers its people,” Exxon said in a statement. “We are deeply saddened by the loss of innocent lives and support the strong international response. We are fully complying with all sanctions.”
Additionally, “Given the current situation, ExxonMobil will not invest in new developments in Russia,” the company added.
Exxon had been under renewed pressure to follow other integrated oil giants and end its participation in massive oil and gas projects in Russia. Under pressure from shareholders and the public at large, BP PLC
and Shell PLC
recently announced the end of their participation in projects with Russian state-owned oil and gas companies following the invasion of Ukraine.
has operated in Russia for a quarter century. It has more than 1,000 employees in the country, although according to media reports it has accelerated the evacuation of its workers there.
One of its major ventures involves a subsidiary that has operated an oil and gas project in the far eastern island of Sakhalin since 1995, with the Exxon unit holding a 30% interest.
The company has set its virtual investment day for Wednesday, with a webcast session slated to begin at 9 a.m. Eastern.
Such events at Exxon are tightly scripted, but it is likely that Chief Executive Darren Woods will get questions about what Exxon intends to do with its assets in Russia.
Exxon had several joint ventures with Russia’s Rosneft, the state-owned energy integrated company, but with sanctions imposed on Russia following the Crimea annexation in 2014, it completed a formal withdraw from the JVs in 2018.
“Thus far, governmental sanctions have not targeted Russia’s energy sector in a substantial way,” Raymond James analyst Pavel Molchanov told MarketWatch.
“Ukraine is asking the European Union to impose a direct embargo on imports of Russian oil and gas, but that seems unlikely,” he said. “On the other hand, private-sector energy companies are feeling shareholder pressure to reduce or even eliminate exposure to Russia.”
More companies are like to announce divestment steps, he said. The removal of banking and insurance services would be more a more direct way to act, Molchanov said.
“While divestment tends to get more public attention, the fact of the matter is that it is essentially a symbolic step: simply changing shareholder A to shareholder B. Nothing fundamentally happens to the underlying business,” he said. That’s not the case when banks or insurers refuse to provide actual services.
“Just as foreign central banks will no longer cooperate with Russia’s central bank, it would be a big deal for major international commercial banks to stop working with Gazprom, Rosneft, or Lukoil,” he said.
While the EU and the U.S have cut Russia from the SWIFT interbanking system, cryptocurrencies could fill some of the gaps, said Naeem Aslam, a market analyst at AvaTrade.
Traders will be looking at other oil and energy companies, and they will be anticipating a similar move by them following BP and Shell moves, he said.
In addition to Exxon, France’s TotalEnergies SE
another multinational integrated energy company, is also most likely to make a similar announcement, he said.
Exxon recently announced a major reorganization, looking to save costs and bringing its chemicals and refining businesses under one umbrella.
MarketWatch writer Mike Murphy contributed to this report.
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